Greycroft - Why Accountants Don’t Run Startups

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Greycroft - Why Accountants Don’t Run Startups

  1. Why Accountants Don’t Run Startups<br />Steve Blank<br />Stanford - School of Engineering<br />U.C. Berkeley - Haas School Of Business<br />www.steveblank.com<br />Twitter: sgblank<br />
  2. Early-Stage Ventures<br />
  3. I Drew This<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br />
  4. I Called It:Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<br />
  5. I Wrote This<br />
  6. A Few People Read It<br />
  7. I Write a Blog <br />www.steveblank.com<br />
  8. Five Short Stories<br />
  9. Not All Startups Are Equal<br />
  10. Small Business<br />Startup<br />Small Business Startups<br />
  11. Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M in revenue<br />Small Business Startups<br />
  12. Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M in revenue<br />Small Business Startups<br /><ul><li>5.7 million small businesses in the U.S. <500 employees
  13. 99.7% of all companies
  14. ~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
  15. Small Business Startup:Internet Edition<br />Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M in revenue<br /><ul><li>The Internet allows a new class of Small Businesses
  16. Not all businesses on the Internet are “Scalable Startups”</li></li></ul><li>Large Company Sustaining Innovation<br />Sustaining Innovation<br />Transition<br />Scalable<br />Startup<br />Large Company<br /><ul><li> Existing Market
  17. Incremental improvements</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Large Company<br />Disruptive Innovation<br /><ul><li> New Market
  18. New tech, customers, channels</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Scalable Startup<br />
  19. Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
  20. Company can grow to $100m/year
  21. Business model found
  22. Focused on execution and process</li></ul>Scalable Startup<br />
  23. Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
  24. Company can grow to $100m/year
  25. Business model found
  26. Focused on execution and process
  27. Typically requires “risk capital”</li></ul>Scalable Startup<br /><ul><li> In contrast a scalable startup is designed to grow big
  28. Typically needs risk capital
  29. What Silicon Valley means when they say “Startup”</li></li></ul><li>Very Different Startup Goals<br />Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M<br />Scalable<br />Startup<br />Large Company<br /><ul><li> Total Available Market > $500m
  30. Company can grow to $100m/year
  31. Business model found
  32. Focused on execution and process
  33. Typically requires “risk capital”</li></li></ul><li>Venture Firms Invest in Scalable Startups<br />Small Business<br />Startup<br />Scalable<br />Startup<br />Large Company<br />
  34. What VC’s Don’t Tell You:The Transition<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Search<br />Build<br />Grow<br />
  35. What VC’s Don’t Tell You:The Transition – Founders Leave<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Founders depart
  36. Professional Mgmt
  37. Process
  38. Beginning of scale</li></li></ul><li>Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Business Model found
  39. 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 />
  40. Plan versus Model<br />
  41. No Business Plan survives first contact with customers<br />
  42. So Search for a Business Model<br />
  43. The Search for a Business Model<br /><ul><li>A Business Plan is static
  44. A Business Model diagrams how a company creates, delivers and captures value – it’s dynamic
  45. Or in English: How a company makes money</li></li></ul><li>Emphasis On Hypotheses Testing<br />
  46. Startups Continually Pivot (Iterate)<br />
  47. Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Business Model found
  48. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  49. 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
  50. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  51. 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
  52. Cash Flow Statement
  53. 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
  54. Viral coefficient
  55. Customer Lifetime Value
  56. Average Selling Price/Order Size
  57. Monthly burn rate
  58. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  59. Cash Flow Statement
  60. 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
  61. Scalable
  62. Price List/Data Sheets
  63. 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
  64. Pricing/Feature unstable
  65. Not yet repeatable
  66. “One-off’s”</li></ul>Sales<br /><ul><li> Sales Organization
  67. Scalable
  68. Price List/Data Sheets
  69. 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
  70. Feature Spec’s
  71. Competitive Analysis</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
  72. Feature Spec’s
  73. Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
  74. Minimum Feature Set
  75. Pivots</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.
  76. Waterfall Development
  77. QA
  78. 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.
  79. Waterfall Development
  80. QA
  81. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  82. Continuous Learning
  83. Self Organizing Teams
  84. Minimum Feature Set
  85. 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”
  86. Known features for line extensions
  87. Known customers/markets
  88. 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
  89. Unknown feature set
