Advanced Entrepreneurship:
Customer Development in High Tech
Introduction to the Course
Steve Blank
sblank@kandsranch.com
www.steveblank.com

You Are Here
Plan Liquidity
Company Timeline
Idea 1st Round
Customer Development in the High-Tech Enterprise Fall 2009

You Are Here
Plan Liquidity
Company Timeline
Idea 1st Round
Customer Development in the High-Tech Enterprise Fall 2009

How do You Get Here
Plan Liquidity
Company Timeline
Idea 1st Round
Customer Development in the High-Tech Enterprise Fall 2009

Entrepreneurship
Logical
Process
Customer Development in the High-Tech Enterprise Fall 2009

Entrepreneurship
Logical
Process
Intuitive
Passion
Customer Development in the High-Tech Enterprise Fall 2009

Today
Part 1: Introduction to the Course
Part 2: Key Concepts

Course Introduction
! Course Objectives
! Intro and Backgrounds
! How the Class Works
! Customer Development
Customer Development in the High-Tech Enterprise Fall 2009

Course Objectives
! Learn how to:
" Reduce product/market risk
" Organize sales, marketing and business
development when bringing a product to market
" Understand its relationship with engineering
! Have Fun
! Learn from Each Other
Customer Development in the High-Tech Enterprise Fall 2009

Course Prerequisites
! Officially – none
! Realistically:
" Experience in bringing a new product to market
" Entrepreneurship 295 or equivalent
" Have written a business plan
Customer Development in the High-Tech Enterprise Fall 2009

Introduction and Backgrounds
! Steve Blank
! Guest Speakers
! Class
Customer Development in the High-Tech Enterprise Fall 2009

Introduction: Steve Blank
8 startups in 25 years
2 strikeouts Rocket Science, Ardent
2 walks ESL, Zilog
2 singles Convergent, MIPS
1 double SuperMac
1 home run E.piphany
Non profits: Audubon, POST, Coastal Commission
Blog: www.steveblank.com
Twitter: sgblank
Customer Development in the High-Tech Enterprise Fall 2009

Introduction: Class
Why are you taking the class?
! How many of you have:
" Been in start-ups?
" Been in a startup that failed?
" Raised or tried to raise money?
! How many are:
" Sales, marketing or business development?
" Engineers?
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
! Syllabus
! 3 Application Exercises
" Individual projects
" Max 2-pages
" Use different company than the research project
" Syllabus has assignment dates, due the week after
" Electronic copy gets graded
! Research Project
" Teams of 4 to 6
" Using customer development model analyze company
success/failure, propose alternatives
" Electronic copy gets graded
! Grading
" Research Project (50%)
" Application Exercises (25%)
" Class Participation (25%)
Customer Development in the High-Tech Enterprise Fall 2009

Class Issues
! “Tech-heavy”
! “Enterprise-heavy”
! For-profit versus non-profit
! Startups versus existing companies
! Methodology focused on product/customer
risk reduction
" Doesn’t work for technology risks (i.e Biotech)
! Doesn’t match your experience or opinion
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
in the High Tech Enterprise
Logistics
Steve Blank
sblank@kandsranch.com

