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Startups Now
 how five innovations have changed
     the startup world, forever




       Keith McGreggor
  Director of VentureLab @
s
                                                                                           m   o w ls                              i ty e
                                                                                         te dsh Too                             ur        s
                                                      s                                s a                      y             c        oi
                                                   ce                                Sy l ro dia             or        et x Se ckn
startups                                         ur                            e ted se et e              pt        dN efle
                                 ta            so                            it a n N M                c e         e e          Ba
               n              lan l R        e                            finter A
                                                                         nI                         on            d
                                                                                                                ar 21 R
          il to             At ixe                                  B eI                          eC          u
         M               AI       P                                                            Th
                                                                                                            G



                                Bel l                                         a                                                         ch
                          rn            ed                                 ol                                                       a Te
                       e              he                                 C                                                      i
                    th             ck                     ple     ca                               oo                         rg
                 ou                                                                              h                          eo                  SF
work           S                 Lo                 Ap          Co                             Ya                       G                      N


                          ele                                        ew                    h
                 ic     h                                          dr                    ra
 life           M                                               An                     Sa


school                                         S                                                                                                  hD
                   BS                         M                                                                                                  P



        1980                                         1990                                      2000                                     2010
GT Research Distribution
       EACH YEAR AT
Over half a billion dollars total R&D on campus for FY2009!

                        College of
                        Computing
                                             Other
     Research Centers


          College of
           Sciences
                                                         College of
                                                         Engineering


                   GTRI



                   > $500,000,000 / year
7/14/09                Enterprise Innovation Institute                 12
research is the transformation
of money into knowledge
EACH YEAR AT


annual invention disclosures   400

unencumbered inventions        250   VentureLab

  startup ideas                25

  license ideas                200

  early ideas                  25
at least one new invention
      every day
innovation is the transformation
of knowledge into money
Decisions




           {
                         LICENSE
                  Inform Office of Technology
                                                  80%
                           Licensing

                        START-UP
                      Assign to Catalyst

                                                  10%
                 LIFESTYLE COMPANY
                    Advice team on viable
                  commercialization strategies.
Research
                  SCIENCE PROJECT
                   Put technology on hold
                   Contact professor every
                                                  10%
                   six months for an update
today


inventions reviewed               250+

new projects                        35+

ongoing projects                     83

new companies created            est. 30

external investment in new and
                                 $185M
existing VL companies in 2012
total of all investments         $700M
about startups ...
NASDAQ        5000




                                                        4000




                                                        3000




                                                        2000




                                                        1000


1996   1998   2000   2002   2004   2006   2008   2010   2012
$1,000,000,000,000
we know something now that
   we didn’t know before

            ...
we know something now that
   we didn’t know before

   we know how to build
        startups
we know something now that
   we didn’t know before
                   engineer
   we know how to build
        startups
five innovations
what is a company?
A organization which sells a
product or service in exchange for
        revenue and profit
A bit of history...
Dutch West India Company 1620
1856 - First Org Chart
1908
Tools for the 20th Century
“Century of the Corporation”
... but what about startups?
Startups are a Smaller Version
     of a Large Company
Startups are a Smaller Version
     of a Large Company
Startups are something else.
five innovations



what is a startup?
innovation


     A startup is a temporary
organization designed to search for
    a repeatable and scalable
         business model.
Startups Search
Companies Execute
Startups   Business Model
Companies    Product/Service
Old School of Startups
   (before 2010) ...
All I Need to Do is Execute the Plan
All I Need to Do is Make the Forecast
Step 1.   Write Business Plan
Step 2.   Make 5-year Forecast
Step 3.   ???
Step 4.   PROFIT!
Crystal ball...




2007                 2013
Previous
5-Year Plans
as a general rule...




Business Plan
 is a work of

FICTION
Business       Business
Model      >    Plan
five innovations


what is a business
     model?
innovation


Business Model Generation
                     infrastructure              offer              customers



                                 activities              relationships

               partners                        value
                                                                                segments
                                               prop.

                                 resources               channels



                                              financial

                          cost structure                    revenue streams
the Canvas
    infrastructure              offer            customers



                 activities              relationships

partners                       value
                                                         segments
                               prop.

                resources                 channels



                              financial

           cost structure                  revenue streams
still fiction...
      infrastructure            offer                 customers


                   ?             ?
  ?              activities                   ?
                                         relationships
                                                                      ?
partners                        ?
                               value
                                                             segments
                               prop.                              ?
                   ?                          ?
                resources                 channels                ?
                                                  ?

                              financial
         ?                                ?
           cost structure                               ?
                                           revenue streams

                    ?                             ?
... and we want facts!
     infrastructure             offer               customers


                   ✔             ✔
 ✔               activities              relationships
                                             ✔                  ✔
partners                       ✔
                               value
                                                           segments
                               prop.                            ?
                  ✔                         ✔
                resources                 channels          ✔
                                                ?

                              financial
        ✔                                 ✔
           cost structure                               ?
                                           revenue streams

                    ?                         ✔
How?
pick one...
      infrastructure            offer                 customers


                   ?              ?
  ?              activities                   ?
                                         relationships
                                                                      ?
partners                        ?
                               value
                                                             segments
                               prop.                              ?
                   ?                          ?
                resources                 channels                ?
                                                  ?

