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Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4
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Stanford E245 Lean LaunchPad winter 10 session 01 course overview rev 4

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  • 1. Engineering 245 The Lean LaunchPad Session 1: Overview/Business Models/Customer Development Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/
  • 2. Agenda “ Is This the Right Course for Me?” <ul><li>Course Objectives/teams/project </li></ul><ul><li>Introductions </li></ul><ul><li>Class Logistics </li></ul><ul><li>Building a “Lean Startup” </li></ul><ul><ul><li>Idea </li></ul></ul><ul><ul><li>Sizing the Opportunity </li></ul></ul><ul><ul><li>Business Models </li></ul></ul><ul><ul><li>Customer Development </li></ul></ul><ul><li>Break : Stay If You Want to Be in the Class </li></ul><ul><li>Class “Culture” and Next Steps </li></ul>
  • 3. Course Objectives <ul><li>Understand the real world aspects of Entrepreneurship by getting out of the building </li></ul><ul><ul><li>Analyze and assess an opportunity </li></ul></ul><ul><ul><li>Build the product </li></ul></ul><ul><ul><li>Get orders </li></ul></ul><ul><ul><li>Work with a team </li></ul></ul><ul><li>Learn whether entrepreneurship is for you </li></ul>
  • 4. What Will you Learn? <ul><li>Opportunity evaluation </li></ul><ul><li>Search for a Business Model </li></ul><ul><li>Customer Discovery and Validation </li></ul><ul><li>Operating and decision making in chaos with insufficient data </li></ul><ul><li>Teamwork </li></ul>
  • 5. The Course ‘By the Numbers’ <ul><li>3/4 Units of Credit </li></ul><ul><li>3 Instructors, 2 CAs, 25+ Mentors, </li></ul><ul><li>8 Lectures </li></ul><ul><li>8 Weekly 10-minute presentations </li></ul><ul><li>1 Final 30 minute presentation </li></ul><ul><li>3 Textbooks </li></ul><ul><li>5 -10 hours of work a week outside the classroom </li></ul>
  • 6. Course Reading <ul><li>Business Model Generation </li></ul><ul><li>Four Steps to the Epiphany </li></ul><ul><li>Founders at Work </li></ul>copies available at the bookstore
  • 7. This Class is Hard <ul><li>You can ’t pass by attending the class </li></ul><ul><li>Your grade is determined by the work you do outside the class </li></ul><ul><li>There ’s a lot of it </li></ul><ul><li>You are dependent on teamwork and teammates – communication is critical </li></ul>
  • 8. Teams <ul><li>Suggested team size is 4 people </li></ul><ul><ul><li>Deadline for team formation is Jan 6 th </li></ul></ul><ul><ul><li>Must contact your mentors by Jan 7 th </li></ul></ul><ul><li>Present Weekly and for Final </li></ul><ul><ul><li>Weekly lessons learned </li></ul></ul><ul><ul><li>Final is demo and summary </li></ul></ul><ul><li>Class is about teamwork, discovery and fast iteration </li></ul>
  • 9. Team Projects <ul><li>Any for-profit scalable startup </li></ul><ul><li>If you are a domain expert, that ’s your best bet (but not required) </li></ul><ul><li>If you pick a web project, you have to build it (and there needs to be some novelty) </li></ul>
  • 10. Team Deliverables <ul><li>Each Week </li></ul><ul><ul><li>Lessons Learned presentation 10 minutes </li></ul></ul><ul><ul><li>Updated blog/wiki </li></ul></ul><ul><ul><li>10 ’s of hours of “outside the building” progress </li></ul></ul><ul><li>Final Presentation </li></ul><ul><ul><li>30 minute Lessons Learned Summary </li></ul></ul>
  • 11. Grading <ul><li>Individual - 20% </li></ul><ul><li>Participation in class 20% </li></ul><ul><li>Team - 80% </li></ul><ul><li>Weekly summary and out of the building progress 50% </li></ul><ul><li>Final Presentation 30% </li></ul>
  • 12. Introductions
