The Smart Fast Startup

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How real startups in the valley quickly nail the product that sells. A Sep 2011 presentation to Brad Barbeau's students at CSUMB.

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  • Shift the focus from building something to checking out the problem and the ideas. Consistent with MVP but more specific on the how-to’s.
  • Main point: Clayton storyEternal debate about product vs market vs teamBut I was in the middle of first startup – it wasn’t as clear – failure of first idea was tramautic, it’s a blind alley, and it’s the kind of formula that might make sense in hindsight.I decided to take that as metaphor because very often, idea #2 fails too. In fact, honest stories of startup success include ideas #3, #4. Twitter exampleTransition: Long road to the overnight success. And it often looks something like this….
  • This is what he was saying.Transition: Why is this? (open for questions)Explain mom and pop startup – coffee shop, sporting goods store - known product, known customer What about a technology startup?
  • Unclear product spec, unclear customerIn fact, if you find the real story behind startups, there is a long road to the overnight success. (Twitter, Angry Birds, even Apple)Transition: So what is the loop really about?
  • Loop is really about defining the exact functionality that will sell, and to who.
  • TwitterAngry BirdsAnd there is no way to do that without engaging with customers.Transition: It’s not what business textbooks tell you. In my first startup, we followed this model….
  • This is the classic business school way of launching a business. And it works. If you are Proctor and Gamble – or the restaurant – dealing with a known product and a known customer.Transition: Dialing that in is hard……if you look at the real stories of startup success, it’s not one loop….it looks more like this..
  • Transition……if we know this is true, why is the startup failure rate so high? (Why is this hard?)
  • Mainpoint: Ideas don’t fail easilyThe more time you invest in building something, the more ominous failure looks (graph). Threshold on y axis, it becomes a part of you.remember Risky Business the movie? The dream is always the same. Risky business in Silicon Valley starts with the same line – the dream is always the same. Someone has an idea, they think people will surely love it as much as they do, so they build it because people will surely want to buy it. Every entreprenuer I have ever worked with wants to see their vision, and their product validated because it is a part of them.As soon as you build something, you’re dead – paulkedrosky, kaufmann foundation, infectious greedTransition: But it doesn’t just happen at big cos, it happens everywhere.
  • Transition: How many of you have seen a product labeled beta? It’s a label entrepreneurs use to say its OK to ship something that might not work all that well?
  • Transition: So we know its hard to get through the loops…..
  • Bring them back to the loops – what is the x axis?Transition: What would happen if we could do this…(next slide)
  • Main Point: These all have the same root causeMake these bullets progressTransition: It wasn’t the product, or the team, or the technology, or their investors, or the amount of money they raised. It was something much more fundamental.
  • Main point: A problem needs to have a sufficient critical mass to give a startup the escape velocity it needs to become a business.Customer dialog – can I have your credit card no. Introduce the concept – escape velocity. Close with the paragraph Nathan quotedTransition: There are startups that have tackled a problem people will pay to have solved, but still don’t make it.
  • Main point: Underlying principles to an effective testPrinciples:People don’t know if they will buy something. People know their problems.Value of a problem is timeDo you have this problem?
  • Main point: Essential steps to a cold call testCustomers you would like to have - Under Armor, Skechers, REI, and Barnes and Noble; along with smaller brands like Skis.com and Evogear.Hypothesize the title of who feels the pain – VP Marketing, Director of online marketing, Director of ecommerceName it – in their jargon – is it conversion, conversion of first time visitorsInterview script – explore the problem, breakthrough questions are the biggest problem, how would you like to change it, what about thisCall results – 3 outcomes (nail, forget it, pivot) – 9/15Busy Executive – Important problem. If a busy executive in an established brand, who has never met you, or even heard of you, picks up the phone and calls back on the sole prospect of talking about a problem and the vague possibility of new technologies that might help, then that’s an important problem. The kind of problem that is hungry for any amount of relief.A startup that begins with monetizable pain will never be thought of as a hammer looking for a nail. It will not be trying to reposition itself as a “must-have” 6 months after launch. It will never sit in the deadpool with the epitaph “we were before our time.” It will not be producing white papers to “educate” target customers on how they are really losing money but they just don’t know it. And it will not need an ROI calculator on its web site.
  • Main point: Smoke test plus hassle testPlace ads you would like to haveMeasure clickthroughFilter to fit profileAsk do you have this problemHow big a hassle is it?When done – target customer profile, CAC
  • Main point: Look at what we have without building anything.What do we have at this point:Market Sweetspot – profile of companies that are interested, and the title to start with in the selling processMessaging – a battle-tested winning problem
  • Main Point: Failure comes from doing too much.Transition: Startups that succeed offer the minimum feature set
  • Main Point:Minimum feature set – meaningful amount of impact on the problem. Capability + usabilityGet it right, and customers and finance community will give you the opportunity to do the rest.Minimum feature set, everything else goes on the roadmap.Transition: How do you find out what that is?
  • Main point: This is how you test for the MFS quicklyPrioritizing Questions: What else should it do?$1000 test?What’s the single most important thing?What would it take for your users to be able to try this?Looking for convergenceBreakthrough Questions: Would you pre-pay at a discount?If I let you have it for free would you install it?Still have not built anything.
  • Main point: Output of the process - Story of what engineers really want.Transition: What does this all this mean for you, if you decide to start a company and raise money?
  • Everyentreprenuer I meet believes this…..Transition: But people get fooled for good reason
  • Transition: So how does this method work for real startups?
  • Logos: 4x 4 matrix Problem pass/fail Product Pass/Fail
  • Main point: You need monetizable pain and the minimum feature set. And you need to be able to test them quickly.
  • The Smart Fast Startup