How the Class Works
Part 1
Class Case Application Research
Exercise Project
Sept 4th Key Concepts: Mkt In & Out
Class 1 & 2 Risk/Tech Risk, Vertical
Mkts, Types of Startups
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 1
Class Case Application Research
Exercise Project
Sept 4th Key Concepts: Mkt In & Out
Class 1 & 2 Risk/Tech Risk, Vertical
Mkts, Types of Startups
Sept 5th Customer Development IMVU Think!
Class 3 & 4 & Discovery - Part 1 WebVan
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 1
Class Case Application Research
Exercise Project
Sept 4th Key Concepts: Mkt In & Out
Class 1 & 2 Risk/Tech Risk, Vertical
Mkts, Types of Startups
Sept 5th Customer Development IMVU Think!
Class 3 & 4 & Discovery - Part 1 WebVan
Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team
Class 5 & 6 Selection
Draft Concept
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 1
Class Case Application Research
Exercise Project
Sept 4th Key Concepts: Mkt In & Out
Class 1 & 2 Risk/Tech Risk, Vertical
Mkts, Types of Startups
Sept 5th Customer Development IMVU Think!
Class 3 & 4 & Discovery - Part 1 WebVan
Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team
Class 5 & 6 Selection
Draft Concept
Sept 26th Validation– Parts 1 & 2 Wildfire Approved
Class 7 & 8 Kittyhawk Concept
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 1
Class Case Application Research
Exercise Project
Sept 4th Key Concepts: Mkt In & Out
Class 1 & 2 Risk/Tech Risk, Vertical Burger
Mkts, Types of Startups
Sept 5th Customer Development IMVU Think!
Class 3 & 4 & Discovery - Part 1 Webvan
Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team
Class 5 & 6 Selection
Draft Concept
Sept 26th Validation– Parts 1 & 2 Wildfire Approved
Class 7 & 8 Kittyhawk Concept
Oct 16th Validation– Part 3 Motive Customer
Class 9 & 10 Discovery
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 2
Class Case Application Research
Exercise Project
Oct 17th ! Creation – Part 2 Priceline Team Meeting
Class 11 & 12 ! Creation Cases
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 2
Class Case Application Research
Exercise Project
Oct 17th ! Creation – Part 2 Priceline Team Meeting
Class 11 & 12 ! Creation Cases
Nov 13th ! Company Building Peppers & Customer Team Draft
Class 14 Part 1 Rogers Validation
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 2
Class Case Application Research
Exercise Project
Oct 17th ! Creation – Part 2 Priceline Team Meeting
Class 11 & 12 ! Creation Cases
Nov 13th ! Company Building Peppers & Customer Team Draft
Class 14 Part 1 Rogers Validation
Nov 14th ! Company Building
Class 15 Part 2
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 2
Class Case Application Research
Exercise Project
Oct 17th ! Creation – Part 2 Priceline Team Meeting
Class 11 & 12 ! Creation Cases
Nov 13th ! Company Building Peppers & Customer Team Draft
Class 14 Part 1 Rogers Validation
Nov 14th ! Company Building
Class 15 Part 2
Dec 3rd Summary Customer
Creation
Customer Development in the High-Tech Enterprise Fall 2009

How the Class Works
Part 2
Class Case Application Research
Exercise Project
Oct 17th ! Creation – Part 2 Priceline Team Meeting
Class 11 & 12 ! Creation Cases
Nov 13th ! Company Building Peppers & Customer Team Draft
Class 14 Part 1 Rogers Validation
Nov 14th ! Company Building
Class 15 Part 2
Dec 3rd Summary Customer
Creation
Dec 6th Research Pescadero Research
Conference Paper Due
Customer Development in the High-Tech Enterprise Fall 2009

Reading
Class Text: Four Steps to the Epiphany
Assigned Reading: In Reader
Blogs: www.steveblank.com
http://startuplessonslearned.blogspot.com/
Presentations: www.slideshare.net/
Google Group: http://groups.google.com/group/lean-startup-circle
Twitter: sgblank
ericries
watch http://www.youtube.com/watch?v=R2lE3fgj7QA for what you could be in store for
Customer Development in the High-Tech Enterprise Fall 2009

Angel/Study.net
http://bcangel.gsb.columbia.edu
! All materials are on Angel/Study.net
" Syllabus
" Reading
" Assignments
" Presentations (after each class)
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
in the High Tech Enterprise
The Course
Steve Blank
sblank@kandsranch.com

Customer Development
! Business Plans
! The Value of “Models” for an Entrepreneur
! Key Concepts
" Market versus Technology Risks
" Vertical Markets
" Three Types of Startups
Customer Development in the High-Tech Enterprise Fall 2009

