Activation rate is the percentage of new users who complete a specific early action that correlates with them becoming genuinely engaged long-term customers, sometimes called an "aha moment," rather than just signing up and never returning.
What counts as the activation event is specific to each product: sending a first message, uploading a first file, completing a first transaction, whatever behavior a company has actually found correlates with someone sticking around. Defining the wrong activation event, one that's easy to complete but doesn't predict real retention, makes the metric misleading rather than useful.
A low activation rate points to an onboarding problem more often than a product-market fit problem: people signed up because they wanted something, but something in the first experience is stopping them from getting to the point where the product's value is actually clear.
Add your revenue and website for a full diligence brief, reviewed by a CPA who ran EY's West Coast R&D Tax Credit practice for 13 years.