The Other Side of the Canvas

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

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

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  • 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