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Why Accountants Don’t Run Startups



                 Steve Blank
           Stanford - School of Engineering
       U.C....
I Drew This



Customer            Customer     Customer   Company
Discovery           Validation   Creation    Building

...
I Called It:
            Customer Development

Customer            Customer     Customer   Company
Discovery           Val...
I Wrote This
A Few People Read It
I Write a Blog
www.steveblank.com
When the Student is ready,
   the Master appears.

       Buddhist proverb
When the Student is ready,
   the Master appears.

       Buddhist proverb


When the Master is ready,
  the Student appea...
Five Short Stories
Tectonic Shifts in
Entrepreneurship
The Silicon Valley
               Funding Pyramid
                               Angels &
             TechStars        In...
Innovation in Financing

            Angels &
           Incubators
            ($0-10M)

                             Inn...
New Trends In Silicon Valley
•  Internet startups - $500K is the new $5M
  –  Driven by the top of the pyramid

•  Seed Fu...
Not All Startups Are Equal
Small Business Startups



                           !"#$$%
!"#$"%&'
                          &'()*+((%
Small Business Startups



                                      !"#$$%
!"#$"%&'
                                     &'()...
Small Business Startups



                                             !"#$$%
    !"#$"%&'
                              ...
Small Business Startup:
             Internet Edition


                                                !"#$$%
    !"#$"%&...
Scalable Startup



!(#)#*)+'                        ,#-.+%
!"#$"%&'                       /0"1#*2%
                      ...
Scalable Startup



!(#)#*)+'                                    ,#-.+%
!"#$"%&'                                   /0"1#*2...
Scalable Startup



     !(#)#*)+'                                            ,#-.+%
     !"#$"%&'                        ...
Very Different Startup Goals

                                                    !"#$$%
!"#$"%&'
                        ...
Silicon Valley Venture Firms Invest
        in Scalable Startups

  !"#$"%&'                 !"#$$%&'()*+((%




 !(#)#*)+...
What VC’s Don’t Tell You:
       The Transition


!(#)#*)+'                  3#$4+'
            3-#*()40*%
!"#$"%&'       ...
What VC’s Don’t Tell You:
The Transition – Founders Leave


  !(#)#*)+'                             3#$4+'
               ...
What’s A Startup?


  !(#)#*)+'                             3#$4+'
                      9$#8:;<68'
  !"#$"%&'            ...
Plan versus Model
No Business Plan survives first
    contact with customers
So Search for a Business Model
The Search for a Business Model



       •  A Business Plan is static

       • A Business Model diagrams how a company
 ...
Emphasis On Hypotheses Testing
Startups Continually Pivot (Iterate)
Startups Search and Pivot


The Search for the Business Model

      !(#)#*)+'                           3#$4+'
          ...
Startups Search, Companies Execute

The Search for the Business Model        The Execution of the Business Model


       ...
Metrics Versus Accounting


              The Execution of the Business Model


!(#)#*)+'                          3#$4+'
...
Metrics Versus Accounting


The Search for the Business Model       The Execution of the Business Model



       !(#)#*)+...
Customer Validation Versus Sales


                The Execution of the Business Model


  !(#)#*)+'                      ...
Customer Validation Versus Sales


The Search for the Business Model          The Execution of the Business Model



     ...
Customer Development Versus
    Product Management


               The Execution of the Business Model



!(#)#*)+'      ...
Customer Development Versus
           Product Management


The Search for the Business Model        The Execution of the ...
Engineering Versus
            Agile Development


                  The Execution of the Business Model

!(#)#*)+'       ...
Engineering Versus
                  Agile Development

The Search for the Business Model     The Execution of the Busines...
How Do Startups Search For A
         Business Model?




•  The Search is called Customer Development
•  The Implementati...
The Lean Startup




•  The Search is called Customer Development
•  The Implementation is called Agile Development
Startups Don’t Last Forever



!(#)#*)+'                                         3#$4+'
                        9$#8:;<68'...
562%!7#-7'1(%8-+*97%:'*%&2%
       8;;0'*7#*7(%
Leadership Versus Management

   !(#)#*)+'                  3#$4+'
               9$#8:;<68'
   !"#$"%&'                 5...
Leadership Versus Management

   !(#)#*)+'                  3#$4+'
               9$#8:;<68'
   !"#$"%&'                 5...
Leadership Versus Management

   !(#)#*)+'                  3#$4+'
               9$#8:;<68'
   !"#$"%&'                 5...
Leadership Versus Management

   !(#)#*)+'                  3#$4+'
               9$#8:;<68'
   !"#$"%&'                 5...
Leadership Versus Management