                              financial
         ?                                ?
           cost structure                               ?
                                           revenue streams

                    ?                             ?
design experiment ...
  offer                 customers
                                            A controlled experiment

    ?                                       generally compares the results
                                            obtained from an experimental
                ?
           relationships
                                        ?
                                            sample against a control
                                            sample, which is practically
                                            identical to the experimental
  ?
 value
                               segments
                                            sample except for the one
 prop.                              ?       aspect whose effect is being
                                            tested (the independent
                ?                           variable).
            channels                ?
                    ?

financial
            ?
                          ?
             revenue streams

                    ?
run it in the world ...
  offer                 customers           A controlled
                                            experiment

    ?                                       generally
                                            compares the
                ?
           relationships
                                        ?
                                            results obtained
                                            from an

  ?
 value
                               segments
 prop.                              ?
                ?
            channels                ?
                    ?

financial
            ?
                          ?
             revenue streams

                    ?
... and iterate!
  offer                 customers           A controlled
                                            experiment
                                            generally
   ✔                                        compares the
                ?
           relationships
                                        ?
                                            results obtained
                                            from an

  ?
 value
                               segments
 prop.                              ?
                ?
            channels                ?
                    ?

financial
            ?
                          ?
             revenue streams

                    ?
five innovations


the scientific method
 applies to business
innovation




             ©2006
the key idea



   There are
  NO FACTS
in the building!

                   57
the big secret



Conduct
 100+
Interviews
                  58
59
A man
   who carries
  a cat by the
    tail learns
 something he
  can learn in
no other way.

           60
Why do Startups fail?
Startups
   don’t fail
because they
 fail to make
something...
Startups don’t fail
  because they
   fail to make
   something.


Startups fail
because they
 fail to make
  something
   someone
wants to buy
  from them.
Business Model
    infrastructure              offer            customers



                 activities              relationships

partners                       value
                                                         segments
                               prop.

                resources                 channels



                              financial

           cost structure                  revenue streams
Product / Market Fit
    infrastructure              offer            customers



                 activities              relationships

partners                       value
                                                         segments
                               prop.

                resources                 channels



                              financial

           cost structure                  revenue streams
“If you build it, he will come...”
Tools for managing       Tools for managing

   Engineering Risk            Customer Risk

   Waterfall Development


                                       ?
    Porter’s Five Forces
       SWOT Analysis
    Project Management
 Baseline Risk Assessment
        Stress Testing
 Concentration Methodology
Quantitative Risk Management
              ...
five innovations


how to reduce
customer risk
innovation


Customer Discovery
Customer Discovery




Startups   Companies
 Search    Execute
Customer Discovery




 Understand the Problem
          then
  Develop the Solution
This may sound familiar...




Understand the Problem
         then
                      ... but it’s actually
 Develop the Solution
                           the inverse
MYTH

Customers want
your technology.
TRUTH

 Customers don’t care
about (your) technology.
Customers just want their
    problem solved.
Customer Discovery



  key idea
Customer POV
Customer Discovery



  WHO CARES?
WHY will they BUY?
Customer


           Gains


  Jobs
Problems
 Needs
             Pains
Customer


             Gains


  Jobs
Problems   Archetype
 Needs
               Pains
Something Makeable...


             Gain Creators


 Products
& Services


              Pain Killers
Value Proposition


             Gain Creators


Products &
 Services    MVP

              Pain Killers
Product / Market Fit
    infrastructure              offer            customers



                 activities              relationships

partners                       value
                                                         segments
                               prop.

                resources                 channels



                              financial

           cost structure                  revenue streams
How do you know you have
  product / market fit?
METRICS
Vanity
METRICS
Vanity
METRICS
five innovations


build to measure
measure to learn
 learn to build
innovation


Lean Startup Methodology
Agile Development
MVP
Minimum Viable Product
MVP
 Minimum Viable Product


                              HIGH
  LOW
                            FIDELITY
FIDELITY




           Built to LEARN
            Not to SELL
Moneyball!
 Actionable
METRICS
the Pipeline




               $$$
METRICS
AARRR
acquisition   activation   retention   revenue




              referral
the equation that matters...
     infrastructure           offer            customers



               activities              relationships

 partners                    value
                                                       segments
                             prop.

               resources                channels



                            financial


            COST
                            <          REVENUE
... is this one: CAC << LTV


    acquisition   activation   retention   revenue




      CAC                            LTV
                  referral
CAC << LTV
 if         and
       COST < REVENUE

then    COMPANY!
five innovations

      define: “startup”
business model generation
   the scientific method
    customer discovery
 lean startup methodology
Business Model Generation
   Customer Discovery
Lean Startup Methodology

 Startup Engineering
one more thing...
Business Plan
Competition
  1995-2013
Business Model
 Competition
    Fall 2013
75 Fifth St NW, Suite 202, Atlanta GA 30308

venturelab.gatech.edu

@venturelab / @keithmcgreggor

keith@venturelab.gatech.edu

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Startups Today (Keynote at Auburn, April 2013)