The Top Lies of Venture Capitalists
1. “I liked your company, but my partners didn't.”
2. “If you get a lead, we will follow.”
3. “Show us some traction, and we'll invest.”
4. “We love to co-invest with other venture capitalists.”
5. “We're investing in your team.”
6. “I have lots of bandwidth to dedicate to your company.”
7. “This is a vanilla term sheet.”
8. “We can open up doors for you at our client
companies.”
9. “We like early-stage investing.”
Source: Guy Kawasaki
Customer Development in the High-Tech Enterprise Fall 2009

The Top Lies of Entrepreneurs
1. “Our projections are conservative.”
2. “(Big name research firm) says our market will be $50 billion in 2010.”
3. “(Big name company) is going to sign our purchase order next week.”
4. “Key employees are set to join us as soon as we get funded.”
5. “No one is doing what we're doing.”.
6. “No one can do what we're doing.”
7. “Hurry because several other venture capital firms are interested.”
8. “Oracle is too big/dumb/slow to be a threat.”
9. “We have a proven management team.”
10. “Patents make our product defensible.”
11. “All we have to do is get 1% of the market.”
Customer Development in the High-Tech Enterprise Fall 2009 Source: Guy Kawasaki

One Way to Plan a Startup
Customer Development in the High-Tech Enterprise Fall 2009

Business Plans – Why?
! Why write a plan?
" VC’s require it
" Planning (Strategic/Financial/Ops)
" Articulate Bus Model/Assumptions
! What’s wrong with a plan?
" Static
" Execution Oriented
Customer Development in the High-Tech Enterprise Fall 2009

The Value of “Models”
! Model = shorthand for complicated idea
" Check to see if the results are static or dynamic
! For example, …
Customer Development in the High-Tech Enterprise Fall 2009

Timmons Model of Entrepreneurship
(The Business Plan)
Communication
Resources Opportunity
Business
Plan
Creativity Leadership
Team
Customer Development in the High-Tech Enterprise Fall 2009

Moore Model of Entrepreneurship
(Chasm + Life Cycle)
Customer Development in the High-Tech Enterprise Fall 2009

New Product Introductions
What’s the Model?
! New Product introduction models
" Checklist of what to and when to do it
" Market size and business case
" Models try to ensure that product matches market
" Technology and development “gates”
Customer Development in the High-Tech Enterprise Fall 2009

StageGate™ Model
(New Product Introduction)
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development in the High-Tech Enterprise Fall 2009

Steve Blank Model of
Entrepreneurship)
Customer Development in the High-Tech Enterprise Fall 2009

Venture Capital Model of a Startup
(Execution)
Concept/ Product Alpha Test/ Launch/
Bus. Plan Development Beta Test 1st Ship
Customer Development in the High-Tech Enterprise Fall 2009

New Product Introduction
It Doesn’t Always Work
! New Product Development Process
" Works great for some new products, fails
miserably for others
" Products usually are late, over cost
" Typically fails to understand and satisfy
customer needs
! Why?
Customer Development in the High-Tech Enterprise Fall 2009

Issues in New Product Intros
! Current models:
" Confuse product development process with
customer needs
" Treat all startups as the same
! We need a New Product Intro Process
" Reduces Market RiskSimple, understood by all
" Founders commitment
" Cross function organization
" Solid homework
Customer Development in the High-Tech Enterprise Fall 2009

Product Development - Microsoft
Unit of progress: Advance to Next Stage
Waterfall
Problem: known Solution: known
Customer Development in the High-Tech Enterprise Fall 2009

Product Development - Startup
Assumes Customers and Markets are Understood
Agile (XP)!
“Product Owner” or
in-house customer
Problem: known Solution: unknown
Customer Development in the High-Tech Enterprise Fall 2009

Product Development - Lean Startup
Assumes Customers and Markets are Unknown
Customer Development Engineering
Customer Customer Customer Scale
Discovery Validation Creation Company
Data, feedback, insights
Problem: unknown Solution: unknown
Hypotheses, experiments, insights
Customer Development in the High-Tech Enterprise Fall 2009

The Lean Startup Model
Agile Product Development
! Continuous cycle of
Product Development
" Product release cycle in
hours not years
" Tightly coupled with
customer development
" Minimum feature sets,
Agile maximum customer
Product
Development coverage
Customer Development in the High-Tech Enterprise Fall 2009

