- Traditional startup models assume the customer problem and product features are known, but they are actually hypotheses that need to be tested - Startups should focus on customer development from the beginning through customer discovery, validation, and creation to learn about customers and iterate the product - The lean startup methodology emphasizes rapid iteration and minimal viable products to get customer feedback quickly rather than lengthy waterfall development processes

1. Everything you knew about starting a company is wrong. And how to do it right.Steve BlankStanford School of Engineeringwww.steveblank.comTwitter: sgblank

2. More startups fail from a lack of customers than from a failure of product development

3. Traditional Product IntroductionConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship

4. Traditional Product IntroductionHas Two Implicit AssumptionsCustomer Problem: knownConceptProduct Dev.Alpha/Beta TestLaunch/1st ShipProduct Features: known

5. Tradition – HireMarketingConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing

6. Tradition – Hire SalesConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization

7. Hire Sales VP

8. Hire 1st Sales StaffSales

9. Tradition – HireBusiness DevelopmentConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization

10. Hire Sales VP

11. Hire 1st Sales StaffSalesBusiness Development Hire First Bus Dev

12. Do deals for FCSTradition – HireEngineering/Product Management ConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization

13. Hire Sales VP

14. Hire 1st Sales StaffSalesBusiness Development Hire First Bus Dev

15. Do deals for FCSEngineering/Product Mgmt Write Requirements

16. Waterfall Development

17. Q/A

18. Tech PubsEngineering Executes a Waterfall ProcessConceptProduct Dev.Alpha/Beta TestLaunch/1st ShipRequire-mentsDesignImplementVerifyMaintain

19. Waterfall / Product ManagementExecution on Two “Knowns”RequirementsProduct Features: knownDesignImplementationVerificationCustomer Problem: knownMaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com

20. This is A Plan For FailureCustomer Problems and Product Features are hypothesesSales & Marketing costs are front loadedfocused on execution vs. learning & discoveryFirst Customer Ship becomes the goalExecution & hiring predicated on business plan hypothesisHeavy spending hit if product launch is wrongFinancial projections assume success=You don’t know if you’re wrong untilyou’re out of business/money

21. An Inexpensive FixFocus on Customers and Markets from Day OneHow?

22. Traditional Product IntroductionConcept/Bus. PlanProduct Dev.Alpha/Beta TestLaunch/1st ShipCustomer DevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer Development

23. Agile DevelopmentWaterfall Product DevelopmentRequire-mentsDesignImplementVerifyMaintainAgile Product Development

24. Lean StartupCustomer Problem + Product Features are UnknownProblem: UnknownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com

25. Customer DevelopmentCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivotThe foundersGet the heck Out of the Building^

26. Customer DevelopmentCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivotDiscovery

27. Test hypotheses I.e. problem and product concept

28. Validation

29. Build a repeatable and scalable sales process

30. Creation

31. Scale via relentless execution and fill the sales pipeline

32. Building

33. (Re)build company’s organization & managementCustomer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationStop selling, start listeningTest your hypothesesContinuous DiscoveryDone by founders

34. Customer ValidationCustomerDiscoveryCustomerValidationCustomer CreationCompanyBuildingPivotRepeatable and scalable business model?

35. PassionateEarlyvangelists?

36. Pivot back to Discovery if no customersThe Pivot The heart of Customer Development

37. Iteration without crisis

38. Fast, agile and opportunisticSpeeding Up Cycle TimeSpeed of cycle minimizes cash needs

39. Minimum feature set speeds up cycle time

40. Near instantaneous customer feedback drives feature set22Customer CreationCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationCreation comes after proof of sales

41. $’s for scale

42. Lean Startups are not cheap startupsCompany BuildingCompanyBuildingCustomer CreationCustomerValidationCustomerDiscovery(Re)build company’s organization & management

43. Re look at your missionNot All Startups Are Equal

44. Small BusinessStartupSmall Business StartupsServe known customer with known product

45. Feed the familySmall BusinessStartupExit Criteria Business Model found- Profitable business Existing team< $1M in revenueSmall Business Startupsknown customer known product

46. Feed the familyScalableStartupLarge Company>$100M/yearScalable StartupGoal is to solve for: unknown customer and unknown features

47. ScalableStartupLarge Company>$100M/yearExit CriteriaTotal Available Market > $500m

48. Can grow to $100m/year

49. Business model found

50. Focused on execution and processScalable Startup

51. ScalableStartupLarge Company>$100M/yearTotal Available Market > $500m

52. Can grow to $100m/year

53. Business model found

54. Focused on execution and process

55. Typically requires “risk capital”Scalable Startup In contrast a scalable startup is designed to grow big

56. Typically needs risk capital

57. What Silicon Valley means when they say “Startup”ScalableStartupLarge CompanySearch Business Model found

58. i.e. Product/Market fit- Repeatable sales model- Managers hiredWhat’s A Startup?A Startup is the organization used to search for a scalable business model

59. What VC’s Don’t Tell You:The Transition – Founders LeaveScalableStartupTransitionLarge CompanyBuildFounders depart

60. Professional Mgmt

61. Process

62. Beginning of scaleStartup-to-Company LifecycleScalableStartupTransitionLarge CompanyBuildSearchGrow

63. Why Startups Aren’t Run By Accountants

64. Startups Search and PivotThe Search for the Business ModelScalableStartupTransitionLarge CompanyBusiness Model found customer needs/product features found i.e. Product/Market fit Found by founders, not employees

65. Repeatable sales model- Managers hired

66. Startups Search, Companies ExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found

67. Product/Market fit- Repeatable sales model- Managers hired

68. Metrics Versus AccountingThe Execution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet

69. Cash Flow Statement

70. Income StatementMetrics Versus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost

71. Viral coefficient

72. Customer Lifetime Value

73. Average Selling Price/Order Size

74. Monthly burn rate

75. etc. Traditional Accounting Balance Sheet

76. Cash Flow Statement

77. Income StatementCustomer Validation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization

78. Scalable

79. Price List/Data Sheets

80. Revenue PlanCustomer Validation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters

81. Pricing/Feature unstable

82. Not yet repeatable

83. “One-off’s”

84. Done by foundersSales Sales Organization

85. Scalable

86. Price List/Data Sheets

87. Revenue PlanCustomer Development VersusProduct ManagementThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s

88. Feature Spec’s

89. Competitive Analysis

90. Prod Mgmt drivenCustomer Development Versus Product ManagementThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s

91. Feature Spec’s

92. Competitive AnalysisCustomer Development Hypothesis Testing

93. Minimum Feature Set

94. Pivots

95. Founder-drivenEngineering Versus Agile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.

96. Waterfall Development

97. QA

98. Tech PubsEngineering Versus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.

99. Waterfall Development

100. QA

101. Tech PubsAgile Development Continuous Deployment

102. Continuous Learning

103. Self Organizing Teams

104. Minimum Feature Set

105. PivotsStartups Model, Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge Company Plan describes “knowns”

106. Known features for line extensions

107. Known customers/markets

108. Known business modelStartups Model, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyUnknown customer needs

109. Unknown feature set

110. Unknown business model

111. Model found by iteration

112. Plan describes “knowns”

113. Known features for line extensions

114. Known customers/markets

115. Known business modelStartups Don’t Last ForeverScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people Business Model found

116. Product/Market fit- Repeatable sales model- Managers hiredYou failif you remain a startup!

117. I Wrote This

118. I Write a Blog www.steveblank.com

119. Thankswww.steveblank.com