  90. Unknown business model
  91. Model found by iteration
  92. Plan describes “knowns”
  93. Known features for line extensions
  94. Known customers/markets
  95. 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
  96. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />You failif you remain a startup!<br />
  97. How Do Startups Search For A Business Model?<br /><ul><li> The Search is called Customer Development
  98. The Implementation is called Agile Development</li></li></ul><li>The Lean Startup<br /><ul><li> The Search is called Customer Development
  99. The Implementation is called Agile Development</li></li></ul><li>Customer Development<br />
  100. Customer Development<br />Get the Hell Out of the Building<br />
  101. More startups fail from a lack of customers than from a failure of product development<br />
  102. Then why do we have:<br />process to manage product development?<br />
  103. Then why do we have:<br />process to manage product development?<br />no process to manage customer development?<br />
  104. Product Development Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  105. Tradition – Hire Marketing<br />Concept/Seed Round<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 />
  106. Tradition – Hire Sales<br />Concept/Seed Round<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
  107. Hire Sales VP
  108. Hire 1st Sales Staff</li></ul>Sales<br />
  109. Tradition – Hire Bus 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 Channel / Distribution
  110. Hire Sales VP
  111. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  112. Do deals for FCS</li></li></ul><li>Tradition – Hire Engineering<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 Channel / Distribution
  113. Hire Sales VP
  114. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  115. Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
  116. Waterfall
  117. Q/A
  118. Tech Pubs</li></li></ul><li>Product Development<br />Concept/Bus. Plan<br />Product Dev.<br />Alpha/Beta Test<br />Launch/1st Ship<br />+<br />CustomerDevelopment<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Customer Development<br />
  119. 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 />
  120. Customer Validation<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Company<br />Building<br />Pivot<br /><ul><li>Repeatable and scalable business model?
  121. Passionate earlyvangelists?
  122. Pivot back to Discovery if no customers</li></li></ul><li>The Pivot<br /><ul><li> The heart of Customer Development
  123. Iteration without crisis
  124. Fast, agile and opportunistic</li></li></ul><li>So What Does Engineering Do?<br />
  125. Traditional Product DevelopmentUnit of progress: Advance to Next Stage<br />Waterfall<br />Requirements<br />Design<br />Problem: known<br />Solution: known<br />Implementation<br />Verification<br />Maintenance<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  126. When the Customer Problem is Known<br />“Product Owner” or <br />in-house customer <br />Problem: Known<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  127. Agile - Customer Problem is KnownUnit of progress: a line of working code<br />“Product Owner” or <br />in-house customer <br />Problem: Known<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  128. When the Customer Problem is Unknown<br />Problem: Unknown<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  129. Lean Startup- Customer Problem is UnknownUnit of progress: learning about customers<br />Problem: Unknown<br />Solution: Unknown<br />Source: Eric Rieshttp://startuplessonslearned.blogspot.com<br />
  130. Leadership Versus Management<br />
  131. Scalable<br />Startup<br />Transition<br />Large Company<br />Leadership Versus Management<br />
  132. Scalable<br />Startup<br />Transition<br />Large Company<br />Leadership Versus Management<br />
  133. Scalable<br />Startup<br />Transition<br />Large Company<br />Leadership Versus Management<br />Search<br />
  134. Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Leadership Versus Management<br />Build<br />Search<br />
  135. Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Leadership Versus Management<br />Build<br />Grow<br />Search<br />
  136. Why Startups Aren’t Run By Accountants<br />
  137. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  138. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Alfred P. Sloan<br />
  139. Alfred P. Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />General Motors, President/Chairman<br /><ul><li> Cost Accounting
  140. MIT Sloan School
  141. Sloan Foundation
  142. etc. </li></li></ul><li>Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  143. Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Billy Durant<br />
  144. Billy Durant<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li> Leader in horse-drawn buggy’s
  145. Fired by board, starts Chevrolet
  146. Regains control of GM
  147. Fired by board, GM ~$3.6 billion*</li></ul>* GM Net sales in 1921 $304.5M = $3.6 Billion today<br />
  148. Durant Versus Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  149. Durant Versus Sloan<br /><ul><li>Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br /><ul><li>Dies managing a bowling alley
  150. Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br />Accountant<br /><ul><li>Dies managing a bowling alley
  151. Dies, rich, honored and famous</li></li></ul><li>You are here<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  152. Thanks<br />www.steveblank.com<br />

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