Art Chang made a great quote at the December Ultra Light Start-up panel on Bootstrapping vs. Seeking Capital (You can view the Zimanablog post for the Ultra Light Start Up here, as well as a great video for the session at the Ultra Light Start Up site here).
The Times Online article explains how Twitter has justified its value through Google's offering of Twitter updates in the results pages whenever Google users conduct a search (The same can be done on Bing). Twitter has yet to indicate a strong business despite its advertising potential through user acceptance of its real time subject search and its use to announce events immediately.
With discussion on the sour US economy and the limited lending by banks to small business, businesses are under more pressure to show cash flow and have a great monetization model. Cash is important in business, but showing how the idea is connecting with a target audience can be equally valuable. This is what Twitter has done, and small businesses have tools available to make this crucial link to the start to customer behavior.
If a website is involved for transactions -- sign up or purchase -- an analytics solution should be added to the site. Traffic data can provide an indicator of how well the concept is appealing to customers. Furthermore, more detailed data can be captured. In Google Analytics, for example, returning visitors can be captured, a means for stating how appealing the website -- and consequently the concept -- is. Benchmarking data is also available (although users should consider that the data may not neatly breakdown into a category that compares to their industry). Time on site, visitor recency, page views per visitor -- all of these can confirm the story of customer interest, depending on the website content and its context. No one metric can capture the information, but a combination of metrics can show the trend.
The key is to show that your business concept has appeal, even if there are some capital concerns in place (That concern can be a separate conversation on how it will be addressed). If the data is showing gradual improvement in traffic and traffic quality over time, your business can then make a statement to its appeal to an audience (and retain if the returning visitor number is significant).
What other metrics can be used from analytics to aid an investment decision?
