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So You Want to Start a Company? Berkeley 111611

  1. So You Want To Be An Entrepreneur? Steve Blank Twitter: @sgblank
  2. So What Do I Do?
  3. 12 Steps to a Startup 1. Decide what type of entrepreneur 2. Do you have what it takes? 3. Find an idea of sufficient size 4. Craft company hypotheses 5. Build the Website Logistics 6. Build a “low-fidelity” web site 7. Get customers to the site 8. Add the backend code to make the site work 9. Test the “problem” with customer data 10. Test the “solution” by building the “high-fidelity” website 11.Ask for money
  4. Step 1: What’s A Startup? Who’s An Entrepreneur?
  5. Lifestyle Startups Work to Live their Passion Startup • Serve known customer with known product • Work for their passion
  6. Small Business Startups Work to Feed the Family Small Startup Business • Serve known customer with known product • Feed the family
  7. Small Business Startups Work to Feed the Family Small Startup Business Exit Criteria • known customer - Business Model found known product - Profitable business • Feed the family - Existing team < $500K in revenue
  8. Social Entrepreneurship Startups Social Large Startup Non-Profit • Solve pressing social problems • Social Enterprise: Profitable • Social Innovation: New Strategies
  9. Scalable Startup Search Execute Scalable Large Startup Company Goal is to solve for: Exit Criteria unknown customer and - Business model found unknown features - Total Available Market > $500m - Can grow to $100/year
  10. Buyable Startup Born to Be Big Search Sell Scalable $2 to $50M Startup Acquisition Goal is to solve for: Sell to larger company Internet, Mobile, Gaming Apps
  11. What’s A Startup? Search Build Execute Large Startup Transition Company A Startup is a temporary organization used to search for a repeatable and scalable business model
  12. Step 2: Do You Have What It Takes? • Founder? • Early Employee? • Later Stage? • Resilient • Relentless • Agile • Curious • Passionate • Driven
  13. Step 3: Find an Idea of Sufficient Size • Idea sources: – New technology – Regulatory/legal changes – Customer tastes changes – Unmet customer needs • Size the opportunity: – Total Available Market – Served Available Market – Target Market
  14. Step 4: Craft Company Hypotheses • Any company can be described in 9 hypotheses
  15. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?
  16. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?
  17. CHANNELS how does each customer segment want to be reached? through which interaction points?
  18. CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
  19. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?
  20. KEY RESOURCES which resources underpin your business model? which assets are essential?
  21. KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial? 21
  22. KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?
  23. COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?
  24. key activities value customer proposition relationships key customer partners segments cost revenue structure key streams resources channels 24 images by JAM
  25. sketch out your business model
  26. Step 5: Website Logistics • Get a domain name • Set up Google Apps • For Coders: set up a web host – Use virtual private servers (VPS) – “Platform As A Service like Heroku, Dotcloud or Amazon Web Services
  27. Step 6: Build a “Low-Fidelity” Web Site • Splash Page – value proposition, benefits summary, and a call-to-action to learn more, answer a short survey, or pre-order • For Non-coders – Make a quick prototype in PowerPoint or use Unbouce, Wordpress – For surveys and pre-order forms use Wufoo or Google Forms • For Coders – Build the User Interface with a wireframe prototyping tool – Create a fake sign up/order form
  28. Step 7: Get Customers to the Site • Start showing the site to potential customers, testing customer segment and value proposition • Use Ads, textlinks or Google AdWords, Facebook ads and natural search • Usse your network to find target customers • For B2B products, use Twitter, Quora, and industry mailing lists are a good place to find target customers. • Use Mailchimp, Postmark or Google Groups to send out emails and create groups • Create online surveys with Wufoo or ZoomerangGet feedback on your Minimum Viable Product (MVP) features and User Interface
  29. Step 8: Build a Complete Solution • Build a more complete solution (Connect the User Interface to code) • Connect the UI to a web application framework ( – Node.js, Rubyon Rails, Django, SproutCore, jQuery, Symfony, Sencha, etc.)