  • 13. Steve Blank, Ann-Miura-Ko, Jon Feiber <ul><li>8 startups in Silicon Valley </li></ul><ul><li>Semiconductors </li></ul><ul><li>Supercomputers </li></ul><ul><li>Consumer electronics </li></ul><ul><li>Video games </li></ul><ul><li>Enterprise software </li></ul><ul><li>Military intelligence </li></ul><ul><li>[email_address] </li></ul><ul><li>twitter sgblank </li></ul><ul><li>www.steveblank.com </li></ul><ul><li>Yale BS EE </li></ul><ul><li>McKinsey and Co. </li></ul><ul><li>Charles River Ventures </li></ul><ul><li>Stanford Ph.D MS&E </li></ul><ul><li>TA: E145, Mayfield Fellows, MS&E 273 </li></ul><ul><li>V.C. @ Floodgate </li></ul><ul><li>[email_address] </li></ul><ul><li>@annimaniac </li></ul><ul><li>BS CS/Astro Physics U of Colorado </li></ul><ul><li>VP Networking SUN </li></ul><ul><li>V.C. @ MDV since 1991 </li></ul>
  • 14. Steve Blank, Ann-Miura-Ko , Jon Feiber <ul><li>8 startups - 32 years in Silicon Valley </li></ul><ul><li>Semiconductors </li></ul><ul><li>Supercomputers </li></ul><ul><li>Consumer electronics </li></ul><ul><li>Video games </li></ul><ul><li>Enterprise software </li></ul><ul><li>Military intelligence </li></ul><ul><li>Teach: Stanford, Berkeley, Columbia </li></ul><ul><li>Details at www.steveblank.com </li></ul><ul><li>Yale BS EE </li></ul><ul><li>McKinsey and Co. </li></ul><ul><li>Charles River Ventures </li></ul><ul><li>Stanford Ph.D MS&E </li></ul><ul><li>V.C. @ Floodgate </li></ul><ul><li>[email_address] </li></ul><ul><li>@annimaniac </li></ul><ul><li>BS CS/Astro Physics U of Colorado </li></ul><ul><li>VP Networking SUN </li></ul><ul><li>V.C. @ MDV since 1991 </li></ul>
  • 15. Steve Blank, Ann-Miura-Ko, Jon Feiber <ul><li>8 startups - 32 years in Silicon Valley </li></ul><ul><li>Semiconductors </li></ul><ul><li>Supercomputers </li></ul><ul><li>Consumer electronics </li></ul><ul><li>Video games </li></ul><ul><li>Enterprise software </li></ul><ul><li>Military intelligence </li></ul><ul><li>Teach: Stanford, Berkeley, Columbia </li></ul><ul><li>Details at www.steveblank.com </li></ul><ul><li>Yale BS EE </li></ul><ul><li>McKinsey and Co. </li></ul><ul><li>Charles River Ventures </li></ul><ul><li>Stanford Ph.D MS&E </li></ul><ul><li>V.C. @ Floodgate </li></ul><ul><li>[email_address] </li></ul><ul><li>@annimaniac </li></ul><ul><li>BS CS/Astro Physics U of Colorado </li></ul><ul><li>50 th employee, VP Networking @ Sun </li></ul><ul><li>V.C. @ MDV since 1991 </li></ul><ul><li>[email_address] </li></ul>
  • 16. Course Assistant (CA ’s) Felix Huber <ul><li>MS MS&E 2010 </li></ul><ul><li>Google Translate Product Mgr </li></ul><ul><li>CA ’s role : Class/lecture questions, Grading and attendance </li></ul>Thomas Haymore <ul><li>B.A. in Political Science </li></ul><ul><li>Stanford Law ( ‘06) </li></ul><ul><li>J.D. Stanford Law ( ‘12) </li></ul>[email_address] [email_address]
  • 17. Volunteer Course Assistant (CA ’s) Felix Huber <ul><li>MS MS&E 2010 </li></ul><ul><li>Google Translate Product Mgr </li></ul><ul><li>CA ’s role : Class/lecture questions, Grading and attendance </li></ul>Thomas Haymore <ul><li>B.A. in Political Science </li></ul><ul><li>Stanford Law ( ‘06) </li></ul><ul><li>J.D. Stanford Law ( ‘12) </li></ul>[email_address] [email_address]
  • 18. Mentors <ul><li>Mentors are Venture Capitalists or Entrepreneurs </li></ul><ul><li>Mentors role is to: </li></ul><ul><ul><li>Help you “Get you out of the building” </li></ul></ul><ul><ul><li>Share contacts </li></ul></ul><ul><ul><li>Offer “Real-world” entrepreneurial advice </li></ul></ul><ul><ul><li>Critical feedback </li></ul></ul><ul><li>You arrange your schedule for the mentors, not the other way around </li></ul>
  • 19. Class Logistics
  • 20. How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - Test for each of the hypotheses     - What  constitutes a pass/fail signal for the  test (e.g. at what point would you say your hypotheses wasn ’t even close to  correct)?
