Your North Star Metric: The Full Methodology
How to find the one number that actually matters
This edition is supported by MightyPartners and Vanta.
MightyPartners - flexible, non-dilutive venture debt for high-growth Australian and New Zealand tech companies ($500K–$10M+, no warrants required).
Vanta is hosting a free live webinar on 19 May (11 AM) on rebuilding your Third Party Risk Management program to keep up with AI in your vendor stack - register here.
I want to start with a confession.
When I was running Startmate - Australia’s most active startup accelerator - we did not have a North Star Metric for a long time.
And honestly? It was chaos.
There’s always so much going on inside an accelerator. Cohort selection. Investor management and deploying capital into companies. Legal documents. Financial reporting. Mentor hours. Community growth. Corporate partnerships. Fellowship programs. Grants. Every single one of those things felt important. Every single one was important. And that’s exactly the problem - when everything matters, nothing does.
We tried the exercise every few years and always failed.
Every attempt ended the same way: not a North Star, but a constellation. A whole Orion of metrics, each one important, none of them the one. We’d build a framework, agree it looked great, and three months later nobody could remember which number we were supposed to be obsessing over.
Eventually, we landed on one. And once we did, everything changed. I kept coming back to it every single week in team meetings - not because I was a broken record, but because it genuinely answered the question “what should we be working on right now?” faster than any other framework.
It became my single most useful tool for communicating strategy to the team and for clarifying what we need to focus on as a team.
Big kudos to Ben Simai at Startmate, who led the exercise that finally made it click.
The methodology I’ve since adapted into the batko.ai North Star tool draws directly from that process.
Start there.
Then come back and read the rest of this.
👉 OR get it as a Notion exercise - HERE
What a North Star Metric Is (And What It Isn’t)
The concept was popularised by Sean Ellis, the growth strategist who coined “growth hacker” and built early growth at Dropbox, Eventbrite, and LogMeIn. His insight was simple: revenue is a lagging indicator. By the time revenue moves, the decision has already been made. What you need is the number that predicts revenue - the moment of value delivery.
Three defining characteristics of a real North Star:
It captures customer value, not company value. Revenue tells you what you earned. Your North Star tells you what your customer got.
It leads revenue. When the North Star goes up, revenue follows with a lag. If that’s not true, you’ve picked the wrong metric.
The whole company can influence it. Engineering, marketing, product, sales - everyone can draw a clear line from their work to this number. If only one team touches it, it’s a team metric, not a company North Star.
Common traps founders fall into:
Revenue as the North Star - Revenue is a consequence. It doesn’t tell you why things are working.
A vanity metric - App downloads, page views, social followers. These feel good; they predict nothing.
An internal metric - “Support tickets closed” or “features shipped” measure internal efficiency. Your North Star measures external value.
The Three Types of North Stars
Not all businesses deliver value the same way. There are three core value games and your North Star should reflect which one you’re playing. This framing comes from Amplitude’s North Star Playbook (by John Cutler and Andy Johns), one of the best free resources on this topic.
The Attention Game
Your product captures and holds attention. Value is delivered through time and engagement.
Best North Stars: daily active users, time spent, sessions per week.
Examples:
Spotify: Time Listened
Netflix: Hours Watched
Duolingo: Daily Active Learners
The Transaction Game
Your product facilitates a transaction - a purchase, a booking, a transfer. Value is delivered when the exchange completes.
Best North Stars: transactions completed, GMV, bookings made.
Examples:
Airbnb: Nights Booked
Uber: Weekly Rides
Afterpay: GMV
Shopify: GMV through merchant stores
The Productivity Game
Your product helps people or teams do something faster, better, or more collaboratively. Value is delivered when work gets done.
Best North Stars: tasks completed, documents published, messages sent.
Examples:
Slack: Messages Sent per Workspace
Canva: Designs Published
Atlassian: Active Teams Using Jira
Notion: Blocks Created
The rule: identify your game before you pick your metric.
A productivity business that picks a transaction metric will optimise for entirely the wrong thing.
The batko.ai exercise expands these into five game types - adding Network (value delivered through connections between participants) and Outcome (value delivered through real-world results users achieve).
👉 Try the full exercise here.
👉 OR get it as a Notion exercise - HERE
The Magic Moment and Why It Matters for Metric Selection
Alongside your North Star, there’s a related concept every founder should understand: the magic moment.
The magic moment is the specific instant when a user first truly feels your product’s value, when an abstract promise becomes felt reality.
