The Other Side of the Canvas

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A look at lean startups for investors, from the other side of the canvas.

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The Other Side of the Canvas

  1. the other sideof the canvasKeith McGreggorDirector, VentureLab at GTLead Instructor, NSF I-Corps Programwhat investors really need to knowabout the new startup philosophy
  2. the “new” startup philosophy
  3. the new testaments
  4. CoherenceClarityContext
  5. CoherenceClarityContext
  6. What is a Startup?
  7. A startup is a temporaryorganization designed to search fora repeatable and scalablebusiness model.- Steve Blank
  8. Startup ≠ CompanyA startup is a temporaryorganization designed to search fora repeatable and scalablebusiness model.
  9. Startups SearchCompanies Execute
  10. Startup Business ModelCompany Product/Service
  11. business planvs.business model
  12. business plana place to collect all of your(current) hypotheses andyour rationale for themcover pagetable of contentsexecutive summarybusiness descriptionbusiness environment analysisindustry backgroundcompetitor analysismarket analysismarketing planoperations planmanagement summaryfinancial planattachments and milestones
  13. Business PlansareFICTION
  14. "Everybody hasa plan until theyget punched inthe mouth."
  15. Five year forecast?MAGICALTHINKING
  16. Crystal ball...2007 2013
  17. $time
  18. $timeYear 3
  19. Planning Plan>
  20. business modelthe rationale of how an organizationcreates, delivers, and captures value
  21. Offer
  22. Offer Customers
  23. Offer CustomersInfrastructure
  24. Offer CustomersInfrastructureFinancial
  25. ?? ??????????????FICTION
  26. ✔✔✔?✔✔?✔✔✔✔✔?✔?✔
  27. ©2006“innovation”
  28. 36the key ideaThere areNO FACTSin the building!
  29. 37the big secretConduct100+Interviews
  30. 38A manwho carriesa cat by thetail learnssomething hecan learn inno other way.
  31. Why do Startups fail?
  32. $timeVALLEY OFDEATH
  33. $timeVALLEY OFDEATHACTUAL CUSTOMER
  34. Startups don’t failbecause theyfail to makesomething.Startups failbecause theyfail to makesomethingsomeonewants to buyfrom them.
  35. $timeVALLEY OFDEATH
  36. Product / Market Fit
  37. Product / Market FitFinancial
  38. Product / Market FitCOST < REVENUE
  39. $timeTRACTION!
  40. $timeTRACTION!Profit
  41. $timeoops...Profit = Revenue - Cost
  42. COST < REVENUE?
  43. METRICSVanity
  44. Moneyball!METRICSActionable
  45. the Pipeline$$$
  46. METRICSAARRR
  47. 55the Pirate MetricsAcquisitionActivationRetentionReferralRevenue
  48. acquisition activation retention revenuereferral
  49. 57SaaS Example
  50. $500 / user / month$$$
  51. 59Paid Demand @ $1500 / 1k ClicksOrganic Traffic @ $0.00Google Adwords= $1.50 per Visitor= $0.00 per Visitor
  52. 60Paid Demand = $1.50 / VisitorOrganic Traffic = $0.00 / Visitor50%50%
  53. 61Cost per Visitor = $0.75
  54. 62Cost per Visitor = $0.75Visitor to Raw Lead3%
  55. 63Cost per Visitor = $0.75Visitor to Raw Lead3%Raw to Qualified Lead20%
  56. 64Cost per Visitor = $0.75Visitor to Raw Lead3%Raw to Qualified Lead20%Qualified Lead Cost =0.750.03 * 0.20= $125
  57. 65Cost per Visitor = $0.75Visitor to Raw Lead3%Raw to Qualified Lead20%Closed Deal Cost =0.750.03 * 0.20 * 0.10= $1250Qualified Lead to Closed Deal10%
  58. 66Cost per Visitor = $0.75Visitor to Raw Lead3%Raw to Qualified Lead20%= $1250Qualified Lead to Closed Deal10%Marketing CostSales CostMarketing Cost Sales Cost = ?
  59. 67VisitorsRaw Leads (RLC)50Qualified Leads (QLC)10Closed Deals (CDC)1Sales CostSales Cost = (1,667 * RLC) + (50 * QLC) + (10*CDC)1,667
  60. 68VisitorsRaw Leads50Qualified Leads10Closed Deals1Sales CostSales 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
  61. 693%20%$1,250 + $6,33410%Marketing Cost Sales Cost= $7,584CAC =Customer Acquisition Cost (CAC)
  62. 70LTV = ?Lifetime Value of a Customer (LTV)
  63. 71Lifetime Value of a Customer (LTV)Average Revenue Per User (ARPU)ARPU =Total RevenueCustomers
