Progress and performance measurement form the foundation of education. Course grades motivate ambitious students—and schools require external evaluation to admit students in the first place. But it’s crucial that as your students set metrics for their new business, they focus on “clarity” versus “vanity” metrics. We love this article from First Round Review, “I’m Sorry, But Those Are Vanity Metrics” about this important topic.

To begin with, you must understand and communicate the distinction between clarity and vanity metrics for startups and how each might be useful to student entrepreneurs for different purposes. Despite the name, vanity metrics do have important roles to play—but clarity metrics are crucial for growing the business.

Vanity Metrics: High-level, often activity-based measures. Ex: Downloads, daily users, subscriptions, followers, etc. Despite the name, these can be useful to students, helping them communicate momentum and attract partners.

Clarity Metrics: Sometimes referred to as “sanity metrics,” these are more operational measures that convey the value of the business and the customer experience. Ex: Time for service, renewal, satisfaction, sales as a percent of users, etc. These metrics are what will drive strategic, long-term growth.

To see how technology-based student startups use both kinds of measures, consider the type of business they each are building:

Service-based Company: LaunchPad students often begin technology-based service companies, like ride- or space-sharing, food delivery, or even on-campus, on-demand, laundry services. (Yes, we’ve really seen this one.)

• Vanity Metric: Typically, this is the number of users. Ideally, it should be the number of users compared to competitors or other similar businesses. Students who network with existing companies in their industry can sometimes form relationships that provide this data insight for comparison.
• Clarity Metric: These measures should be the earliest act of service or the best measure of performance. For a food delivery business that might be deliveries made under a certain amount of time, while for a ride-sharing service the metric might be the speed of match between driver and rider.

Ad-based Company: Many LaunchPad students have recognized unique advertising opportunities. For example, one graduate works with brands interested in the gamers and esports audience. Another former Propel attendee helps local businesses target potential on-campus customers.

• Vanity Metric: Impressions are the most well recognized (and over-utilized) advertising metric. While these measures do communicate exposure, without linking them to activity-based data, exposure does not capture results.
• Clarity Metric: For these types of companies, it is all about the “event-stream.” These kinds of metrics, like the point of origination for an ad-viewer or how an ad viewers’ behavior changes, should be arranged chronologically and be based on key moments in the customer journey.

Software-based Company: Lots of engineering and computer science LaunchPad students have started app and SaaS businesses. These range in focus from sports analytics to healthcare benefits, and from data security to blockchain.

• Vanity Metric: The number of downloads or accounts is an important measure that often interests investors and advisors. Recall, however, the number of times you’ve added an app to your phone, maybe even set up a profile, but then used it only very briefly or never at all.
• Clarity Metric: Active engagement time is a more insightful metric for determining software-based business strategy. The “active” element is critical here. Many apps will continue running even without being actively used. Rather than over-relying on technology-based insights, like A/B testing, students should be encouraged to connect with users based on this activity, or lack thereof, to understand the situation completely.

eCommerce Company: Another type of business LaunchPad students frequently create is an eCommerce company that sells products they or their employees create. Over the years, these companies have often focused on fashion manufacturing and retail.

• Vanity Metric: Of course, size or quantity of purchase is the most obvious metric for an online sales company, but students should remain equally focused on loyalty and frequency metrics.
• Clarity Metric: Are their customers coming back? How often and as a result of what prompt? Other helpful clarity metrics for eCommerce companies can help founders understand who the customer is and how those change: Who orders most frequently? What is the common element between them? Do you see this group growing or shrinking?

Students are trained to focus on performance measures. While this can be helpful, it is easy to become overly focused on vanity metrics to catch the attention of a select group of stakeholders. Clarity metrics, which reflect the behavior of customers over time, will help them make real progress and build a stronger business. Otherwise, students can find themselves going viral quickly, only to later crash and burn.