Everything You Knew About Startups is Wrong, And How to Make it Right

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Everything You Knew About Startups is Wrong, And How to Make it Right

  1. Everything you knew about starting a company is wrong.  And how to do it right.<br />Steve Blank<br />Stanford School of Engineering<br />www.steveblank.com<br />Twitter: sgblank<br />
  2. More startups fail from a lack of customers than from a failure of product development<br />
  3. Traditional Product Introduction<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  4. Traditional Product IntroductionHas Two Implicit Assumptions<br />Customer Problem: known<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />Product Features: known<br />
  5. Tradition – HireMarketing<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br />
  6. Tradition – Hire Sales<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  7. Hire Sales VP
  8. Hire 1st Sales Staff</li></ul>Sales<br />
  9. Tradition – HireBusiness Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  10. Hire Sales VP
  11. Hire 1st Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  12. Do deals for FCS</li></li></ul><li>Tradition – HireEngineering/Product Management <br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  13. Hire Sales VP
  14. Hire 1st Sales Staff</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  15. Do deals for FCS</li></ul>Engineering/Product Mgmt<br /><ul><li> Write Requirements
  16. Waterfall Development
  17. Q/A
  18. Tech Pubs</li></li></ul><li>Engineering Executes a Waterfall Process<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />Require-ments<br />Design<br />Implement<br />Verify<br />Maintain<br />
  19. Waterfall / Product ManagementExecution on Two “Knowns”<br />Requirements<br />Product Features: known<br />Design<br />Implementation<br />Verification<br />Customer Problem: known<br />Maintenance<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  20. This is A Plan For Failure<br />Customer Problems and Product Features are hypotheses<br />Sales & Marketing costs are front loaded<br />focused on execution vs. learning & discovery<br />First Customer Ship becomes the goal<br />Execution & hiring predicated on business plan hypothesis<br />Heavy spending hit if product launch is wrong<br />Financial projections assume success<br />=<br />You don’t know if you’re wrong untilyou’re out of business/money<br />
  21. An Inexpensive Fix<br />Focus on Customers and Markets from Day One<br />How?<br />
  22. Traditional Product Introduction<br />Concept/Bus. Plan<br />Product Dev.<br />Alpha/Beta Test<br />Launch/1st Ship<br />Customer Development<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Customer Development<br />
  23. Agile Development<br />Waterfall Product Development<br />Require-ments<br />Design<br />Implement<br />Verify<br />Maintain<br />Agile Product Development<br />
  24. Lean StartupCustomer Problem + Product Features are Unknown<br />Problem: Unknown<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  25. Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br />The founders<br />Get the heck Out of the Building<br />^<br />
  26. Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br /><ul><li>Discovery
  27. Test hypotheses I.e. problem and product concept
  28. Validation
  29. Build a repeatable and scalable sales process
  30. Creation
  31. Scale via relentless execution and fill the sales pipeline
  32. Building
  33. (Re)build company’s organization & management</li></li></ul><li>Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Stop selling, start listening<br />Test your hypotheses<br />Continuous Discovery<br />Done by founders<br />
  34. Customer Validation<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Company<br />Building<br />Pivot<br /><ul><li>Repeatable and scalable business model?
  35. PassionateEarlyvangelists?
  36. Pivot back to Discovery if no customers</li></li></ul><li>The Pivot<br /><ul><li> The heart of Customer Development
  37. Iteration without crisis
  38. Fast, agile and opportunistic</li></li></ul><li>Speeding Up Cycle Time<br /><ul><li>Speed of cycle minimizes cash needs
  39. Minimum feature set speeds up cycle time
  40. Near instantaneous customer feedback drives feature set</li></li></ul><li>22<br />Customer Creation<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br /><ul><li>Creation comes after proof of sales
  41. $’s for scale
  42. Lean Startups are not cheap startups</li></li></ul><li>Company Building<br />Company<br />Building<br />Customer Creation<br />CustomerValidation<br />CustomerDiscovery<br /><ul><li>(Re)build company’s organization & management
  43. Re look at your mission</li></li></ul><li>Not All Startups Are Equal<br />
