Startup science 2017 ①

Startup Science ①
"Making a successful startup is an Art.
Making a startup that doesn’t fail is a Science.”
Created by
Masa Tadokoro

You can make the world a better
place with your startup
❓
Copywite 2015 Masayuki Tadokoro All rights reserved

93% of startups fail

Question:
Why do startups fail?
❓

There is only one reason:
You don’t make
something people want

MarketProduct
Product/market fit means being in
a good market with a product that
can satisfy that market
Fit

Make something people
want.
Paul Graham
Y Combinator, Founder

With headquarters in Silicon Valley, it is known as
the greatest start-up incubator in the world.
What is Y Combinator？

To date, Y Combinator generated
1400+ startups,
more than 100 exits and
the combined valuation of YC
startups exceed 80 billion USD
jp.techcrunch.com/2015/03/18/20150317y-combinator-talks-numbers-842-companies-funded-to-date-23-women-in-current-batch/

＋
ー
Product/
market-fit
Start-ups should follow a “J-curve”

Before product/market fit.
After fit.
product/market

Only7％
archive
PMF
93% die
before
PMF

http://www.businessinsider.com/how-billion-dollar-startup-fab-died-2015-2#ixzz3cRjBHFri
fab.com received
336 million;
they spent (wasted)
more than half.
They eventually
sold the company with
a 15 million valuation.

Before proving our business model, we
spent 70 million to launch in Europe
and another tens
of millions for marketing.
We wasted 15 million for warehouses
which were never used.
参照：http://www.businessinsider.com/how-billion-dollar-startup-fab-died-2015-2#ixzz3cRjBHFri
Jason Goldburg
Fab. CEO/Founder

If you have too much money,
you will find easy ways to solve the issues
without thinking thoroughly
Ben Narasin
General Partner, Canvas Ventures
https://www.youtube.com/user/vlabvideos/videos

There is
no silver bullet
to achieve
product/market fit

However,
you can
reduce the risk of failure
by learning
processes
and gaining knowledge

Learn steps to build up
successful start-ups.
**A right step will be different from one another
- it depends on the characteristic of product, market and resources.
The theme of the day!

About me

Masa
Tadokoro
【Serial Entrepreneur】
He has extensive experiences in start-up space;
5 start-ups in Japan and 1 start-up in Silicon Valley
(Successful exit experience).
【Venture Capitalist】
Currently he is a Venture Partner of Fenox VC;
he is in-charge of start-up investment
in Japan and South East Asia.
【Lecturer 】
How to start a startup
Start-up finance
How to ideate startup
Open innovation
【Other】
Adviser/board member of several startups
Director of startup management at Pioneers Asia
https://www.facebook.com/masa.tadokoro
https://www.linkedin.com/in/masatadokoro
【Social media】
Find me
and connect!

Agenda
① Idea Verification : What is a good start-up idea?
② Customer-problem Fit： Does the issue really exist?
③ Problem-solution Fit:
④ Product-Market Fit:
Do you provide an appropriate
solution to the issue?
Does the market for the solution
exist?

Idea Verification
Verify
your Idea
Create
Plan A
Build Plan A
with
Lean Canvas
Ideation
Clarify
what issue
Is to be solved
Verify the
potential of
your idea
1-1 1-2 1-3 1-4
Know
Start-up
Meta-principles
Know
start-up
un-common
principles
Start as
a side project

Customer Problem Fit
Examine issues
and assumptions
Build a issue
Hypothesis
Clarify issue of customers
(Leveraging Persona
sheet, Empathy map
Customer journey etc）
Clarify if the
customer truly
has the issues
2-1 2-3
Clarify
Assumptions
Verify
Assumptions
with Javelin board
2-2
Verify the fit between
founders
Founder
Issue
fit

Problem-solution fit
Figure out how
customers want to
solve the issue
Product
Interview
Build a
prototype
based on the
blueprint
Conduct interview
with users who have
experienced the
prototype
3-1 3-2 3-3
Build
Prototype
Create UX
Blueprint
Forming
team
Fix core team
members

