Does your cohort retention curve smile?

The best thing to measure the growth rate of is revenue. The next best, for start-ups that aren’t charging initially, is active users. That’s a reasonable proxy for revenue growth because whenever the start-up does start trying to make money, their revenues will probably be a constant multiple of active users. - Paul Graham

In absence of real revenue, the cohort retention curve is one of the major metrics used by investors like Andreessen and Horowitz.

A cohort is a group of users sharing a common characteristic like users who signed up on the same day or users who have placed at least one order. A Cohort Retention Curve helps you in visualizing your retention for a cohort over time.

A curve that flattens is considered to be good as it means you are able to retain some users. The higher the curve flattens, the better retention you have.

But, the real great retention curve smiles. Look at the cohort retention curve for Evernote:

For most of the good products, cohort retention curves get flatten after a while. But, the magic happens when it smiles back which means even churned users are coming back to your product due to development or network effect or so. This is where the magic happens!

So, how is your retention curve looking?