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Five Innovations
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Five Innovations

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Five innovations that have changed the startup world forever. …

Five innovations that have changed the startup world forever.
Presented at two locations in Puerto Rico in August, 2013.

Published in: Business, Technology
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  1. Startups 2013 how five innovations have changed the startup world, forever Keith McGreggor Director of VentureLab @
  2. 1980 1990 2000 2010 Southern Bell Lockheed Apple Coca Cola Yahoo G eorgiaTech BS M S PhD M ichele Andrew Sarah school life work startups M ilton AIAtlanta Pixel Resources BeInfinite Ansel N etroadshow M ediaTools TheConceptory G uardedN et 21e Reflex Security Backnoise Iterated System s N SF
  3. America’s Best Engineering Graduate Schools 2012 1. ! Massachusetts Institute of Technology 2. ! Stanford University 3. ! University of California — Berkeley 4. ! Georgia Institute of Technology 5. ! California Institute of Technology (CalTech) 6. ! University of Illinois — Urbana-Champaign 7.! Carnegie Mellon University 8.! University of Michigan — Ann Arbor 9.! University of Texas — Austin 10.! Cornell University! Eighth Year!
  4. 7/14/09 Enterprise Innovation Institute GT Research Distribution Over half a billion dollars total R&D on campus for FY2009! 12 College of Engineering GTRI College of Sciences Research Centers College of Computing Other > $500,000,000 / year EACH YEAR AT
  5. research is the transformation of money into knowledge
  6. EACH YEAR AT annual invention disclosures 400 unencumbered inventions 250 startup ideas 25 license ideas 200 early ideas 25 VentureLab
  7. at least one new invention every day
  8. innovation is the transformation of knowledge into money
  9. Decisions LICENSE Inform Office of Technology Licensing START-UP Assign to Catalyst LIFESTYLE COMPANY Advice team on viable commercialization strategies. SCIENCE PROJECT Put technology on hold Contact professor every six months for an update Research { 80% 10% 10%
  10. inventions reviewed 250+ new projects 35+ ongoing projects 83 new companies created 30 external investment in new and existing VL companies in 2012 $185M total of angel & VC investments in VL companies $700M+ 2012
  11. 1 Rice Alliance for Technology and Entrepreneurship Rice University United States 2 VentureLab Georgia Tech United States 3 UB Technology Incubator State University of New York, Buffalo United States 4 NDRC LaunchPad Trinity College Dublin Ireland 5 SETsquared Universities of Bath... United Kingdom 6 Innovation Centre University of the Sunshine Coast Australia 7 Tech 20/20 University of Tennessee United States 8 ATP Innovations University of Sydney Australia 9 STING KTH Royal Institute of Technology Sweden 10 NCTU Innovation Incubation Center National Chiao Tung University Taiwan 11 Youngstown Business Incubator Youngstown State University United States 12 I3P Politecnico di Torino Italy 13 Vermont Center for Emerging Technologies University of Vermont United States 14 Jon Brumley Texas Venture Labs University of Texas at Austin United States 15 Startup Sauna Aalto University Finland 16 InNOLEvation Accelerator Florida State University United States 17 TEC University of Alberta Canada 18 ASU Venture Catalyst Arizona State University United States 19 Oxford Entrepreneurs Incubation Centre Oxford University United Kingdom & #1 Engineering/Science Incubator #1 Early Stage Incubator
  12. How?
  13. about startups ...
  14. 1996 1998 2000 2002 2004 2006 2008 2010 2012 NASDAQ 1000 2000 3000 4000 5000
  15. $1,000,000,000,000
  16. we know something now that we didn’t know before ...
  17. we know something now that we didn’t know before we know how to build startups
  18. we know something now that we didn’t know before we know how to build startups engineer
  19. five innovations
  20. what is a company?
  21. A organization which sells a product or service in exchange for revenue and profit
  22. A bit of history...
  23. Dutch West India Company 1620
  24. 1856 - First Org Chart
  25. 1908
  26. Tools for the 20th Century “Century of the Corporation”
  27. ... but what about startups?
  28. Startups are a Smaller Version of a Large Company
  29. Startups are a Smaller Version of a Large Company
  30. Startups are something else.
  31. five innovations what is a startup?
  32. A startup is a temporary organization designed to search for a repeatable and scalable business model. innovation
  33. Startups Search Companies Execute
  34. Business Model Product/Service Startups Companies
  35. Old School of Startups (before 2010) ...
  36. All I Need to Do is Execute the Plan
  37. All I Need to Do is Make the Forecast
  38. What we know now (and have known all along)...
  39. Business Plans are FICTION
  40. "Everybody has a plan until they get punched in the mouth."
  41. Five year forecast? MAGICAL THINKING
  42. Crystal ball... 2007 2013
  43. Previous 5-Year Plans
  44. Business Model Business Plan>
  45. five innovations what is a business model?
  46. Business Model Generation segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial innovation
  47. the Canvas segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial
  48. still fiction... segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
  49. ... and we want facts! segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial ✔ ✔ ✔ ? ✔ ✔ ? ✔ ✔ ✔ ✔ ✔ ? ✔ ? ✔
  50. How?
  51. pick one... segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
