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How to start your startup 28 may2015

We examine how to avoid pitfalls in startup formation and operation.

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How to start your startup 28 may2015

  1. 1. How to Start Your Startup Got Startup Meetup May 28, 2015
  2. 2. Why Startups Fail • Most startups fail • Within 3 years, 92% of startups fail • Of failed startups, 74% failed due to premature scaling Startup Genome Report
  3. 3. Some Startup Failure is Avoidable “Startups die in many ways, but in the past couple of years I’ve noticed that the most common cause of death is what I call ‘Startup Suicide’, a phenomenon in which a startup’s founders and its management kill the company while it’s still very much breathing.” Justin Kan
  4. 4. Top Reasons for Startup Failure Why startups fail, according to their Founders, Erin Griffith, Fortune, 9/25/14
  5. 5. # 1 Product/Market Fit • 42% of failed startups cite to lack of market demand for their product or service • Need to achieve product/market fit
  6. 6. # 2 – Running out of Money • Inadequate funding is a frequent source of failure • Cash flow management is key
  7. 7. #3 – Not the Right Team • Inadequate management team • Poor leadership • Poor team dynamics • Poor hiring/firing practices
  8. 8. #4 – Poor Product Strategy • Improperly positioning the product • Mispricing the product • Poor quality control • Poor cost control • Poor timing of product release
  9. 9. #5 – Loss of Focus • Poor marketing • Inadequate attention to sales • Inadequate attention to customers after sale
  10. 10. Successful Startups Realize • That the business model is the product • That product failure is part of the startup process • That product pivoting may be required • The goal is to quickly achieve a product/market fit • People are important • That teamwork and focus • That customer attention • Cash flow is critical • Funding • Sales
  11. 11. The Business Model is the Product • “If you Build It, They Will Come” only works in the movies • Webvan – grocery delivery • Went public in 1999 with a valuation of $4.8B • Went bankrupt in 2001
  12. 12. Fail often, fail fast • Push ahead with a product as soon as possible to gather feedback and learn about opportunities • The Minimum Viable Product (MVP) may be used to test product viability • Quickly discard products that don’t have a good reception (e.g. 40% say “they must have it”)
  13. 13. Product Pivoting • Don’t be wedded to a particular product • If a product doesn’t have traction, try again • To pivot you must have learned something from your previous failure
  14. 14. Product/Market Fit is the Foundation
  15. 15. People Are Important • Managers • All key roles filled • Not too many, not too few • CEO, CFO, CTO are key for a tech startup • Employees • Right fit • Hire slow, fire fast • Customers • Customer support • Customer feedback
  16. 16. Cash Flow Pitfalls • Not documenting your cash-flow projections • Being on budget but out of cash • Being profitable but broke • Seasonal sale fluctuations • Unanticipated expenses & emergencies • New businesses aren’t given much credit • Sales volumes don’t keep up with marketing expenses • Slow Accounts Receivable • Growing too fast • Withheld funds by missing banker/investor milestones
  17. 17. “What We Learned” • Biggest risk: making something no on wants • Not launching is painful, but not learning is fatal • Put something in user’s hands and get real feedback ASAP • Know where your target audience hangs out & speak with them in an authentic way Drew Houston, CEO Dropbox
  18. 18. Key Points • Develop a business model, not a business plan • Fast learning loops: build-measure-learn • Business model validation – get out of the building! • MVP – it’s not what you think • The Lean Startup Path
  19. 19. The Lean Startup • Method for developing businesses and products • Steve Blank in mid-1990 created the “Customer Development” methodology • Eric Reis (a student of Blank) popularized the Lean Startup movement in 2011 as a technique for “Validated Learning”
  20. 20. The Business Model Canvas
  21. 21. Another Representation
  22. 22. Three tips for success 1) Realize that your business method is the product 2) People are an essential ingredient for a successful company 3) Cash flow is king