Product-market-fit
Deliver the MVP
to the first
customer
Clarify what to
learn with an
MVP
Figure out things to
learn using the
MVP
Chose MVP type
and build
Learn by delivering
to an evangelist customer
Conduct Qualitative analysis by
interviews with customers and
Quantitative analysis by
innovation metrics
Examine the UX
with Hooked model
Improve UX to
Enhance
the customer
engagement
Iterate product to
bring more value
to customers
Iterate product/ launch
it
Conduct
Quantitative &
Qualitative Analysis
Build MVP
Repeat the
process until
the PMF has
been achieved
Create
Highly adaptive teamPivot the business model
Pivot the
Business Model

There are “Dos” and “Don’ts” for
each stage startup
You can reduce waste/risks by having clear
guidelines on actions. Startups cannot
afford to make much waste
Why have you to think
In a “step-by-step” manner?

The step-by-step method is inevitable in order to
prevent "premature scaling". It is one of
the main reasons why startups die

・Those that want to start a start-up
・Those that want to do a new business in their
current company.
・Those that want to invest in good startups as
institutional investors, i.e.VC or angel.
・Those who have started a startup and want to
achieve a product/market fit
Target audience

Idea Verification
Verify
your Idea
Create
Plan A
Build Plan A
with
Lean Canvas
Ideation
Clarify
what issue
is to be solved
Verify the
potential of
your idea
1-1 1-2 1-3 1-4
Know
Start-up
Meta-principles
Know
start-up
un-common
principles
Start as
a a side project

Staying in the building
before getting out of the Building

Idea Verification
Verify
your Idea
Create
Plan A
Build Plan A
with
Lean Canvas
Ideation
Clarify
what issue
is to be solved
Verify the
potential of
your idea
1-1 1-2 1-3 1-4
Know
Start-up
Meta-principles
Know
start-up
un-common
principles
Start as
a side project

Question:
What is a good business idea?
❓

Issue
Solution
Focus!
Good business idea:
it is focusing on issues,
not solutions

Quality of issue
Quality of
solution
High
HighLow
Low
There are many business ideas.

Quality of issue
Quality of
solution
High
HighLow
Low
Most
Ideas
Valuable
Idea

A path to finding a good business idea is to
verify the quality of the issue first,
then verify the quality of the solution.
①
②
Good
idea
Bad
idea
Quality of issue
Quality of
solution
High
HighLow
Low

X High quality
idea
Low quality
idea
Quality of issue
Quality of
solution
High
HighLow
Low
If there is no path
finding a good solution
then find a good issue

http://www.business2community.com/tech-gadgets/5-reasons-google-glass-
miserable-failure-01462398#WBTitUHCbv4hdv2H.97

http://www.forbes.com/sites/paullamkin/2016/12/07/pebble-shuts-down-fitbit-picks-up-the-pieces/#7800299e73b8

http://jp.techcrunch.com/2016/11/27/20161126ears-hands-or-eyes/

X High quality
idea
Low quality
idea
Quality of issue
Quality of
solution
High
HighLow
Low
・Google Glass
・Smart watch

Domain
Expertise
Industry
knowledge
Market
Knowledge
Good
idea
Bad
idea
Quality of issue
Quality of
solution
High
HighLow
Low
Quality of issue
depends on
your expertise,
industry knowledge
and knowledge on
how the
particular market
is evolving.

What is a good idea?
Start-up ❓

How crazy is your idea?

You should know
a secret most of people don’t
know.
- Peter Theil
Author of “Zero to One”

If your idea is sexy to everyone -
it’s no longer sexy

Good idea to
everyone
looks like a
bad idea but isn’t bad
Your
start-up
idea
Everyone thinks
it’s a good idea
Looks bad but is
actually a good one
(Someone already knows)
Looks bad but is
actually a good one
(Other people don’ t know)

Dfree:
It is a device that tells when you need to
urinate

http://dfree.biz

Good idea to
every one
Other companies
are also
considering the idea
The market is
getting
crowded
It is competition of resources,
operation
and price of product
Large corporates
have advantages
over startups
Startups are
at a disadvantage
due to the lack of
resources
Startup will
eventually loose
Startup should not choose
the idea looks good for
everyone

Can you commit
that you will achieve
100+ million revenue
within 3 years?
- Executive of
large company

- Executive of
large company
You don’t
start your
startup with this
mindset
Can you commit
that you will achieve
100+ million revenue
within 3 years?

