From downloads to dollars: Metrics to watch for B2C subscription apps

By Viktoriia Korytska, investment analyst at F1V

I sift through looong databases and talk to over 100 founders every month to find a few consumer apps that catch my eye. There are thousands of such startups, but only a handful can raise funds.

Some of them can be killers one day. But how not to overlook these if your VC firm invests early?

Metrics suggest an app’s product-market fit early on. It’s rough, but still a solid hint. The Flyer One Ventures team always checks these five metrics.

Customer acquisition: Ratio of organic to paid

The first thing we want to know is how an app attracts its users.

Sign-ups come in two forms: paid and organic. The latter rules them all, as it signals the potential for steady growth. Think TikTok buzz, word-of-mouth, SEO, content on social media, personal branding, or positive AppStore reviews.

Aim for at least 50% of organic sign-ups. If that drops even slightly, review your strategy around the acquisition funnels and track down the churn points. We analyze the performance of all channels, checking if new organic sign-ups are growing steadily (user base, waitlist, etc.).

Investors see prevailing organic sign-ups as proof of market appeal and lasting demand. Heavy reliance on paid traffic from the start, on the other hand, suggests short-term interest. It’s a red flag for VCs.

Quick tips to hack organic growth: 1) create your ideal customer profile (ICP) to drive the right audience to your app; 2) create social features in the app for network effects; 3) start building your brand early on (some apps have long waitlists even before launch, thanks to personal branding and PR).

Unit economics: LTV to CAC ratio

Next, we need a holistic picture of how effectively an app acquires, retains, and monetizes users. This is what the LTV-to-CAC ratio tells us.

Customer acquisition cost (CAC) shows how much an app spends to acquire a new user, while lifetime value (LTV) estimates the total revenue a user may bring over their lifespan with the app.

A healthy LTV-to-CAC ratio is at least 2x, meaning LTV is double the cost of CAC. 3-4x? Rocket speed.

Engagement: Stickiness ratio

After that, our analysts check how engaged an app’s users are.

We always look at the dynamics of an app's active users (DAU, WAU, MAU*) and the time they spend in it.

During the first call, we ask founders which users they count as “active” — who log in or do other things. Then we look at the data.

How we assess active users depends on the app category. Social, news, or gaming apps usually have a higher DAU/MAU ratio, as many people tend to use them daily. Shopping, streaming, or productivity apps typically have a medium DAU/MAU ratio but higher WAU/MAU.

A good DAU/MAU ratio for frequently used apps is 40%. Anything above 50%? Extremely sexy. Below 25%? An alarm bell. Remember, active users always drop after apps switch to monetization, so it’s crucial to get this metric in good shape first.

We also pay attention to the average session time. This metric is especially crucial for apps that generate income through ads.

Averages depend on the app category: For instance, it’s about 15 minutes for health & fitness apps, but nearly twice as long for entertainment apps.

Monetization: Install to trial, trial to paid conversions

Conversion rates show if an app can make a profit and how well its monetization strategy works.

Our team looks at three markers:

Install to trial (14-20% is good).
Trial to paid (25% is good; 30-38% is great).
Install to paid, with or without a trial (8-10% is good).

We also analyze how many users request their money back (if the numbers are higher, it’s a big warning sign):

Refund rate, showing users who request their money back through an app (up to 12%).
Chargeback rate, showing users who ask their bank to return the payment (up to 1%).
Fraud rate, showing users who were charged for no reason (up to 1-3%).

The golden way to monetization is choosing the right bundle of features for your premium package. This can be done through testing and user interviews or surveys.

Also, avoid hard pushes on your users with aggressive ads or neverending pop-up paywalls — no one likes that.

Retention: N-day across all users

Attracting users and having them create a profile is only half the work. The most difficult part is building a product that people want to use long-term.

In this area, we focus on the N-day (bounded) retention rate across all users, which tells us how many of them return to an app on a specific day after installing it. Day 1 (>30%) and Day 30 (>7%) are crucial for us.

If some users have ditched your app, you may try returning them with push notifications, but it requires many tests.

Some companies make reactivation creative. For example, Duolingo used a playful twist: With the new release of the app, the “‘passive aggressive” bird icon turns old and tired if users neglect the app for a long time.

This clever nudge sparked engagement and blew up social media. On Twitter, users started tagging Duolingo’s profile, leaving tweets like “Duolingo, why so depressed? I hate opening the app with this sad face, you miserable old owl.”

Daily Active Users (DAU), Weekly Active Users (WAU), and Monthly Active Users (MAU).

If you are an early-stage startup building a consumer app that aligns with our investment thesis and the benchmarks above, you can send your pitch to F1V: Use our Typeform. Hope we can work together.

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