  52. design experiment ... segments value prop. revenue streams customersoffer relationships channels financial ? ? ? ? ? ? ? ? ? ? ? A controlled experiment generally compares the results obtained from an experimental sample against a control sample, which is practically identical to the experimental sample except for the one aspect whose effect is being tested (the independent variable).
  53. run it in the world ... segments value prop. revenue streams customersoffer relationships channels financial ? ? ? ? ? ? ? ? ? ? ? A controlled experiment generally compares the results obtained from an
  54. ... and iterate! segments value prop. revenue streams customersoffer relationships channels financial ✔ ? ? ? ? ? ? ? ? ? ? A controlled experiment generally compares the results obtained from an
  55. five innovations the scientific method applies to business
  56. ©2006 innovation
  57. 64 the key idea There are NO FACTS in the building!
  58. 65 the big secret Conduct 100+ Interviews
  59. 66 A man who carries a cat by the tail learns something he can learn in no other way.
  60. Why do Startups fail?
  61. Startups don’t fail because they fail to make something...
  62. Startups don’t fail because they fail to make something. Startups fail because they fail to make something someone wants to buy from them.
  63. segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial Business Model
  64. segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial Product / Market Fit
  65. “If you build it, he will come...”
  66. Tools for managing Engineering Risk Tools for managing Customer Risk ? Waterfall Development Porter’s Five Forces SWOT Analysis Project Management Baseline Risk Assessment Stress Testing Concentration Methodology Quantitative Risk Management ...
  67. five innovations how to reduce customer risk
  68. Customer Discovery innovation
  69. Customer Discovery Startups Search Companies Execute
  70. Customer Discovery Understand the Problem then Develop the Solution
  71. I find out what the world needs. Then I go ahead and try to invent it. - Thomas Edison
  72. Customers want your technology. MYTH
  73. Customers don’t care about (your) technology. TRUTH Customers just want their problem solved.
  74. Customer Discovery key idea Customer POV
  75. Customer Discovery WHO CARES? WHY will they BUY?
  76. segments value prop. revenue streams customersofferinfrastructure cost structure activities partners resources relationships channels financial Product / Market Fit
  77. How do you know you have product / market fit?
  78. METRICS
  79. METRICS Vanity
  80. METRICS Vanity
  81. five innovations build to measure measure to learn learn to build
  82. Lean Startup Methodology innovation
  83. Agile Development
  84. MVPMinimum Viable Product
  85. LOW FIDELITY HIGH FIDELITY Minimum Viable Product MVP Built to LEARN Not to SELL
  86. Moneyball! METRICS Actionable
  87. the Pipeline $$$
  88. METRICS AARRR
  89. acquisition activation retention revenue referral
  90. 98 SaaS Example
  91. $500 / user / month $$$
  92. 100 Paid Demand @ $1500 / 1k Clicks Organic Traffic @ $0.00 Google Adwords = $1.50 per Visitor = $0.00 per Visitor
  93. 101 Paid Demand = $1.50 / Visitor Organic Traffic = $0.00 / Visitor 50% 50%
  94. 102 Cost per Visitor = $0.75
  95. 103 Cost per Visitor = $0.75 Visitor to Raw Lead 3%
  96. 104 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20%
  97. 105 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% Qualified Lead Cost = 0.75 0.03 * 0.20 = $125
  98. 106 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% Closed Deal Cost = 0.75 0.03 * 0.20 * 0.10 = $1250 Qualified Lead to Closed Deal 10%
  99. 107 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% = $1250 Qualified Lead to Closed Deal 10% Marketing Cost Sales Cost Marketing Cost Sales Cost = ?
  100. 108 Visitors Raw Leads (RLC) 50 Qualified Leads (QLC) 10 Closed Deals (CDC) 1 Sales Cost Sales Cost = (1,667 * RLC) + (50 * QLC) + (10*CDC) 1,667
  101. 109 Visitors Raw Leads 50 Qualified Leads 10 Closed Deals 1 Sales Cost Sales Cost = (1,667 * $2.00) + (50 * $20. 00) + (10 * $200. 00) 1,667 = $3,334 + $1,000 + $2,000 = $6,334 $2.00 $20.00 $200.00
  102. 110 3% 20% $1,250 + $6,334 10% Marketing Cost Sales Cost = $7,584CAC = Customer Acquisition Cost (CAC)
  103. 111 LTV = ? Lifetime Value of a Customer (LTV)
  104. 112 Lifetime Value of a Customer (LTV) Average Revenue Per User (ARPU) ARPU = Total Revenue Customers
  105. 113 Lifetime Value of a Customer (LTV) Average Revenue Per User (ARPU) ARPU = Total Revenue Customers Gross Margin = Revenue - Cost Revenue
  106. 114 Lifetime Value of a Customer (LTV) LTV = ARPU * Gross Margin not quite...
  107. 115 Churn churn = leave stay
  108. 116 Lifetime Value of a Customer (LTV) LTV= ARPU * Gross Margin Churn
  109. 117 Lifetime Value of a Customer (LTV) LTV= 0.01 Suppose ARPU = $500 per month & Gross Margin = 40% & Churn = 1% per month 1% $500 * 0.4 = $20,000
  110. 118 $1,250 + $6,334 Marketing Cost Sales Cost = $7,584CAC = LTV= 0.01 $500 * 0.4 = $20,000 ARPU Gross Margin Churn
  111. Balancing a SaaS model 3xCAC < LTV recover CAC < 12 months why? churn < 3%
  112. the equation that matters... segments value prop. REVENUE customersofferinfrastructure COST activities partners resources relationships channels financial <
  113. ... is this one: CAC << LTV acquisition activation retention revenue referral CAC LTV
  114. if CAC << LTV COST < REVENUE and then COMPANY!
  115. five innovations define: “startup” business model generation the scientific method customer discovery lean startup methodology
  116. Customer Discovery Business Model Generation Lean Startup Methodology Startup Engineering
  117. venturelab.gatech.edu @venturelab / @keithmcgreggor keith@venturelab.gatech.edu 75 Fifth St NW, Suite 202, Atlanta GA 30308

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