  • 21. How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - Test for each of the hypotheses     - What  constitutes a pass/fail signal for the  test (e.g. at what point would you say your hypotheses wasn ’t even close to  correct)? January 6 th Team Mixer - Teams by midnight Jan 6 th
  • 22. How the Class Works Class Topic Deliverable for the Next Week (Submit interview notes, present results, update wiki/blog) January 4 th Class 1 Business Model and Customer Development - Hypotheses for each part of business model. - Test for whether your business is worth  pursuing (market  size) - Test for each of the hypotheses     - What  constitutes a pass/fail signal for the  test (e.g. at what point would you say your hypotheses wasn ’t even close to  correct)? January 6 th Team Mixer - Teams by midnight Jan 6 th January 11 th Class 2 Testing the Value Proposition <ul><li>- Name your team.   </li></ul><ul><li>- What are your value proposition hypotheses?     </li></ul><ul><li>- What did you discover from customers?     </li></ul>
  • 23. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) January 18 th Class 3 Testing Customers /Users / Payers <ul><li>- What were your user/customer hypotheses?   </li></ul><ul><li>- Did  you learn anything different?     </li></ul><ul><li>- Anything change about Value Proposition?      - </li></ul><ul><li>- What are your customer acquisition costs?     </li></ul><ul><li>- What are the direct benefits (economic/other)? </li></ul><ul><li>- Who is the decision maker, how large is their   budget? What are they spending it on today?   </li></ul><ul><li>- How will this buying decision be made?   </li></ul><ul><li>- What  resonates with customers? </li></ul><ul><li>- For web startups, start coding the product .   </li></ul><ul><li>- Setup Google or Amazon cloud infrastructure </li></ul>
  • 24. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) January 18 th Class 3 Testing Customers and Users   <ul><li>- What were your user/customer hypotheses?   </li></ul><ul><li>- Did  you learn anything different?     </li></ul><ul><li>- Anything change about Value Proposition?      - </li></ul><ul><li>- What are your customer acquisition costs?     </li></ul><ul><li>- What are the direct benefits (economic/other)? </li></ul><ul><li>- Who is the decision maker, how large is their   budget? What are they spending it on today?   </li></ul><ul><li>- How will this buying decision be made?   </li></ul><ul><li>- What  resonates with customers? </li></ul><ul><li>- For web startups, start coding the product .   </li></ul><ul><li>- Setup Google or Amazon cloud infrastructure </li></ul>January 25 th Class 4 Testing Demand Creation - Anything change about Value Proposition or  Customers/Users or Channel? - Present and explain your marketing campaign.  - What  worked best and why?
  • 25. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog) Feb 1 st Class 5 Testing Sales Channel For web teams : Get working website/analytics up.  - Track where visitors are coming from, how behavior differs.  - What were your hypotheses about site results? - Anything in Value Proposition or Customers/Users?     For non-web  teams : Interview 10 people in channel - Anything change in Value Proposition, Channel or  Customers/Users? - Does your product extend/replace existing channel revenue? - What ’s the “cost” of your channel/ it’s efficiency vs. product selling price. For Everyone : What is your customer lifetime value? - What feedback did you receive from your users? - What are the entry barriers?
  • 26. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 1 st Class 5 Testing Sales Channel For web teams: Get working website/analytics up.  - Track where visitors are coming from, how behavior differs.  - What were your hypotheses about site results? - Did anything  change about Value  Proposition or Customers/Users?     For non-web  teams: Interview 10 people in channel - Did  anything  change  about  Value  Proposition  or  Customers/Users? - Does your product extend/replace existing channel revenue? - What ’s the “cost” of your channel/ it’s efficiency vs. product selling price. For Everyone: What is your customer lifetime value? - What feedback did you receive from your users? - What are the entry barriers? Feb 8 th Class 6 Testing Revenue Model - Assemble income statement for your business model.   - Lifetime  value  calculation   for  customers.    
  • 27. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments?