  30. Step 9: Test the Customer Problem
  31. Customer Development The Search for the repeatable and scalable Business Model
  32. Customer Development There are no facts inside your building So get the hell out
  33. More startups fail from a lack of customers than from a failure of product development
  34. Customer Development The Search For the Business Model Customer Customer Customer Company Discovery Validation Creation Building Pivot
  35. Customer Discovery Customer Customer Customer Company Discovery Validation Creation Building Pivot • Stop selling, start listening • Test your hypotheses – problem and solution • Continuous Discovery
  36. Customer Discovery
  37. Customer Validation Customer Customer Customer Company Discovery Validation Creation Building Pivot • Repeatable and scalable business model? • Passionate earlyvangelists? • Pivot back to Discovery if no customers
  38. The Pivot • The heart of Customer Development •Iteration without crisis •Fast, agile and opportunistic
  39. Pivot Cycle Time Matters •Speed of cycle minimizes cash needs •Minimum feature set speeds up cycle time • Near instantaneous customer feedback drives feature set
  40. The Minimum Viable Product (MVP) • Smallest feature set that gets you the most … - orders, learning, feedback, failure…
  41. Pivot Example Robotic Weeding Talked 75 Customers in 8 Weeks
  42. Our initial plan Confidential
  43. 20 interviews, 6 site visits… We got OUR Boots dirty Mowing Interviewed: • Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6) • Toro dealer (large mower manufacturer) • User of back-yard mowing system • Maintenance Services for City of Los Altos • Colony Landscaping (Mowing service for stadiums) Weeding Visited two farms in Salinas Valley to better understand problem Interviewed: • Bolthouse Farms, Large Agri-Industry in Bakersfield • White Farms, Large Peanut farmer in Georgia • REFCO Farms, large grower in Salinas Valley • Rincon Farms, large grower in Salinas Valley • Small Organic Corn/Soy grower in Nebraska • Heirloom Organics, small owner/operator, Santa Cruz Mts • Two small organic farmers at farmers market • Ag Services of Salinas, Fertilizer applicator
  44. Business Plan Autonomous Vehicles for Mowing & Weeding - Innovation Dealers Mowing - Dealers - Customer We reduce sell, installs and - Owners of (Mowing and Education operating cost supports public or Ag) - Dealer training - Labor reduction customer commercially - Vehicle OEMs - Better used green (John utilization of Co. trains spaces (e.g. golf Deere, Toro, Jac assets (eg mow dealers, supports courses) obsen, etc) or weed at dealers - Landscaping Engineers on nights) - Mowing service provider - Research labs Autonomous - Improved Dealers vehicles, GPS, performance - Ag Dealers Weeding path-planning (less - Farmers with rework, food manual weeding safety) operations Dealer discount Asset sale COGS seek a 50-60% Gross Margin Our revenue stream derives from selling the Heavy R&D investment equipment
  45. Found weeding in organic crops is HUGE problem; 50 - 75% of costs Crews of 100s-1000 Back-breaking task (Ilegal) labor harder to get 1-5 weedings per year/field $250-3,500 per acre and increasing Food contamination risk
  46. Decision to make – mowing vs weeding Application If ROI is < 1 Labor costs Autonomous TAM yr they will significant? would solve buy problem? Mowing of Yes. Yes Yes Adjusted up to Professionally xxx large fields run organizations Weeding in Agri Industry: YES! for TAM increased YES! organic crops Not necessarily to $2.6 B (Total Agriculture organic) Large They are Key need is Growers: Yes spending weed vs. crop Target Market $500/ac! differentiation (organic Small specialty) Growers: No 162 M/yr 18%/yr growth
  47. Autonomous vehiclesWEEDING - Innovation Dealers - Low density - Ag Dealers - Customer We reduce sell, installs and vegetable - Ag Service Education operating cost supports growers providers - Dealer training - Labor reduction customer - High density (100 to 1) vegetable - Research labs - Reduced risk of Co. trains growers contamination dealers, supports - Thinning - Mitigate labor dealers operations Engineers on availability - Ag Dealers - Conventional Machine Vision concerns - Ag Service vegetables Two problems: providers - Identification - Elimination Dealer discount Asset sale COGS seek a 50-60% Gross Margin Our revenue stream derives from selling the Heavy R&D investment equipment
  48. 1 Week – 1 CarrotBot Confidential
  49. CARROTBOT  Machine Vision data collection platform  Monochrome & Color Cameras  Laser-line sweep (depth measurement) CarrotBot 1.0  Encoders (position/velocity)  Onboard data acquisition & power