高い
専門性
業界の
知識
Crazy Good
start-up
idea
Your secret
Good
idea
Bad
idea
Quality of issue
Quality of
solution
High
HighLow
Low
Domain
Expertise
Industry
knowledge
Market
Knowledge
Your secret
is key

To develop a long-lasting mobile
battery is a good idea; it is a good idea
to everyone's eyes. Therefore, it is
not a good start-up idea
- Chris Dixon
Partner, Andereesen Horowitzs
Copyright 2017 Masayuki Tadokoro All rights reservedhttps://www.youtube.com/watch?v=fGjGu9gFfO4

“The short path to
epiphany is find ”
-Sam Altman,
Y-combinator President
https://www.youtube.com/watch?v=cKpmHoJfO5g

Good idea
Idea looks bad
Most ideas that
look bad are
just bad ideas

Criteria to measure craziness of a startup idea:
Do you hesitate to talk
about the idea to someone?

Dia : Customized apparel EC for
oversized women
https://www.dia.co

Idea looks bad at
a glance
Other companies
might have rejected it
The market
has not been
clearly defined
The company that can
create something
people want, will win
Resources is
not key to win
- collecting insights
from users is the key
Iterating product
by listening to the
voice of customers
Start-up
will win
Why do startups need
to pick an idea that
looks bad?

Idea craziness:
The biggest unfair advantage of a start-up

Astroscale：
Providing solution collecting space debris
http://astroscale.com/services/adras-1

アストロスケール
When I started Astroscale,
everyone asked me
where was the market?
I was fascinated with this
feedback - I perceive it as
a great opportunity.
Nobu Okada
CEO of Astroscale
https://www.youtube.com/watch?v=SGCxbgqLhqo

AirBnB looked like a very bad idea
at the beginning

Good idea
Idea looks bad
Sleeping
on a couch
in stranger’s
apartment

Startup ideas that “look bad”
have been changing the world

On-demand grocery delivery service;
Instacart shoppers will
deliver a glossaries to the user
with 2 taps of the screen

Instacart was chosen as
the most promising start-up
in 2015 by Forbes magazine

Apoorva Metha,
founder of Instacart,
was a developer of
Amazon warehouse system, i.e.
Amazon fulfillment service

Grocery shopping was very painful;
always wished somebody else woul
have done it for me.
Apoorva Metha
Instacart, Founder

Apoova suggested Instacart model to
Amazon management.
However, the idea was turned down
since it contradicted the investments
Amazon had already made, i.e. all of
logistics systems and warehouses

The biggest threat to
retail stores/supermarket is
amazon.com

Amazon revenue↑
Supermarket revenue ↓
Amazon revenue↓
Supermarket revenue ↑

Instacart can be a great partner to local
retail stores and supermarkets

Instacart revenue ↑
Supermarket Revenue ↑

高い
専門性
業界の
知識
Crazy Good
start-up
idea
High quality
idea
Low quality
idea
Quality of issue
Quality of
solution
High
HighLow
Low
Expertise
on
logistics
system
Sharing
Economy
Discovery of win-win model
for retail stores that Amazon cannot tap into
Your secret
is key

Deliver goods
with good logistics
looks like
a bad idea
Hire someone
for grocery
shopping
Everyone thinks
it’s a good idea
Looks bad but is
actually a good one
(Someone already knows)
Looks bad but is
actually a good one
(Other people don’ t know)

SPACE X:
To migrate human beings to Mars

Reusable rocket

The paradigm shift is
accelerating in
recent years
The paradigm shift is accelerating
in recent years
The periods between products/services are becoming
shorter

Many startups are reaching 1 Billion market cap
with unprecedented pace
https://cbi-blog.s3.amazonaws.com/blog/wp-content/uploads/2016/11/First-Equity-To-Billion-Val-Final.png

Many corporations that
did not keep up with the paradigm shift,
failed.

Conventional Innovation Curb
Innovator Early
adaptor
Early
majority
Late
majority
Laggard
3~7%
You were able to verify your product over
time

New Innovation Curb
Trial
User
Burst
Majority
Marketing blast model -
from influential “trial
users” to “burst
majority” -
Business model 2025, by Hiroyuki Naganuma
Speed is Critical!

