The document discusses the Lean Startup methodology as a practical approach to developing a startup through customer engagement and iteration rather than traditional business planning. It emphasizes the creation of a validated business model and the use of customer development and agile development techniques for rapid product iteration. Key topics include market analysis, business model components, and the importance of understanding customer needs and relationships.

1. Lean Startup Victoria

2. This meetup is not about how to write a business plan. The end result is not a PowerPoint slide deck for a VC presentation.

3. Instead, we want to get our hands dirty talking to customers, partners, and competitors to leap into the chaos and uncertainly of how a startup actually works.

4. We’ll learn how to use a business model to brainstorm each part of a company, customer development to get out of the building and see whether anyone would want and use your product, and agile development to help us rapidly iterate our products into something customers will use and buy.

5. The goal is to have a validated business model that can bootstrap profitably or raise capital

6. Engineering 245 The Lean LaunchPad Session 1: Overview/Business Models/Customer Development Professors Steve Blank, Ann Miura-Ko, Jon Feiber http://e245.stanford.edu/

7. Reading Business Model Generation Four Steps to the Epiphany Founders at Work

8. How to Build A Startup Idea Size Opportunity Business Model Customer Development

9. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation Theory Practice

10. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation

11. An Idea is _Not_ a Company

12. Size of Opportunity

13. Small Business Startups Small Business Startup - Business Model found - Profitable business Existing team < $1M in revenue

14. Small Business Startups - Business Model found - Profitable business Existing team < $10M in revenue 5.7 million small businesses in the U.S. <500 employees 99.7% of all companies ~ 50% of total U.S. workers http://www.sba.gov/advo/stats/sbfaq.pdf Small Business Startup

15. Scalable Startup Scalable Startup Large Company >$100M/year Total Available Market > $500m Company can grow to $100m/year Business model found Focused on execution and process

16. Scalable Startup Scalable Startup Large Company >$100M/year Total Available Market > $500m Company can grow to $100m/year Business model found Focused on execution and process Typically requires “risk capital” In contrast a scalable startup is designed to grow big Typically needs risk capital What Silicon Valley means when they say “Startup”

17. Very Different Startup Goals Small Business Startup - Business Model found - Profitable business Existing team < $10M Scalable Startup Large Company Total Available Market > $500m Company can grow to $100m/year Business model found Focused on execution and process Typically requires “ risk capital ”

18. Venture Firms Invest in Scalable Startups Small Business Startup Scalable Startup Large Company

19. Market/Opportunity Analysis How Big is It?: Market/Opportunity Analysis Identify a Customer and Market Need Size the Market Competitors Growth Potential

20. How Big is the Pie? Total Available Market Total Available Market How many people would want/need the product? How large is the market be (in $ ’s) if they all bought? How many units would that be? How Do I Find Out? Industry Analysts – Gartner, Forrester Wall Street Analysts – Goldman, Morgan

21. How Big is My Slice? Served Available Market How many people need/can use product? How many people have the money to buy the product How large would the market be (in $ ’s) if they all bought? How many units would that be? How Do I Find Out? Talk to potential customers Served Available Market Total Available Market

22. How Much Can I Eat? Target Market Who am I going to sell to in year 1, 2 & 3? How many customers is that? How large is the market be (in $ ’s) if they all bought? How many units would that be? How Do I Find Out? Talk to potential customers Identify and talk to channel partners Identify and talk to competitors Total Available Market Target Market Served Available Market

23. Segmentation Identification of groups most likely to buy Target Market Geographic Demographic Psychographic variables Behavioral variables Channel etc… Total Available Market Served Available Market

24. Market Size: Summary Market Size Questions: How big can this market be? How much of it can we get? Market growth rate Market structure (Mature or in flux?) Most important : Talk to Customers and Sales Channel Next important: Market size by competitive approximation Wall Street analyst reports are great And : Market research firms Like Forester, Gartner

25. Business Model

26. What Is a Business Model ? Diagram of flows between company and customers Scorecard of hypotheses testing Rapid change with each iteration and pivot Founder- driven * Alex Osterwalder

27. 9 building blocks of a business model:

28. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?

29. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?

30. CHANNELS how does each customer segment want to be reached? through which interaction points?

31. CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

32. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?

33. KEY RESOURCES which resources underpin your business model? which assets are essential?

34. KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial?

35. KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?

36. COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?

37. images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition

38. sketch out your business model

39. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

40. But, Realize They ’re Hypotheses

41. More startups fail from a lack of customers than from a failure of product development (focus on “who” more than “what”)

42. Test Hypotheses: Problem Customer User Payer Test Hypotheses: Demand Creation Test Hypotheses: Channel Test Hypotheses: Product Market Type Competitive Test Hypotheses: Pricing Model / Pricing Test Hypotheses: Size of Opportunity/Market Validate Business Model Test Hypotheses: Channel (Customer) (Problem) Customer Development Team Agile Development

43. The Pivot The heart of Customer Development Iteration without crisis Fast, agile and opportunistic