The Lean Startup Model
Customer Development
! Continuous cycle of
Customer
customer interaction
Development " Rapid hypothesis
testing about market,
pricing, customers, …
" Extreme low cost, low
burn, tight focus
" Measurable gates for
investors
Customer Development in the High-Tech Enterprise Fall 2009

Lean Startup Principles
Extraordinary Value at Low cost in Little Time
! Leverages:
Customer
Development " Commodity Technology
" Agile management
" Customer Development
! Designed to test hypothesis
and answer the unknowns
Agile
Product
Development
Customer Development in the High-Tech Enterprise Fall 2009

The Lean Startup Model
Customer Development Parallels Agile Development
Agile Development
Concept / Agile Continuous Continuous
Business Plan Development Test Ship
Customer Development
Customer Customer Customer Company
Discovery Validation Creation Building
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
Turns Market Risk/Product Fit Hypothesis into Facts
Customer Customer Customer Company
Discovery Validation Creation Building
! Discovery: Test hypotheses i.e. problem and product
! Validation: Build a repeatable and scalable sales process
! Creation: Create end-user demand and fill the sales pipeline
! Building: Scale via relentless execution
Customer Development in the High-Tech Enterprise Fall 2009

Lean Startup Advantages
Customer
Development
! Builds low-burn companies by design
" Low cost market risk testing
Agile
! Organized around learning and Product
Development
discovery
! Right model for current conditions
The next wave of capital efficient startups
Customer Development in the High-Tech Enterprise Fall 2009

The Value of “Models”
! Model = shorthand for complicated idea
! This class teaches a “model” for product
introduction
! How to reduce risk for customer/market fit
! Side effect is rethinking timing in Sales,
Marketing & Business Development
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
Product Development
Concept/ Product Alpha/Beta Launch/
Bus. Plan Dev. Test 1st Ship
Customer Development
Customer Customer Customer Scale
Discovery Validation Creation Company
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
This is what our class is about
Customer Customer Customer Scale
Discovery Validation Creation Company
Customer Development in the High-Tech Enterprise Fall 2009

Customer Development
in the High Tech Enterprise
Key Concepts
Steve Blank
sblank@kandsranch.com
www.steveblank.com

Class 2: Agenda
! Vertical Markets
! Market Risk vs. Invention Risk
! Case: In N Out
! Three Types of Startups
! Customer Development
" Definitions
" Market Type effects
Customer Development in the High-Tech Enterprise Fall 2009

New Product Conundrum
! New Product Introduction methodologies
sometimes work, yet sometimes fail
" Why?
" Is it the people that are different?
" Is it the product that are different?
! Perhaps there are different “types” of startups?
Customer Development in the High-Tech Enterprise Fall 2009

Startup Checklist – 1
What Vertical Market am I In?
! Web 2.0 ! Semiconductors
! Enterprise Software ! Electronic Design
! Enterprise Hardware Automation
! Communication Hdw ! Cleantech
! Communication Sftw ! Med Dev / Health Care
! Consumer Electronics ! Life Science / Biotech
! Game Software ! Personalized Medicine
Customer Development in the High-Tech Enterprise Fall 2009

A Plethora of Opportunities
Customer Development in the High-Tech Enterprise Fall 2009

Market Risk vs. Invention Risk
Customer Development in the High-Tech Enterprise Fall 2009

Startup Checklist - 2
! Market Risk?
! Technical Risk?
! Both?
Customer Development in the High-Tech Enterprise Fall 2009

Startup Checklist - 3
! Opportunity Where does the idea come from?
! Innovation Where is the innovation?
! Customer Who is the User/Payer?
! Competition Who is the competitor/complementor?
! Sales What is the Channel to reach the customer?
! Marketing: How do you create end user demand?
! What does Biz Dev do? Deals? Partnerships? Sales?
! Business/Revenue Model(s) How do we organize to make money?
! IP/PatentsRegulatory Issues? How and how long?
! Time to Market How long does it take to get to market?
! Product Development Model How to you engineer it?
! Manufacturing What does it take to build it?
! Seed Financing How much? When?
! Follow-on Financing How much? When?
! Liquidity How much? When?
Customer Development in the High-Tech Enterprise Fall 2009