  64. 72Lifetime Value of a Customer (LTV)Average Revenue Per User (ARPU)ARPU =Total RevenueCustomersGross Margin =Revenue - CostRevenue
  65. 73Lifetime Value of a Customer (LTV)LTV = ARPU * Gross Marginnot quite...
  66. 74Churnchurn =leavestay
  67. 75Lifetime Value of a Customer (LTV)LTV=ARPU * Gross MarginChurn
  68. 76Lifetime Value of a Customer (LTV)LTV=0.01Suppose ARPU = $500 per month& Gross Margin = 40%& Churn = 1% per month1%$500 * 0.4= $20,000
  69. 77$1,250 + $6,334Marketing Cost Sales Cost= $7,584CAC =LTV=0.01$500 * 0.4= $20,000ARPU Gross MarginChurn
  70. Balancing a SaaS model3xCAC < LTVrecover CAC < 12 monthswhy?churn < 3%
  71. COST < REVENUEthe equation that matters...
  72. ... is this one: CAC << LTVacquisition activation retention revenuereferralCAC LTV
  73. $timeCAC << LTVProfit
  74. ifCAC << LTVCOST < REVENUEandthen COMPANY!
  75. CoherenceClarityContext
  76. Canvas Flow
  77. for each customer segment,one or more value propositions
  78. for each value proposition,one or more customer segments
  79. indirectfor each customer segment,one or more channelsdirect
  80. getfor each customer segment,how to get/keep/growkeepgrow
  81. for each customer segment,which revenue stream (and for what value)A$ for AB$ for B
  82. for each value proposition,some resources and activities create itABact 1act 2RRRR
  83. although an activity might createa resource too...ABactR
  84. each customer relationship phasehas its own activities and/or resourcesGetKeepactRGrow
  85. channels also require activities or resources...actRindirectdirect
  86. revenue streams also need activities or resourcesactRA$ for AB$ for B
  87. partners provide missingresources or activitiesact 1???RRRRpartner 1partner 2
  88. each activity or resourcehas an associated costact 1act 2RRRRfixed costs variable costs
  89. the engine of the business
  90. the canvas, pitched
  91. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  92. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  93. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  94. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  95. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  96. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  97. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  98. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  99. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  100. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements CloserCAC << LTVCOST < REVENUE
  101. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements Closer
  102. Title Team OverviewProblem Solution Value SecretsAdvantage Strategy ModelProjections Requirements CloserMy company, _______________,is developing ______________to help __________________________________________________________.company namesomethingsomeonesolve some problemwith secret sauce
  103. CoherenceClarityContext
  104. trendsmacro-economicforcesindustryforcesmarketforces
  105. trendsmacro-economicforcesmarketforcesmarket issuesmarket segmentsneeds & demandsswitching costsrevenue attractiveness
  106. trendsmacro-econoforcesindustryforcesCompetitionincumbents & insurgentsSubstitutionsSuppliers & value chainStakeholders
  107. trendsindustry markettechnologyregulatorysocietal & culturalsocioeconomic
  108. macro-economicforcesforces forcesglobal marketconditionscapital marketscommodities & resourceseconomic infrastructure
  109. trendsmacro-economicforcesindustryforcesmarketforcestechnologyregulatory societalculturalsocioeconomicsuppliersstakeholdersincumbentsinsurgentssubstitutesglobal marketcapital market commoditieseconomic infrastructuresegmentsneeds and demandsswitching costsrevenue attractiveness
  110. trendsmacro-economicforcesindustryforcesmarketforcesforesightmacroeconomicscompetitiveanalysismarketanalysis
  111. the other sideof the canvas
  112. venturelab.gatech.edu@venturelab / @keithmcgreggorkeith@venturelab.gatech.edu75 Fifth St NW, Suite 202, Atlanta GA 30308

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