Ideas you should avoid
❓

Looks good at first glance.
Like SNS for pets, looks-like-good-idea actually but is a bad
idea; somebody else has already tried it and it never took off

Too niche
A prime example is E-commerce sites handling products
with extreme tastes. The idea is to avoid competition and
tap into a small potential market

SEMG pod was a wearable thats detect
muscle movement; nobody wanted to use it
Creating something you want to build, not
something you want to have personally

Issues based only on your
assumption
The founder of KOLOS never used tablet
devices; he decided to build this product
only because he got a good reaction on
Kickstarter

Idea generated from
analysis
Miku was a Groupon-like service for esthetics
salon lovers; they closed the service shortly
after they launched

Entering into fierce competition
Argyle social was the social media
dashboard for B2B users. The market was
too crowded; they could not beat Radian6,
Adobe, or HootSuite

You cannot explain the
business model in one
sentence
Amiloom was too complex; you cannot
explain it in one sentence. Nobody
understood the service, and nobody used it

Then, what should your idea
be based on?
❓

Ask yourself:
If some genius out there
would create a solution
perfect for you,
what would it be like?
通年

Brian Chesky, the founder of Airbnb,
started the service
to solve his own problem.
He was not able to pay rent while
he had one empty room available
in his apartment
* He only had 1000 USD in his bank account,
though the rent of his apartment was 1,500 USD
https://www.youtube.com/watch?v=6yPfxcqEXhE

The best issues you should take on
are something you are personally
struggling with
He posted available room info to his blog*
The very first version of Airbnb

Your
Issue
Easy to sympathize
Convey a strong
message
The degree of pain of the
issue can be exaggerated
–
You need to an objective
view
Issue of
your close friend
or family
Easy to know the
nuance and sentiment
of the issues
The perspective can be biased
- you need an objective view
Issue of
someone you know
The degree of pain tends
to be superficial -
You need to dig out the
root of the pain
Who is the owner of the issue?
Advantage
Dis-
advantage
Who’s
issue?
Can have objective
view that keeps bias
away

Your
Issue
Easy to sympathize
Convey a strong
message
The degree of pain of the
issue can be exaggerated
–
You need to an objective
view
Issue of
your close friend
or family
Easy to know the
nuance and sentiment
of the issues
The perspective can be biased
- you need an objective view
Issue of
someone you know
The degree of pain tends
to be superficial -
You need to dig out the
root of the pain
Who is the owner of the issue?
Advantage
Dis-
advantage
Who’s
issue?
Can have objective
view that keeps bias
away
Is it solving the
issue targeting
people,
including you?

① Looking back your career/life, write down
one thing you have domain expertise in, which
few other people have.
② For the thing you wrote about in the above
exercise, write one thing you are struggling with
the most, which you strongly think needs to be
solved
Exercise
❓

・Know the differences between start-ups and
small businesses
・Unlearn the common sense you have learned in your life
・Doing start-up is often counter-intuitive
Start-up meta principles

❓
What are the differences between
Start-ups and small businesses?

Difference between start-up and small business
社名 Startup Small Business
How to
grow
J-curve; it will generate tons of returns
when it becomes successful
Linear growth: you can get an
incremental return
Market
Environment
The existence of market has yet to be
confirmed. Start-ups take place in
extremely uncertain environment.
Timing is critical
The existence of market is already
proven. Market environment is
relatively stable
Scale Start small. but can scale quickly
You can increment business from small to
medium. You can stay small
Stalkholders VCs, or angel investors Bootstrap, bank loan
Incentives
Stock-options, capital gains
with IPO or Buyout Stable revenue
Addressable
Market
The supply of labor and consumption of
service can take place everywhere
The supply of labor and consumption of
service will take place in limited area
Innovation
Method
Disruptive innovation which redefines
current market
Sustainable innovation based on
current market
❓

Small Business

Relationship business
（A business that depends on specific relationship）
is not Startup

”A startup is a temporary
organization designed to
search for a repeatable and
scalable business model.”
ー Steve Blank
https://www.youtube.com/watch?v=6t0t-CXPpyM