The magic moment is never the signup.
It’s never the payment.
It’s always tied to an action the user takes that produces a result they care about.
Canva’s magic moment isn’t signing up or even choosing a template. It’s the moment you hit publish, the design lands in a client’s inbox, and they reply: “this looks incredible.” That moment - proof that you, with zero design training, made something that impresses people - is what makes Canva irreplaceable. Notice what “designs published” captures that “designs created” never could: it counts every magic moment. And when someone publishes that design and shares it with others, those other people see Canva-made work for the first time. The magic moment drives the viral loop. That’s not a coincidence; it’s why this metric was chosen.
Atlassian’s magic moment is when a team crosses the threshold where Jira becomes the source of truth for their whole sprint. Before that point, it’s just software people were told to use. After it, removing Jira would break how the team works. The metric “active teams” - not “users” - counts every team that’s crossed that threshold.
The principle: your North Star should proxy the magic moment at scale. When you find a metric that goes up every time a user reaches their magic moment, you’ve found something real.
How to Choose Yours: The Full Methodology
The simplified “three questions” approach to picking a North Star works fine as a starting point. But the methodology I’ve found actually produces a defensible, team-aligned metric is more rigorous than that. Here’s the full process - the same one inside the batko.ai North Star tool.
👉 OR get it as a Notion exercise - HERE
Step 1: Define your game and articulate your Moment of Success
First, identify which value game you’re playing (Attention / Transaction / Productivity / Network / Outcome). Then write one sentence - called the Moment of Success - that describes the exact moment your customer gets the value they came for. Not what they do in your app. The moment the value lands.
Push yourself here. “A user completes a task” is too vague. “A freelance designer downloads a Canva presentation and their client approves the proposal on the spot” is a Moment of Success.
The more specific it is, the easier every subsequent step becomes.
Step 2: Map the full value exchange
List everything you give your customers (product access, content, status, community, data insights, integrations, tools) and everything you receive in return (revenue, attention, user data, referrals, network effects, feedback). Most founders only write “revenue” on the receive side. The best North Stars often emerge from the non-obvious exchanges - the data you collect, the network effects you generate, the referrals that compound.
Step 3: Generate 3-5 candidate metrics using the forcing template
For each candidate, complete this sentence:
“I believe [company] succeeds when [metric] grows, because [reason].”
The “because” is the whole exercise. It forces causal thinking. “I believe Canva succeeds when designs published grows, because each published design proves a user reached their magic moment — and gets Canva in front of new potential users” is a causal argument. “I believe Canva succeeds when signups grow” is not.
Aim for at least three candidates. Don’t eliminate early. You need options to score against each other.
Step 4: Score every candidate on six criteria (1-5 each)
Expresses customer value
Measurable today
Leads to revenue
Team can influence it
Reviewable weekly or monthly
Clearly actionable
Candidates scoring below 18/30 should be eliminated. This removes the feel-good options and forces a genuine decision between only the metrics that pass all six tests.
Step 5: Commit to one
Pick the surviving candidate with the highest score and the clearest causal story. Then ask the commitment question: if this metric doubles, does the business clearly win? If you hesitate - if you find yourself adding qualifications - it’s not the right one.
Not two metrics. Not a composite. One.
Step 6: Build the Ray
Once you have your North Star, map the input metrics that drive it - your North Star Ray.
The Ray uses four dimensions to ensure you’re not missing any lever:
Breadth - How many customers reach the value moment? (acquisition, reach)
Depth - How deeply do they engage when they get there? (feature adoption, intensity)
Frequency - How often do they return? (retention, habit formation)
Efficiency - How quickly do they get to value? (time-to-value, conversion)
For each input metric in your Ray, ask: “What’s the worst way someone could game this metric?” This question naturally creates guardrails. A metric that’s easily gamed is a metric that will eventually be gamed - usually by accident, sometimes by incentive.
The Ray is what turns your North Star from a brand exercise into a weekly management tool. Every sprint, every OKR, every hire maps back to a node in the Ray.
Run the full exercise free at batko.ai/operate/northstar
I’m also building a public library of real North Stars contributed by founders - filterable by stage, industry, and game type. Live at batko.ai/operate/northstar/library.
👉 OR get it as a Notion exercise - HERE
What Investors Actually Want to See
There’s a moment in every fundraise where an investor stops looking at your deck and asks: “what’s the one number you obsess over?”
The question isn’t about the metric. It’s about whether you’ve done the thinking.