  50. The Business Plan Canvas Updated •Technology •Farming Design conventions. •Marketing •Demo, demo, a •Demo and nd demo!! customer •Cost •Proximity is •Organic •Research Labs feedback paramount Farmers Reduction •Equipment •Weeding •Remove labor Manufacturers Service force pains •Distribution Providers •Eliminate bio- Network •Conventional waste hazards •Service •IP – Patents Farmers Providers •Video •Dealers Classifier Files •Direct Service •Robust •Indirect Service Technology • … then Dealers •Asset Sale Value-Driven •Direct Service with equipment rental •… then Asset Sale
  51. Visit Highlights Carrot vs. Weeds Due to small root systems, carrots have no chance against weeds
  52. Visit Highlights Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked
  53. Visit Highlights State of the Art in Weeding Technology for Organic Crops
  54. Customer Hypothesis Pre-Test Large Growers Us Dealer Industrial Growers Hypothesis Confirmed • Growers interested in own Industrial equipment Growers • Industrial (10,000s of acres) Post-Test • Large (1,000s of acres) Large • Willing to pay $100k for one unit Growers Us Dealer • Smaller growers (100s of acres) Service usually subcontract the labor Providers services or rent equipment Equipment • All purchases through local dealers Rental •Customer service is essential
  55. Customer Map #1 – Industrial Growers Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr End User • Equipment Operator Influencer • Local Farm Mgr • Cliff Kirkpatrick, visited Recommender • Director, Ag Equipment Operator Technology • Justin Grove, interviewed Decision • VP, Growing Maker Operations Approver • CFO, CEO (Jeff Dunn) Cliff, Farm Mgr
  56. Customer Map #2 – Service Providers Example: Ag Services – Service Provider, Salinas Valley End User • Equipment Operator Influencer • Grower Recommender • Service Mgr Me (left), Marty (middle, Service Mgr), Doug (right, Grower) Decision Maker • ?? (service mgr’s & Approver boss)
  57. The Business Plan Canvas Updated •Technology •Farming Design conventions. •Marketing •Demo, demo, a •Mid/Large •Demo and nd demo!! Organic Farmers customer •Cost •Proximity is •Agricultural •Research Labs feedback paramount Reduction corporations •Equipment •Remove labor •Weeding Service Manufacturers force pains Providers •Distribution •Eliminate bio- Network •Service •IP – Patents waste hazards •Mid/Large Providers •Video •Direct Service Conventional Classifier Files •Indirect Service Farmers •Robust • … then Dealers Technology •Direct Service with equipment rental Value-Driven •($1,500/d; 120d/yr ) •Low density: $1,500/d •High density: $6,000/d
  58. World Ag Expo interviews: the need is real and wide spread • 10+ interviews at show – Everyone confirmed the need – Robocrop, UK based, crude competitor sells for $171 K • Revenue Stream – Mid to small growers prefer a service – Large growers prefer to buy, but OK with service until technology is proven – Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability) Confidential
  59. The Business Plan Canvas Updated •Technology •Farming Design conventions. •Marketing •Demo, demo, a •Mid/Large •Research Labs •Demo and nd demo!! Organic Farmers •Equipment customer •Cost •Proximity is •Agricultural Manufacturer feedback Reduction paramount corporations •Distribution •Remove labor •Weeding Service Network force pains Providers •Service •Eliminate bio- Providers •IP – Patents waste hazards •Mid/Large •2 or 3 Key •Video •Direct Service Conventional Farms Classifier Files •Indirect Service Farmers •Robust • … then Dealers Technology Value-Driven •Direct Service with • R&D equipment rental • Bill of Materials •Low density: $1,500/d • Training & Service •High density: $6,000/d • Sales
  60. Autonomous weeding - Final - Innovation Direct - Low density - Ag Service - Customer We reduce - Provide high vegetable providers Education operating cost quality service at growers - Dealer training - Labor reduction competitive price - High density - Research (100 to 1) vegetable Institutes (eg - Reduced risk of growers UC Davis, Laser contamination - Thinning Zentrum - Mitigate labor operations Hannover) Engineers on availability Direct - Conventional Machine Vision concerns - Alliance with vegetables - 3-4 key farms Two problems: service - Identification providers - Elimination - Eventually sell through dealers Costs for service provision Service provision COGS seek a 50-60% Gross Margin - Charge by the acre with modifier according to Heavy R&D investment weed density - Eventually move to asset sale
  61. Thanks