Facebook VP of Growth Alex Schultz explains how to estimate a good retention target for your startup

“Businesses in different verticals require different terminal retention rates. If you’re in e-commerce and you’re retaining on a monthly active basis 20-30% of your users, you’re probably going to do pretty well. If you’re in social media and the first batch of people signing up to your product aren’t 80% retained, you’re not going to have a massive social media site.”

To answer this question for yourself, you need to use dimensional reasoning to figure out what good retention looks like for your company’s vertical.

Alex walks through solving for Facebook’s retention rate as an example. At the time of the lecture (2014), there were about 2 billion people on the Internet outside of China, and Facebook reported roughly 1.3 billion active users. If you divide these two numbers by each other, you get to a 65% retention rate.

He walks through how to back into the terminal retention rates for Amazon and WhatsApp here as well.

The estimates aren’t perfect but they’re good enough approximations that you can use to back into the retention rate you need for your startup.

Full video: Y Combinator “Lecture 6 - Growth (Alex Schultz)” (Oct 2014)