Execution: Lots to Worry About
Customer Development in the High-Tech Enterprise Fall 2009

Execution: Very Different by Vertical
Customer Development in the High-Tech Enterprise Fall 2009

Market Risk Reduction Strategy
Customer Development in the High-Tech Enterprise Fall 2009

In-N-Out Case

In-N-Out Secret Menu
! X by Y ! Grilled Cheese
" X meat patties and Y slices of cheese " Two slices of melted cheese, tomato,
(for example, a 3 by 3 or a 2 by 4) lettuce and spread on a bun, with no meat.
! Double Meat ! Extra Everything
" Two meat patties without cheese. " Adds extra spread, tomato, lettuce, and
! Triple Meat onions (regular or grilled).
" Three meat patties without cheese. ! Fries "Light"
! Animal Style " Almost raw fries that are cooked for less
time.
" A mustard cooked beef patty served on a
bun with pickles, lettuce, tomatoes, extra ! Fries "Well" (aka "Wellies")
spread and grilled onions. Any burger " Fries that are cooked longer to be extra
(including veggie and grilled cheeses) may crisp.
be made this way. ! Cheese Fries
! Flying Dutchman " Fries with two slices of melted cheese
" Two meat patties, two slices of melted placed on top.
cheese and nothing else. ! Animal Style Fries
! Protein Style " Fries with cheese, spread, and grilled
" Instead of a bun, the burger is wrapped in onions.
lettuce. Any burger (including veggie and ! Neapolitan Shake
grilled cheeses) may be made this way.
" All three shake flavors (strawberry, vanilla
! Veggie Burger (Wish Burger) and chocolate) combined in one shake.
" A burger without the meat and cheese.
Customer Development in the High-Tech Enterprise Fall 2009

In-N-Out Meat Factory
Customer Development in the High-Tech Enterprise Fall 2009

So Why Are We Talking About This?
Existing Market Resegmented New Market
Market
Customer Development in the High-Tech Enterprise Fall 2009

Three Types of Markets
Existing Market Resegmented New Market
Market
Customer Development in the High-Tech Enterprise Fall 2009

Three Types of Markets
Existing Market Resegmented New Market
Market
! Who Cares?
! Type of Market changes EVERYTHING
! Sales, marketing and business development
differ radically by market type
Customer Development in the High-Tech Enterprise Fall 2009

Definitions: Three Types of Markets
Existing Market Resegmented New Market
Market
! Existing Market
" Faster/Better = High end
! Resegmented Market
" Niche = marketing/branding driven
" Cheaper = low end
! New Market
" Cheaper/good enough can create a new class of
product/customer
" Innovative/never existed before
Customer Development in the High-Tech Enterprise Fall 2009

Existing Market Definition
! Are there current customers who would:
" Need the most performance possible?
! Is there a scalable business model at this point?
! Is there a defensible business model
" Are there sufficient barriers to competition from
incumbents?
Customer Development in the High-Tech Enterprise Fall 2009

Existing Market
Performance Our Company
Existing
Companies
Customer Development in the High-Tech Enterprise Fall 2009

Oops, forgot about Time
Performance Our Company
Existing
wt h
c e G ro
Companies
Today rfo rm an
Co mp any Pe
g
E x is t in
Time
Customer Development in the High-Tech Enterprise Fall 2009

Existing Market Risks
! “Better/Faster” is an engineering driven axiom
! Incumbents defend high-end, high-margin
businesses
! Factor in:
" Network effect of incumbent
" Sustaining innovation of incumbent
" Industry (or you own) “standards”
! “They’ll never catch up” is not a business strategy
! Established companies almost always win
Customer Development in the High-Tech Enterprise Fall 2009