  • 28. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure <ul><li>- Assemble a “resources assumptions” spreadsheet.     </li></ul><ul><li>- Include  people, hardware, software, prototypes,  financing, etc. </li></ul><ul><li>- When will you need these resources? </li></ul>
  • 29. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure <ul><li>- Assemble a “resources assumptions” spreadsheet.     </li></ul><ul><li>- Include  people, hardware, software, prototypes,  financing, etc. </li></ul><ul><li>- When will you need these resources? </li></ul>March 1 st Class 9 Present! <ul><li>Group 1 – 30 Minute Presentations </li></ul>March 8 th Class 10 Present! <ul><li>Group 2 – 30 Minute Presentations </li></ul>
  • 30. How the Class Works Class Topic Deliverable for the Next Week ( Submit interview notes, present results, update wiki/blog, build website) Feb 15 th Class 7 Testing Partners - Any change of Value Proposition, Customers/Users,  Channel, or Demand  Creation? - What are the partners incentives/impediments? Feb 22 nd Class 8 Testing Key Resources and Cost Structure <ul><li>- Assemble a “resources assumptions” spreadsheet.     </li></ul><ul><li>- Include  people, hardware, software, prototypes,  financing, etc. </li></ul><ul><li>- When will you need these resources? </li></ul>March 1 st Class 9 Present! <ul><li>Group 1 – 30 Minute Presentations </li></ul>March 8 th Class 10 Present! <ul><li>Group 2 – 30 Minute Presentations </li></ul>March 11 th Funding! <ul><li>Optional presentations at VC firm for funding </li></ul>
  • 31. How to Build A Startup Idea Size Opportunity Business Model Customer Development
  • 32. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation
  • 33. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation Theory Practice
  • 34. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation <ul><li>Web startups get the product in front of customers earlier </li></ul>
  • 35. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation
  • 36. Idea
  • 37. We ’re Engineers Darn It! <ul><li>Aren ’t companies all about product? </li></ul><ul><li>I have a great technology idea </li></ul><ul><li>Teach me how to make a company around it </li></ul><ul><li>Just like Facebook and Google (or Intel or Apple) </li></ul>Stanford
  • 38. Sources of Startup Ideas? <ul><li>Technology shifts </li></ul><ul><ul><li>Moore ’s Law </li></ul></ul><ul><ul><li>Disruptive tech </li></ul></ul><ul><ul><li>Research </li></ul></ul><ul><li>Market changes </li></ul><ul><ul><li>Value chain disruption </li></ul></ul><ul><ul><li>Deregulation </li></ul></ul><ul><li>Societal changes </li></ul><ul><ul><li>Changes in ways we live, learn, work, etc. </li></ul></ul><ul><ul><li>The world is flat (outsourcing) </li></ul></ul><ul><li>Dinosaur factor </li></ul><ul><ul><li>Arrogance </li></ul></ul><ul><ul><li>Deadened reflexes </li></ul></ul><ul><li>Irrational exuberance </li></ul><ul><ul><li>Undervalued assets </li></ul></ul>
  • 39. An Idea is _Not_ a Company
  • 40. Size of Opportunity
  • 41. This Class is about Scalable Startups <ul><li>Not all startups are designed to scale </li></ul><ul><li>Small business startups have different goals </li></ul><ul><ul><li>They are done by normal people </li></ul></ul><ul><li>Scalable startups are designed to grow big </li></ul><ul><ul><li>Typically require venture capital </li></ul></ul><ul><li>This means the size of the opportunity needs to be $100’s of millions to billions </li></ul>
  • 42. Small Business Startups Small Business Startup <ul><li>- Business Model found </li></ul><ul><li>- Profitable business </li></ul><ul><li>Existing team </li></ul><ul><li>< $1M in revenue </li></ul>
  • 43. Small Business Startups <ul><li>- Business Model found </li></ul><ul><li>- Profitable business </li></ul><ul><li>Existing team </li></ul><ul><li>< $10M in revenue </li></ul><ul><li>5.7 million small businesses in the U.S. <500 employees </li></ul><ul><li>99.7% of all companies </li></ul><ul><li>~ 50% of total U.S. workers </li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf Small Business Startup
  • 44. Scalable Startup Scalable Startup Large Company >$100M/year <ul><li>Total Available Market > $500m </li></ul><ul><li>Company can grow to $100m/year </li></ul><ul><li>Business model found </li></ul><ul><li>Focused on execution and process </li></ul>