Start and Up
（To grow rapidly）

Start-up
Entrepreneur
Only a fraction of
entrepreneurs are
startup founders
Most entrepreneurs
are not start-up
founders

Start-ups should be designed to grow
rapidly. It is not a start-up if the
company does not grow rapidly
although it may possess advanced
technology, be funded by
VCs or have an exit strategy.
-Paul Graham
Y−combinator founder
http://www.paulgraham.com/growth.html

start-ups
Small
businesses
Start-ups should grow rapidly,
while small businesses grow incrementally

Start-up founders
should say ‘No’ to
97% of things.
-Sam Altman,
http://blog.samaltman.com/the-post-yc-slump

Activities,
considered as good ones
for a regular company,
are often regarded as
unnecessary ones;
in many cases, they are
even regarded as
bad activities.
Question: what are
these activities?
❓

Creating
detailed business
plans
Things you should avoid in start-up
before product-market-fit
（ex-business planning people often do this）

Developing product with
a detailed specification
（Engineers often do this）

Sticking with
your first
business model
（Someone who has a success track record
often do this）

Paying too much attention to
competitors
（ex-marketing researchers often do this）

Too Conscious of Differentiation
（ex-marketing researchers often do this）

Trying to create
a precise financial projection
（people with financial backgrounds often do this）

Trying to create an impeccable
accounting report
（people with financial backgrounds often do this）

Creating detailed
performance reports
(ex-operational managers often do this)

Adding too many
nice-to-have functions
to the product
（Engineers often do this）

Paying too much attention
to the product design
or high usability
(Designers often do this)

Optimizing/automating of
system from the beginning
（Back-end engineers often do this）

Hiring engineers specialized
in a very specific skill
（Needed skills will be changed
when you pivot your business model down the road）

Raising too much money:
（You will justify unnecessary expenses）

Attending
networking events or parties
which are not directly relevant
to your startup
（Sales/business development people often do this）
Things you should
avoid in start-up

Hiring too many people
before your business
really takes off
（ex-HR people often do this）

Hiring VP of Sales/VP of Biz-dev with
impressive backgrounds
at an early stage

Engaging in partnerships
before you validate
the business model
（Alliance/biz dev people often do this）

Closing exclusive contract
with a few companies
(Fall into Dependent in Relationship Model）

Focusing more on
marketing than sales
*Initial traction is necessary
（ex-Marketing people often do this）

Investing too much
in public relations
（PR/corporate communicate people often do this）

Moving to a nice office
（to have your own office）
（B2B sales people often do this ）

Approaching VCs aggressively
（VCs will approach you when you are creating
a good start-up）

Distributing more
equity to VCs/Angels
than to founding
members

Fake work is both easier and
more fun than real work for
many founders.
-Sam Altman,
http://blog.samaltman.com/the-post-yc-slump

“If you are working on the wrong
problem, it doesn’t matter how hard you
work at it. Have the right people and
have the right problem.”
-Caterina Fake

- What is to Focus?
❓

To become an expert in customer
issues and
to make something
customers want

Startup should look fragile
HP Garage

Microsoft in 1975
Paul Allen
Bill Gates

Doing a startup is
counter-intuitive.
-Paul Graham
Y−combinator founder
https://www.youtube.com/watch?v=ii1jcLg-eIQ

❓
Start up is
a different game
than you are use to

Unlearn game you are where you
are fulfilling “right” answers to 100
point scale marked sheet
Things you should
unlearn in start-up

Unlearn the game where you are
trying to get a higher appraisal by
directly reporting to boss.
Things you should
unlearn in start-up

trying to be liked by
many people
Things you should
unlearn in start-up

incrementally improving
(At the beginning stage you should focus on Pivot/Scrap-build）
Things you should
unlearn in start-up

trying to win in competition
（In start-up, the fewer competitors, the better it is）
Things you should
unlearn in start-up

Unlearn the game where you are burning a
budget within given time period
and justifying it
Things you should
unlearn in start-up

Unlearn the game where you are trying to
expand your business with only one
relationship/platform
(It is not scalable/repeatable)
Things you should
unlearn in start-up

scaling from the beginning to acquire
as many customers many as possible
（Do things that don’t scale）
Things you should
unlearn in start-up

Startup science 2017 ①

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