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