  • 45. Scalable Startup Scalable Startup Large Company >$100M/year <ul><li>Total Available Market > $500m </li></ul><ul><li>Company can grow to $100m/year </li></ul><ul><li>Business model found </li></ul><ul><li>Focused on execution and process </li></ul><ul><li>Typically requires “risk capital” </li></ul><ul><li>In contrast a scalable startup is designed to grow big </li></ul><ul><li>Typically needs risk capital </li></ul><ul><li>What Silicon Valley means when they say “Startup” </li></ul>
  • 46. Very Different Startup Goals Small Business Startup <ul><li>- Business Model found </li></ul><ul><li>- Profitable business </li></ul><ul><li>Existing team </li></ul><ul><li>< $10M </li></ul>Scalable Startup Large Company <ul><li>Total Available Market > $500m </li></ul><ul><li>Company can grow to $100m/year </li></ul><ul><li>Business model found </li></ul><ul><li>Focused on execution and process </li></ul><ul><li>Typically requires “ risk capital ” </li></ul>
  • 47. Venture Firms Invest in Scalable Startups Small Business Startup Scalable Startup Large Company
  • 48. Market/Opportunity Analysis <ul><li>How Big is It?: Market/Opportunity Analysis </li></ul><ul><ul><li>Identify a Customer and Market Need </li></ul></ul><ul><ul><li>Size the Market </li></ul></ul><ul><ul><li>Competitors </li></ul></ul><ul><ul><li>Growth Potential </li></ul></ul>
  • 49. How Big is the Pie? Total Available Market Total Available Market <ul><li>How many people would want/need the product? </li></ul><ul><li>How large is the market be (in $ ’s) if they all bought? </li></ul><ul><li>How many units would that be? </li></ul><ul><li>How Do I Find Out? </li></ul><ul><li>Industry Analysts – Gartner, Forrester </li></ul><ul><li>Wall Street Analysts – Goldman, Morgan </li></ul>
  • 50. How Big is My Slice? Served Available Market <ul><li>How many people need/can use product? </li></ul><ul><li>How many people have the money to buy the product </li></ul><ul><li>How large would the market be (in $ ’s) if they all bought? </li></ul><ul><li>How many units would that be? </li></ul><ul><li>How Do I Find Out? </li></ul><ul><li>Talk to potential customers </li></ul>Served Available Market Total Available Market
  • 51. How Much Can I Eat? Target Market <ul><li>Who am I going to sell to in year 1, 2 & 3? </li></ul><ul><li>How many customers is that? </li></ul><ul><li>How large is the market be (in $ ’s) if they all bought? </li></ul><ul><li>How many units would that be? </li></ul><ul><li>How Do I Find Out? </li></ul><ul><li>Talk to potential customers </li></ul><ul><li>Identify and talk to channel partners </li></ul><ul><li>Identify and talk to competitors </li></ul>Total Available Market Target Market Served Available Market
  • 52. Segmentation Identification of groups most likely to buy Target Market <ul><li>Geographic </li></ul><ul><li>Demographic </li></ul><ul><li>Psychographic variables </li></ul><ul><li>Behavioral variables </li></ul><ul><li>Channel </li></ul><ul><li>etc… </li></ul>Total Available Market Served Available Market
  • 53. Market Size: Summary <ul><li>Market Size Questions: </li></ul><ul><ul><li>How big can this market be? </li></ul></ul><ul><ul><li>How much of it can we get? </li></ul></ul><ul><ul><li>Market growth rate </li></ul></ul><ul><ul><li>Market structure (Mature or in flux?) </li></ul></ul><ul><li>Most important : Talk to Customers and Sales Channel </li></ul><ul><li>Next important: Market size by competitive approximation </li></ul><ul><ul><li>Wall Street analyst reports are great </li></ul></ul><ul><li>And : Market research firms Like Forester, Gartner </li></ul>
  • 54. Business Model
  • 55. What Is a Business Model ? <ul><li>Diagram of flows between company and customers </li></ul><ul><li>Scorecard of hypotheses testing </li></ul><ul><li>Rapid change with each iteration and pivot </li></ul><ul><li>Founder- driven </li></ul>* Alex Osterwalder
  • 56. 9 building blocks of a business model:
  • 57. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?
  • 58. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?
  • 59. CHANNELS how does each customer segment want to be reached? through which interaction points?
  • 60. CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
  • 61. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?
  • 62. KEY RESOURCES which resources underpin your business model? which assets are essential?
  • 63. KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial?
  • 64. KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?
  • 65. COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?