But metrics discipline matters well beyond that one conversation. Here’s what sophisticated investors are actually looking at.
Growth trajectory: T2D3
The canonical trajectory for a top-tier SaaS company is what Neeraj Agrawal at Battery Ventures called T2D3 - Triple Triple Double Double Double. Starting from $2M ARR: triple to $6M, triple to $18M, then double three more times to reach ~$144M in five years. It sounds aggressive until you see how many successful IPOs followed exactly this shape.
This trajectory is why growth rate matters as much as absolute ARR when setting a North Star. A metric growing 3x year-on-year tells a fundamentally different story than one growing 50% - even if the absolute numbers look similar today.
Stage-specific benchmarks
At the very early stage, Paul Graham’s framework is the simplest: “A startup is a company designed to grow fast.” YC’s internal benchmark for healthy early-stage growth is roughly 5-7% week-on-week. That compounds to approximately 12-15x annually — the kind of growth that justifies venture backing.
Paul Graham also introduced the concept of default alive vs default dead: if your current revenue growth continues and you make no changes, will you reach profitability before you run out of cash? Every founder should know the answer to this question at all times. It’s not a fundraising question - it’s a survival question.
Inflection points
Investors at every stage are asking the same underlying question: what does this capital unlock? The money should get the business to a clear inflection point = a milestone after which the trajectory changes fundamentally. That might be product-market fit, a first enterprise contract, a proven acquisition channel, or the revenue level at which you become default alive.
If you can’t describe the inflection point your raise gets you to, you’re not ready to raise.
Unit economics investors actually check
When you’re approaching a Series A, the standard benchmarks (drawn from Redpoint Ventures’ research across 600+ SaaS companies) are:
LTV:CAC ratio of 3x or above - for every dollar spent acquiring a customer, you generate at least $3 in lifetime value
CAC payback under 18 months - the faster you recover acquisition cost, the better your capital efficiency
Net revenue retention above 100% - your existing customers expand faster than they churn
Gross margins above 60% - for software businesses; the ceiling on valuation multiples drops sharply below this
And the valuation multiple you’ll receive scales directly with growth rate: 5-10x ARR for slow growth (sub-50% year-on-year), 10-20x for medium growth (50-100%), and 20-50x+ for high growth (100%+ year-on-year).
Your North Star metric, and how confidently you can explain its causal relationship to revenue, is what determines which bracket you’re arguing for.
Non-dilutive alternatives: when your metrics are ready
If your North Star is trending the right way and your unit economics are clean, there are funding pathways that don’t require giving up equity. Venture debt is massively underutilised in Australia compared to the US, and most founders don’t know it exists until they’re deep into a Series A.
This edition is proudly supported by Mighty Partners
- flexible
- non-dilutive venture debt
for high-growth Australian and New Zealand tech companies
($500K-$10M+, 12-36 month terms, no warrants required).
When Gracie and the team at Mighty assess a business, here’s what they’re actually looking at:
Revenue scale and quality - ARR, growth rate, recurring vs project-based, customer concentration
Unit economics - gross margin, CAC payback, revenue retention
Cash efficiency - runway, monthly burn, path to profitability
Capital structure - existing investors, previous equity raised
“Debt is almost always cheaper than equity, as long as the business continues to grow in value.
The cost of debt is fixed.
The cost of equity keeps growing as your business does.”
👉 Learn more at mightypartners.com.au 💸
The Lesson
The North Star exercise reveals something uncomfortable for most founders: you are not as clear on your own value proposition as you think you are.
I’ve run this with dozens of founders. The ones who get it wrong almost always make the same mistake: they pick the metric that’s easiest to move, not the one that’s most meaningful.
Easy to move: signups, page views, downloads, demo bookings.
Most meaningful: the moment your product changed something for your customer.
And once you find it - mention it every single week. In every team meeting. Every time someone asks “what should we be working on?” the answer should flow back to the North Star automatically. That’s what alignment actually feels like.
Do the exercise.
It takes 20 minutes.
Start here: batko.ai/operate/northstar
👉 OR get it as a Notion exercise - HERE
AI is in your vendor stack.
Is your risk program keeping up?
Every startup scaling toward a fundraising or institutional investment needs to show they have security and compliance under control. But AI tools are being added to vendor stacks faster than most risk programs can track.
Vanta is hosting a free live webinar on 19 May (11 AM) on exactly this:
how the Samsara team rebuilt their Third Party Risk Management program to keep up with AI, and what you can learn from their playbook.