   !(#)#*)+'                  3#$4+'
               9$#8:;<68'
   !"#$"%&'                 5...
Inventor of the Modern Corporation



 !(#)#*)+'                  3#$4+'
             9$#8:;<68'
 !"#$"%&'                ...
Inventor of the Modern Corporation



 !(#)#*)+'                    3#$4+'
               9$#8:;<68'
 !"#$"%&'            ...
Alfred P. Sloan



   !(#)#*)+'                            3#$4+'
                      9$#8:;<68'
   !"#$"%&'            ...
Founder of General Motors



!(#)#*)+'                   3#$4+'
             9$#8:;<68'
!"#$"%&'                  567&#82'
Founder of General Motors



!(#)#*)+'                      3#$4+'
             9$#8:;<68'
!"#$"%&'                     56...
Billy Durant



!(#)#*)+'                                     3#$4+'
               9$#8:;<68'
!"#$"%&'                   ...
Durant Versus Sloan



!(#)#*)+'                        3#$4+'
                  9$#8:;<68'
!"#$"%&'                      ...
Durant Versus Sloan



      •  Dies, rich, honored and famous
Durant Versus Sloan



•  Dies managing a bowling alley   •  Dies, rich, honored and famous
Durant Versus Sloan

                                     Accountant
•  Dies managing a bowling alley   •  Dies, rich, hon...
You are here
!(#)#*)+'                   3#$4+'
             9$#8:;<68'
!"#$"%&'                  567&#82'
E-School instead of B-School
Business School Versus
      Entrepreneurship School

                           Business School

!(#)#*)+'               ...
Business School Versus
            Entrepreneurship School

                                              Business School
...
Business School Courses Versus
   Entrepreneurship Courses

                           Business School

!(#)#*)+'         ...
Business School Versus
         Entrepreneurship Courses

                                               Business School
E...
E-School Will Emerge


•  Entrepreneurial Education will change radically
•  E-School Students are not B-School Students
•...
E-School – Let’s Help Build It


•  Startup Accelerators - great coaching/networking
   but minimal methodology
•  Lean/Cu...
Durant School of
Entrepreneurship
The Durant School of
     Entrepreneurship




http://www.cafepress.com/durantschool
The Durant School of
     Entrepreneurship




http://www.cafepress.com/durantschool
The Durant School of
     Entrepreneurship




http://www.cafepress.com/durantschool
Thanks

===>:"+?+*)#8@>(67'
Why accountants don’t run startups sllc
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Why accountants don’t run startups sllc

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  • It's a very good presentation on how to start/run a business.
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  • Steve always has such clarity and context. Great big picture!
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  • Hi,
    Your presentation have lot of helping thanks for this..
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  • Be Daring, Be Durant
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  • Excellent - the truth! Thank you Steve.
    Would have like to see how you integrate crowdfunding into your model.
    It also explains why products like Zero (the accounting software) are dividing accountants into two camps - those with their heads in the clouds and those stuck on the bottom line.
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Transcript of "Why accountants don’t run startups sllc"