  • 66. images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition
  • 67. sketch out your business model
  • 68. building block building block building block building block building block building block building block building block building block building block building block building block
  • 69. But, Realize They ’re Hypotheses
  • 70. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess
  • 71. How Do Startups Search For A Business Model? <ul><li>The Search is called Customer Development </li></ul><ul><li>The Implementation is called Agile Development </li></ul>
  • 72. Customer Development Solving For Customer Risk
  • 73. Customer Development Get Out of the Building The founders ^
  • 74. More startups fail from a lack of customers than from a failure of product development (focus on “who” more than “what”)
  • 75. Customer Development Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship Product Introduction Model Customer Development Company Building Customer Discovery Customer Validation Customer Creation Pivot
  • 76. <ul><li>Stop selling, start listening </li></ul><ul><li>Test your hypotheses </li></ul><ul><li>Continuous Discovery </li></ul><ul><li>Done by founders </li></ul>Customer Discovery Customer Discovery Customer Validation Company Building Customer Creation Pivot
  • 77. Turning Hypotheses to Facts <ul><li>Test Hypotheses: </li></ul><ul><li>Product </li></ul><ul><li>Market Type </li></ul><ul><li>Competition </li></ul>
  • 78. <ul><li>Test Hypotheses: </li></ul><ul><li>Problem </li></ul><ul><li>Customer </li></ul><ul><li>User </li></ul><ul><li>Payer </li></ul>
  • 79. <ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul>
  • 80. <ul><li>Test Hypotheses: </li></ul><ul><li>Problem </li></ul><ul><li>Customer </li></ul><ul><li>User </li></ul><ul><li>Payer </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Demand Creation </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Product </li></ul><ul><li>Market Type </li></ul><ul><li>Competitive </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Pricing Model / Pricing </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Size of Opportunity/Market </li></ul><ul><li>Validate Business Model </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>(Customer) </li></ul><ul><li>(Problem) </li></ul>
  • 81. <ul><li>Test Hypotheses: </li></ul><ul><li>Problem </li></ul><ul><li>Customer </li></ul><ul><li>User </li></ul><ul><li>Payer </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Demand Creation </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Product </li></ul><ul><li>Market Type </li></ul><ul><li>Competitive </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Pricing Model / Pricing </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Size of Opportunity/Market </li></ul><ul><li>Validate Business Model </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>(Customer) </li></ul><ul><li>(Problem) </li></ul>Customer Development Team Agile Development
  • 82. <ul><li>Test Hypotheses: </li></ul><ul><li>Problem </li></ul><ul><li>Customer </li></ul><ul><li>User </li></ul><ul><li>Payer </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Demand Creation </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Product </li></ul><ul><li>Market Type </li></ul><ul><li>Competitive </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Pricing Model / Pricing </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Size of Opportunity/Market </li></ul><ul><li>Validate Business Model </li></ul><ul><li>Test Hypotheses: </li></ul><ul><li>Channel </li></ul><ul><li>(Customer) </li></ul><ul><li>(Problem) </li></ul>Customer Development Team Agile Development
  • 83. The Pivot <ul><li>The heart of Customer Development </li></ul><ul><li>Iteration without crisis </li></ul><ul><li>Fast, agile and opportunistic </li></ul>
  • 84. Break
  • 85. Our “Culture” for E245 <ul><li>Show up on time and stay ‘til we’re done </li></ul><ul><li>Keep your commitments (in class and out) </li></ul><ul><li>Step outside if you must call, email, skype, twitter, chat, surf the web, or do anything unrelated to E245 </li></ul><ul><li>Entrepreneurship is a team sport </li></ul><ul><ul><li>80% of your grade depends on working with others </li></ul></ul>
  • 86. What Lies Ahead: “To Do” List <ul><li>Check web site for admission lists </li></ul><ul><ul><li>attendance is mandatory in session 2 </li></ul></ul><ul><ul><li>waitlist (if any) will be cleared at beginning of class </li></ul></ul><ul><li>Form full teams by Session 2 </li></ul><ul><ul><li>mixer on Thursday, 5:15 at Thornton 110 </li></ul></ul><ul><li>Team deliverable by next week: </li></ul><ul><ul><li>Hypotheses for each part of business model. </li></ul></ul><ul><ul><li>- Test for whether your business is worth  pursuing (market  size) </li></ul></ul><ul><ul><li>- Test for each of the hypotheses     </li></ul></ul><ul><ul><li>- What  constitutes a pass/fail signal for the  test (e.g. at what point would you say your hypotheses wasn ’t even close to  correct)? </li></ul></ul>

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