Resegmented Market Definition (1)
Low End
! Are there customers at the low end of the market
who would:
" buy less (but good enough) performance
" if they could get it at a lower price?
! Is there a business profitable at this low-end?
! Are there sufficient barriers to competition from
incumbents?
Customer Development in the High-Tech Enterprise Fall 2009

Low-end Resegmentation
“Good Enough” Performance
Performance
Existing
wt h
Companies
rm an c e G ro
rfo
any Pe
Today
g Co mp
E x is t in
Our Company
At the Low-end
Time
Customer Development in the High-Tech Enterprise Fall 2009

Resegmented Market Definition (2)
Niche
! Are there customers in the current market who
would:
" buy if it addressed their specific needs
" if it was the same price?
" If it cost more?
! Is there a defensible business model at this point?
! Are there barriers to competition from incumbents?
Customer Development in the High-Tech Enterprise Fall 2009

Niche Resegmentation
“Branding” has its place
Existing Customers
Performance New Niches
a ny
N ew C om p
a
N ic h e fo r
a ny
N ew C om p
a
N ic h e fo r
n y
n gC om pa
E x is t i
Time
Customer Development in the High-Tech Enterprise Fall 2009

Resegmented Market Risks
! “Cheaper” is a sales-driven axiom
! Incumbents abandon low-end, low-margin
businesses
" For sometimes the right reasons
! Low-end must be coupled with a profitable
business model
" Up migration
Customer Development in the High-Tech Enterprise Fall 2009

New Market Definition
! Is there a large customer base who couldn’t do
this before?
" Because of cost, availability, skill…?
! Did they have to go to an inconvenient, centralized
location?
! Are there barriers to competition from
incumbents?
Customer Development in the High-Tech Enterprise Fall 2009

New Market
Customers That Don’t Yet Exist
Existing Customers
New Niches
Performance
New Customers
New Markets
a ny
ng Com p
E x is t i
t
M arke
N ew
Time
Customer Development in the High-Tech Enterprise Fall 2009

New Market Risks
! “New” is a marketing-driven axiom
! New has to be unique enough that:
" There is a large customer base who couldn’t do
this before
" They want/need/can be convinced
" Adoption occurs in your lifetime
! Company manages adoption burn rate
" Investors are patient and have deep pockets
Customer Development in the High-Tech Enterprise Fall 2009

Hybrid Markets
! Some products fall into Hybrid Markets
! Combine characteristics of both a new market
and low-end resegmentation
" SouthWest Airlines
" Dell Computers
" Cell Phones
" Apple iPhone?
Customer Development in the High-Tech Enterprise Fall 2009

Extra
What’s a Startup
Business Model?

Business Model
1. A diagram that shows all the flows between your
company and its customers
Customer Development in the High-Tech Enterprise Fall 2009

Clean Tech Markets
Air, Water Energy Green Renewables Smart Transport
& Waste Efficiency Building Power
Customer Development in the High-Tech Enterprise Fall 2009

Clean Tech Markets - Risk
Air, Water Energy Green Renewables Smart Transport
& Waste Efficiency Building Power
! Which markets have technology risk?
! Which markets have customer risk?
! Which have both?
Customer Development in the High-Tech Enterprise Fall 2009

Clean Tech Markets - Risk
Definitions
Air, Water Energy Green Renewables Smart Transport
& Waste Efficiency Building Power
! Technology Risk
" risk is in development of the product (i.e. fuel cells, thin-film
arrays, etc.) then customers automatically adopt
! Customer risk
" risk is in customer and market adoption
! Which have both?
! You spend your time differently depending on risk
Customer Development in the High-Tech Enterprise Fall 2009

Business Plan Hypothesis
Next…

Clean Tech Markets - Hypotheses
Size of Opportunity
Customer
Competition
Sales ! Your business plan is a set of untested
Marketing hypothesis
Biz Dev
Customer Dev
! What are they?
Bus/Rev Model ! How do you test them?
IP/Patents
Regulatory
! How do you execute them?
Time to Market
Prod Dev Model
Manufacturing
Team
Seed Financing
Follow-on
Liquidity Customer Development in the High-Tech Enterprise Fall 2009