  1. 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. 2. I Drew This Customer Customer Customer Company Discovery Validation Creation Building Pivot
  3. 3. I Called It: Customer Development Customer Customer Customer Company Discovery Validation Creation Building Pivot
  4. 4. I Wrote This
  5. 5. A Few People Read It
  6. 6. I Write a Blog www.steveblank.com
  7. 7. When the Student is ready, the Master appears. Buddhist proverb
  8. 8. When the Student is ready, the Master appears. Buddhist proverb When the Master is ready, the Student appears. Steve Blank proverb
  9. 9. Five Short Stories
  10. 10. Tectonic Shifts in Entrepreneurship
  11. 11. The Silicon Valley Funding Pyramid Angels & TechStars Incubators Y-Combinator ($0-10M) Floodgate Seed Funds SoftTech (Clavier) ($10-50M) SV Angel (Conway) Felicis (Senkut) First Round Capital Small VC Funds Union Square Ventures ($50-250M) Sequoia Benchmark Traditional VC Funds (>$250M) Source: Dave McClure 500hats.com
  12. 12. Innovation in Financing Angels & Incubators ($0-10M) Innovation is Seed Funds happening here ($10-50M) Small VC Funds ($50-250M) Traditional VC Funds (>$250M) Source: Dave McClure 500hats.com
  13. 13. New Trends In Silicon Valley •  Internet startups - $500K is the new $5M –  Driven by the top of the pyramid •  Seed Funds providing entrepreneurial education* –  Ycombinator, TechStars, SeedCamp, LaunchBox, etc •  Customer Development/Lean Startup adoption –  Methodology to test hypothesis and business model *~100 startup accelerator programs: http://blog.shedd.us/321987608/
  14. 14. Not All Startups Are Equal
  15. 15. Small Business Startups !"#$$% !"#$"%&' &'()*+((%
  16. 16. Small Business Startups !"#$$% !"#$"%&' &'()*+((% - Business Model found - Profitable business -  Existing team < $10M in revenue
  17. 17. Small Business Startups !"#$$% !"#$"%&' &'()*+((% - Business Model found - Profitable business -  Existing team < $10M in revenue •  5.7 million small businesses in the U.S. <500 employees •  99.7% of all companies •  ~ 50% of total U.S. workers http://www.sba.gov/advo/stats/sbfaq.pdf
  18. 18. Small Business Startup: Internet Edition !"#$$% !"#$"%&' &'()*+((% - Business Model found - Profitable business -  Existing team < $10M in revenue •  The Internet allows a new class of Small Businesses •  Not all businesses on the Internet are “Scalable Startups”
  19. 19. Scalable Startup !(#)#*)+' ,#-.+% !"#$"%&' /0"1#*2% ,-.//012+#$'
  20. 20. Scalable Startup !(#)#*)+' ,#-.+% !"#$"%&' /0"1#*2% ,-.//012+#$' -  Total Available Market > $500m -  Company can grow to $100m/year -  Business model found -  Focused on execution and process
  21. 21. Scalable Startup !(#)#*)+' ,#-.+% !"#$"%&' /0"1#*2% ,-.//012+#$' -  Total Available Market > $500m -  Company can grow to $100m/year -  Business model found -  Focused on execution and process -  Typically requires “risk capital” •  In contrast a scalable startup is designed to grow big •  Typically needs risk capital •  What Silicon Valley means when they say “Startup”
  22. 22. Very Different Startup Goals !"#$$% !"#$"%&' &'()*+((% - Business Model found - Profitable business -  Existing team < $10M !(#)#*)+' ,#-.+% !"#$"%&' /0"1#*2% -  Total Available Market > $500m -  Company can grow to $100m/year -  Business model found -  Focused on execution and process -  Typically requires “risk capital”
  23. 23. Silicon Valley Venture Firms Invest in Scalable Startups !"#$"%&' !"#$$%&'()*+((% !(#)#*)+' ,#-.+% !"#$"%&' /0"1#*2%
  24. 24. What VC’s Don’t Tell You: The Transition !(#)#*)+' 3#$4+' 3-#*()40*% !"#$"%&' 567&#82' Search Build Grow
  25. 25. What VC’s Don’t Tell You: The Transition – Founders Leave !(#)#*)+' 3#$4+' 3-#*()40*% !"#$"%&' 567&#82' -  Founders depart -  Professional Mgmt -  Process -  Beginning of scale
  26. 26. What’s A Startup? !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Business Model found -  i.e. Product/Market fit - Repeatable sales model - Managers hired A Startup is the organization used to search for a scalable business model
  27. 27. Plan versus Model
  28. 28. No Business Plan survives first contact with customers
  29. 29. So Search for a Business Model
  30. 30. The Search for a Business Model •  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
  31. 31. Emphasis On Hypotheses Testing
  32. 32. Startups Continually Pivot (Iterate)
  33. 33. Startups Search and Pivot The Search for the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Business Model found -  i.e. Product/Market fit - Repeatable sales model - Managers hired
  34. 34. Startups Search, Companies Execute The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Business Model found - Cash-flow breakeven -  Product/Market fit - Repeatable sales model - Profitable - Managers hired - Rapid scale - New Senior Mgmt ~ 150 people
  35. 35. Metrics Versus Accounting The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Traditional Accounting -  Balance Sheet -  Cash Flow Statement -  Income Statement
  36. 36. Metrics Versus Accounting The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Startup Metrics -  Customer Acquisition Cost Traditional Accounting -  Balance Sheet -  Viral coefficient -  Cash Flow Statement -  Customer Lifetime Value -  Income Statement -  Average Selling Price/Order Size -  Monthly burn rate -  etc.
  37. 37. Customer Validation Versus Sales The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Sales -  Sales Organization -  Scalable -  Price List/Data Sheets -  Revenue Plan
  38. 38. Customer Validation Versus Sales The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Customer Validation -  Early Adopters Sales -  Sales Organization -  Pricing/Feature unstable -  Scalable -  Not yet repeatable -  Price List/Data Sheets - “One-off’s” -  Revenue Plan