    1. 1. The Smart Fast Startup<br />How to Quickly Nail <br />the Product that Sells<br />
    2. 2.
    3. 3. Hypothetical Startup<br />
    4. 4. Theoretical Successful Startup<br />
    5. 5. Unproven emerging market<br />Fuzzy target customer profile<br />No repeatable business model<br />Unclear solution requirement<br />Typical Technology Startup<br />Now Entering:<br />The Land of Extreme Uncertainty<br />
    6. 6. Theoretical Successful Startup<br />
    7. 7. Real Startup<br />
    8. 8. Idea<br />Product<br />Business plan<br />Product Spec<br />Development<br />Launch<br />Traditional Path<br />Target customers<br />Like it?<br />Pay for it? <br />Build it<br />Still like it? <br />Credit card ?<br />Problem – “buyers are liars” – we suck at predicting what we will use or buy<br />
    9. 9. Real Startup<br />
    10. 10. Amount of Perceived Failure<br />Time Spent Building Something<br />Failure Avoidance Syndrome<br />
    11. 11.
    12. 12.
    13. 13.
    14. 14.
    15. 15.
    16. 16. Time and Money Spent<br />
    17. 17. Venture Investors<br />Co-Founders<br />First Time<br />Stronger Company<br />Better terms<br />More money<br />More fun<br />Less Trauma<br />Less Risk<br />Time and Money Spent<br />
    18. 18. Famous Startup Epitaphs<br />Hammer looking for a Nail<br />Feature looking for a Product<br />Before our Time<br />Nice to Have<br />Very cool, but no one would Pay<br />
    19. 19. The Problem<br />Monetizable<br />Merely <br />Interesting<br />“Monetizable Pain”<br />
    20. 20. Measure monetizable pain<br />
    21. 21. B2B<br />50%<br />Monetizable Pain Threshold<br />
    22. 22. B2C<br />
    23. 23. Two Bridges<br />Monetizable Pain<br />Market Sweetspot<br />Messaging<br />CAC<br />
    24. 24. Famous Startup Epitaphs II<br />More Money<br />More Partners<br />More Engineers<br />More Marketing<br />More ………..<br />
    25. 25. Minimum Feature Set<br />Product Roadmap<br />
    26. 26. Minimum Feature Set<br /><ul><li>Buying panel
    27. 27. Breakthrough Q’s
    28. 28. Mockups
    29. 29. Product tests</li></li></ul><li>Two Bridges<br />Monetizable Pain<br />Market Sweetspot<br />Messaging<br />CAC<br />Min Feature Set<br />Customer Validated<br />Product Spec<br />Beta Sites<br />Early Adopters<br />Revenue<br />
    30. 30. VC’s invest in the new, new thing<br />Truth: VC’s invest in a good business<br />What does this mean for you?<br />Myth<br />
    31. 31. What is Google’s best innovation?<br />
    32. 32. What is Google’s best innovation?<br />
    33. 33. Pass<br />Min<br />Feature<br />Set<br />Fail<br />Pass<br />Fail<br />Monetizable Pain<br />
    34. 34. Recommended Reading:<br />The Lean Startup<br />By Eric Ries<br />Nail It Then Scale It<br />By Nathan Furr and Paul Ahlstrom<br />mark@sandhillpartners.com<br />408-771-8585<br />
    35. 35. Key questions<br />If I do this will I get funded?<br />What about competition<br />Makes prospective investors nervous<br />I say its not as important as you think<br />Already doing what you are doing<br />Could do it, or have the idea<br />Nearly every startup has someone in this category<br />Execution is what matters<br />
    36. 36. Two Bridges<br />Monetizable Pain<br />Min Feature Set<br />

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