Clean Tech Markets -
Hypotheses
Size of Opportunity
Customer
! Size of Opportunity
Competition
" TAM, SAM
Sales
! Customer
Marketing
" Who’s the end user? Economic buyer?
Biz Dev Reimburser?
Customer Dev ! Sales
Bus/Rev Model " What’s the distribution channel?
IP/Patents ! Marketing
" How do you create end-user demand
Regulatory
Time to Market
! Customer Development
" How do you test your hypothesis
Prod Dev Model
! Business Model
Manufacturing
" How do all the parts work to create profits?
Team ! Financing
Seed Financing " What is the path to cash flow positive
Follow-on
Liquidity Customer Development in the High-Tech Enterprise Fall 2009

Your Hypothesis Go Here
Finally…

Clean Tech Markets
Air, Water Energy Green Renewables Smart Transport
Waste Efficiency Building Power
Size of Opportunity
Customer
Competition
Sales
Marketing
Biz Dev
Customer Dev
Bus/Rev Model
IP/Patents
Regulatory
Time to Market
Prod Dev Model
Manufacturing
Team
Seed Financing
Follow-on
Liquidity Customer Development in the High-Tech Enterprise Fall 2009

Clean Tech Markets
Air, Water Energy Green Renewables Smart Transport
Waste Efficiency Building Power
Size of Opportunity
Customer
Competition
Sales
Marketing
Biz Dev
Customer This Is Important
Development
Bus/Rev Model
IP/Patents
Regulatory
Time to Market
Prod Dev Model
Manufacturing
Team
Seed Financing
Follow-on
Liquidity
Customer Development in the High-Tech Enterprise Fall 2009

Business Plan - Sum of Hypotheses
! Business plan collects your hypothesis
! Adds facts as you know them today
! Contains a plan of how to turn hypothesis into
facts
! Extrapolates results if hypothesis turn into facts
! Has a business model which is clearly articulated
Customer Development in the High-Tech Enterprise Fall 2009

Start with the Pieces
Business Model…

Business Model
! Goal is to get to a single diagram of your
business
! Start by drawing pieces of your business
" Problem/Opportunity
" Market Size
" Distribution Channel
" Demand Creation
" Financial assumptions
! Then put it all together
Customer Development in the High-Tech Enterprise Fall 2009

Why Are You in Business?
Problem/Opportunity

Pain Points in Inter-District
Development of Curricula

Can Save a Ton of Dollars
Recognize Your Market
Type

Market Type?
! Existing Market
! Resegment a Niche
! Resegment on Low Cost
! New Market
Customer Development in the High-Tech Enterprise Fall 2009

Definitions: Types of Markets
Existing Market Resegmented New Market
Market
! Existing Market
" Faster/Better = High end
! Resegmented Market
" Niche = marketing/branding driven
" Cheaper = low end
! New Market
" Cheaper/good enough can create a new class of
product/customer
" Innovative/never existed before
Customer Development in the High-Tech Enterprise Fall 2009

Type of Market Changes Everything
Existing Market Resegmented New Market
Market
! Market
" Market Size ! Sales • Customers
" Cost of Entry " Sales Model - Needs
" Launch Type " Margins - Adoption
" Competitive " Sales Cycle
Barriers " Chasm Width
" Positioning • Finance
- Ongoing Capital
- Time to Profitability
Customer Development in the High-Tech Enterprise Fall 2009

So if You Succeed Do I Care?
How Big is It?

Total Available Market, Served
Available Market, Target Market
TAM = how big is the universe Total
Available
Market Served
Available
Market
Target
SAM = how many can I reach Market
with my sales channel
Target Market (for a startup) =
who will be the most likely buyers
Customer Development in the High-Tech Enterprise Fall 2009 10
9

sizing up the market
$123 billion tourism
industry inside the U.S.
$1 billion English travel
guides sold annually
$210 million 20-35 year
old travelers
SF (Initial test market)