  39. 39. Customer Development Versus Product Management The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Product Management -  Delivers MRD’s -  Feature Spec’s -  Competitive Analysis
  40. 40. Customer Development Versus Product Management The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Product Management Customer Development -  Delivers MRD’s -  Hypothesis Testing -  Feature Spec’s -  Minimum Feature Set -  Competitive Analysis -  Pivots
  41. 41. Engineering Versus Agile Development The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Engineering -  Requirements Docs. -  Waterfall Development -  QA -  Tech Pubs
  42. 42. Engineering Versus Agile Development The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Engineering Agile Development -  Requirements Docs. -  Continuous Deployment -  Waterfall Development -  Continuous Learning -  QA -  Tech Pubs -  Self Organizing Teams -  Minimum Feature Set -  Pivots
  43. 43. How Do Startups Search For A Business Model? •  The Search is called Customer Development •  The Implementation is called Agile Development
  44. 44. The Lean Startup •  The Search is called Customer Development •  The Implementation is called Agile Development
  45. 45. Startups Don’t Last Forever !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Business Model found - Cash-flow breakeven -  Product/Market fit - Profitable - Repeatable sales model - Rapid scale - Managers hired - New Senior Mgmt ~ 150 people You fail if you remain a startup!
  46. 46. 562%!7#-7'1(%8-+*97%:'*%&2% 8;;0'*7#*7(%
  47. 47. Leadership Versus Management !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  48. 48. Leadership Versus Management !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  49. 49. Leadership Versus Management !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Search
  50. 50. Leadership Versus Management !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Search Build
  51. 51. Leadership Versus Management !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Search Build Grow
  52. 52. Inventor of the Modern Corporation !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  53. 53. Inventor of the Modern Corporation !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Alfred P. Sloan
  54. 54. Alfred P. Sloan !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' General Motors, President/Chairman -  Cost Accounting -  MIT Sloan School -  Sloan Foundation -  etc.
  55. 55. Founder of General Motors !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  56. 56. Founder of General Motors !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Billy Durant
  57. 57. Billy Durant !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Leader in horse-drawn buggy’s -  Fired by board, starts Chevrolet -  Regains control of GM -  Fired by board, GM ~$3.6 billion* * GM Net sales in 1921 $304.5M = $3.6 Billion today
  58. 58. Durant Versus Sloan !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  59. 59. Durant Versus Sloan •  Dies, rich, honored and famous
  60. 60. Durant Versus Sloan •  Dies managing a bowling alley •  Dies, rich, honored and famous
  61. 61. Durant Versus Sloan Accountant •  Dies managing a bowling alley •  Dies, rich, honored and famous
  62. 62. You are here !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82'
  63. 63. E-School instead of B-School
  64. 64. Business School Versus Entrepreneurship School Business School !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Execution -  Strategy -  Accounting -  Products -  Engineering -  Management -  Administrative
  65. 65. Business School Versus Entrepreneurship School Business School Entrepreneurship School !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' -  Hypothesis testing -  Execution -  Business Model testing -  Accounting -  Customer Development -  Products -  Agile Development -  Engineering -  Metrics -  Management -  Administrative -  Venture Finance -  Hands-on
  66. 66. Business School Courses Versus Entrepreneurship Courses Business School !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Courses -  Managerial Finance/Accounting -  Managing Groups and Teams -  Financial Accounting -  Operations -  Modeling for Optimization -  Global Value Chain Strategies
  67. 67. Business School Versus Entrepreneurship Courses Business School Entrepreneurship School !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567&#82' Courses -  Entrepreneurial Management Courses -  Creativity and Innovation -  Managerial Finance/Accounting -  Managing Groups and Teams -  Technology Entrepreneurship -  Financial Accounting -  Patent Law for Entrepreneurs -  Operations -  Global Entrepreneurial Marketing-  Modeling for Optimization -  Entrepreneurial Finance -  Global Value Chain Strategies
  68. 68. E-School Will Emerge •  Entrepreneurial Education will change radically •  E-School Students are not B-School Students •  Y-Combinator/Techstars first inkling •  Today ~100 startup accelerator programs *~100 startup accelerator programs: http://blog.shedd.us/321987608/
  69. 69. E-School – Let’s Help Build It •  Startup Accelerators - great coaching/networking but minimal methodology •  Lean/Customer Development - great methodology but no education •  Need to be connected to Engineering School •  Stanford, Harvard and others get it…but… *~100 startup accelerator programs: http://blog.shedd.us/321987608/
  70. 70. Durant School of Entrepreneurship
  71. 71. The Durant School of Entrepreneurship http://www.cafepress.com/durantschool
  72. 72. The Durant School of Entrepreneurship http://www.cafepress.com/durantschool
  73. 73. The Durant School of Entrepreneurship http://www.cafepress.com/durantschool
  74. 74. Thanks ===>:"+?+*)#8@>(67'
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