Why Accountants Don’t Run Startups<br />Steve Blank<br />Stanford - School of Engineering<br />U.C. Berkeley - Haas School...
Early-Stage Ventures<br />
I Drew This<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer Creation<br />Pivot<...
I Called It:Customer Development<br />CustomerDiscovery<br />Company <br /> Building<br />CustomerValidation<br />Customer...
I Wrote This<br />
A Few People Read It<br />
I Write a Blog  <br />www.steveblank.com<br />
Five Short Stories<br />
Not All Startups Are Equal<br />
Small Business<br />Startup<br />Small Business Startups<br />
Small Business<br />Startup<br />-  Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul><...
Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< ...
99.7% of all companies
~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
Small Business Startup:Internet Edition<br />Small Business<br />Startup<br />- Business Model found<br />- Profitable bus...
Not all businesses on the Internet are “Scalable Startups”</li></li></ul><li>Large Company Sustaining Innovation<br />Sust...
 Incremental improvements</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Lar...
 New tech, customers, channels</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />>$100M/year<br />Scalable S...
Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
 Company can grow to $100m/year
 Business model found
 Focused on execution and process</li></ul>Scalable Startup<br />
Scalable<br />Startup<br />Large Company<br />>$100M/year<br /><ul><li>Total Available Market > $500m
 Company can grow to $100m/year
 Business model found
 Focused on execution and process
 Typically requires “risk capital”</li></ul>Scalable Startup<br /><ul><li> In contrast a scalable startup is designed to g...
 Typically needs risk capital
 What Silicon Valley means when they say “Startup”</li></li></ul><li>Very Different Startup Goals<br />Small Business<br /...
 Company can grow to $100m/year
 Business model found
 Focused on execution and process
 Typically requires “risk capital”</li></li></ul><li>Venture Firms Invest in Scalable Startups<br />Small Business<br />St...
What VC’s Don’t Tell You:The Transition<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Search<br />Bui...
What VC’s Don’t Tell You:The Transition – Founders Leave<br />Scalable<br />Startup<br />Transition<br />Large Company<br ...
 Professional Mgmt
 Process
 Beginning of scale</li></li></ul><li>Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Business Model...
 i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />A Startup is ...
Plan versus Model<br />
No Business Plan survives first contact with customers<br />
So Search for a Business Model<br />
The Search for a Business Model<br /><ul><li>A Business Plan is static
A Business Model diagrams how a company creates, delivers and captures value – it’s dynamic
 Or in English: How a company makes money</li></li></ul><li>Emphasis On Hypotheses Testing<br />
Startups Continually Pivot (Iterate)<br />
Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Com...
 i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Sc...
 Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<b...
 Cash Flow Statement
 Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of...
 Viral coefficient
 Customer Lifetime Value
 Average Selling Price/Order Size
 Monthly burn rate
 etc.  </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
 Cash Flow Statement
 Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalabl...
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution...
 Pricing/Feature unstable
 Not yet repeatable
“One-off’s”</li></ul>Sales<br /><ul><li> Sales Organization
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Customer Development VersusProduct Management<br />The Execution of the Business Model<br ...
 Feature Spec’s
 Competitive Analysis</li></li></ul><li>Customer Development Versus Product Management<br />The Search for the Business Mo...
 Feature Spec’s
 Competitive Analysis</li></ul>Customer Development<br /><ul><li> Hypothesis Testing
 Minimum Feature Set
 Pivots</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalable<br /...
 Waterfall Development
 QA
 Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Executio...
 Waterfall Development
 QA
 Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
 Continuous Learning
 Self Organizing Teams
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Greycroft - Why Accountants Don’t Run Startups

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Transcript of "Greycroft - Why Accountants Don’t Run Startups"

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