OLED’s - Billion Dollar
Opportunity
-./0&1+234&5*+67'43&4)4583*+(56&'93:48 Our target market is the Flat
!"#$%&'())(*+,
;./0&;(<4&*=&->&'93:48
Panel display market.
!"A%%&'())(*+B,
Target products: Camcorders, DVD
-93?48&/:80&"@AA players and recorder, digital cameras,
'())(*+B computer monitors, LCD and Plasma TV
Apex: ! 3.5M
OLED TV market will grow to $15.29
billion by 2015
YEAR 1 PROJECTIONS
Units sold : 1,000,000
Price per unit : $700 - $1,000
Revenue from Royalties (assuming .5-1.0% of shelf price):
Worst case = $3,500,000 Best Case = $10,000,000
Customer Development in the High-Tech Enterprise Fall 2009

Distribution Channel
How Does Your Product Get to Your Customer?

Sales Ecosystem
Discussion channel
Mandate channel
Sale
Superintendant
Another
District district
IT Director
Engagement
(Early Stages) School
Dept. Head Another
school
in the
district
Teacher Teacher

Distribution Channel
Licensed Partners:
• Sony Consumer electronics
• Samsung • Flat Screen TVs through
(Other possibilities - LG, Toshiba, Panasonic,
DuPont)
Fry’s, Best Buy, Magnolia,
etc
IP
.
C Patents !"#$%"&'$()#* +),'()-$./# 01'")2
1
D
2 patents owned by Apex! Partners’ distribution channels
• Technology patent - SOLED • Sony
• Long-Brite and inkjet printing process • Samsung
(Other possibilities - LG, Toshiba, Panasonic,
DuPont)
Dollar flows:
Wages: founders &
Consultants
IP Costs: Lawyer .
C License fees C.E-F1E;
& Patent costs.
1 Royalties
Premises: Dev’t labs. D

Demand Creation
How Do You Drive Demand Into Your Channel?

Demand Creation
! State-by-state rollout: educational standards
! Continuous iteration of feedback
CA Pilot Broad Grow
Adoption Adoption
! Hypotheses: Will ! Hypotheses: Will ! Hypothesis: How
they adopt, use, they buy hands- well does it sell
and pay? off? Can it scale? itself?
! 10 schools f2f: ! CA telemarket ! All telemarket
! Sales: $1,066 ! F2f elsewhere ! $533/dist
! Travel: $1,000

distribution and demand creation
! Unique Idea: website and iPhone app form
symbiotic relationship
Travel
AdWords App
traffic
Listing
TravelSpy.com iPhone App
traffic Blogs (ex.
Magazines
Travelblog.org)

Financial Assumptions
What are the Ten Numbers that Matter?

Financial Assumptions
! Ten Numbers that matter depends on your business
" Average selling price
" Life time value
" Material cost
" Distribution channel cost
" Customer Acquisition cost
" Time to market
" Time to cash flow positive
" Etc.
! Do this before 45 pages of financials
Customer Development in the High-Tech Enterprise Fall 2009

Business Model
How Do The Pieces Work Together?

Bird’s Eye View of our Business
Hardware
Model
($155)
Online Distribution
• Own website ($208+.3x)
Customer • Amazon.com ($40+32x)
• eBay ($300+25x)
Acquisition
Target Market
Cost:
($41)
Demand Creation Viral
MyNote • SEO/SEM
($156.00) Marketing
• Blogs
• Forums
• Bookstore
promotion
• Sales force
• Viral marketing Offline Distribution
• Website $399.99
• College bookstores
($0.02)
Software (in-house)
($1.00)

BUSINESS MODEL
iPhone Application Subscription Based Service
$ 2.99 (x.7) $ 5/month
Year 1: $ 40K END-USERS END-USERS Year 1: $ 50K
Year 2: $1M Year 2: $1.2 M
E
IC
SE
E
RV
NU
RV
RE
SE
VE
IC
VE
E
RE
Third
NU
Nightlife
E
party
venues
affiliates
CITYBEATS.COM
Two Revenue Streams
March | 2011
Total Revenue (year 1) = $ 90 K
Critical Mass: 500,000 users
Total Revenue (year 2) = $ 2.2 M

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