  44. Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
  45. Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></ul>- Profitable business<br /><ul><li> Existing team</li></ul>< $1M in revenue<br />Small Business Startups<br /><ul><li>known customer known product
  46. Feed the family</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Scalable Startup<br />Goal is to solve for:<br /> unknown customer and unknown features <br />
  47. Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Exit Criteria<br /><ul><li>Total Available Market > $500m
  48. Can grow to $100m/year
  49. Business model found
  50. Focused on execution and process</li></ul>Scalable Startup<br />
  51. Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
  52. Can grow to $100m/year
  53. Business model found
  54. Focused on execution and process
  55. Typically requires “risk capital”</li></ul>Scalable Startup<br /><ul><li> In contrast a scalable startup is designed to grow big
  56. Typically needs risk capital
  57. What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Search <br /><ul><li>Business Model found
  58. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />A Startup is the organization used to search for a scalable business model <br />
  59. What VC’s Don’t Tell You:The Transition – Founders Leave<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Build<br /><ul><li>Founders depart
  60. Professional Mgmt
  61. Process
  62. Beginning of scale</li></li></ul><li>Startup-to-Company Lifecycle<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Build<br />Search<br />Grow<br />
  63. Why Startups Aren’t Run By Accountants<br />
  64. Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Business Model found<br /><ul><li> customer needs/product features found</li></ul> i.e. Product/Market fit<br /><ul><li> Found by founders, not employees
  65. Repeatable sales model</li></ul>- Managers hired<br />
  66. Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li>Business Model found
  67. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  68. Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Traditional Accounting<br /><ul><li>Balance Sheet
  69. Cash Flow Statement
  70. Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Startup Metrics<br /><ul><li> Customer Acquisition Cost
  71. Viral coefficient
  72. Customer Lifetime Value
  73. Average Selling Price/Order Size
  74. Monthly burn rate
  75. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  76. Cash Flow Statement
  77. Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Sales<br /><ul><li>Sales Organization
  78. Scalable
  79. Price List/Data Sheets
  80. Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Customer Validation<br /><ul><li> Early Adopters
  81. Pricing/Feature unstable
  82. Not yet repeatable
  83. “One-off’s”
  84. Done by founders</li></ul>Sales<br /><ul><li> Sales Organization
  85. Scalable
  86. Price List/Data Sheets
  87. Revenue Plan</li></li></ul><li>Customer Development VersusProduct Management<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Product Management<br /><ul><li> Delivers MRD’s
  88. Feature Spec’s
  89. Competitive Analysis
  90. Prod Mgmt driven</li></li></ul><li>Customer Development Versus Product Management<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Product Management<br /><ul><li> Delivers MRD’s
  91. Feature Spec’s
  92. Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
  93. Minimum Feature Set
  94. Pivots
  95. Founder-driven</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  96. Waterfall Development
  97. QA
  98. Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  99. Waterfall Development
  100. QA
  101. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  102. Continuous Learning
  103. Self Organizing Teams
  104. Minimum Feature Set
  105. Pivots</li></li></ul><li>Startups Model, Companies Plan<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li> Plan describes “knowns”
  106. Known features for line extensions
  107. Known customers/markets
  108. Known business model</li></li></ul><li>Startups Model, Companies Plan<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Unknown customer needs
  109. Unknown feature set
  110. Unknown business model
  111. Model found by iteration
  112. Plan describes “knowns”
  113. Known features for line extensions
  114. Known customers/markets
  115. Known business model</li></li></ul><li>Startups Don’t Last Forever<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li> Business Model found
  116. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />You failif you remain a startup!<br />
  117. I Wrote This<br />
  118. I Write a Blog <br />www.steveblank.com<br />
  119. Thanks<br />www.steveblank.com<br />

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