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Session 5 - Ignitor Bootcamp - 3 July 2015
After attending a bootcamp, the document provides advice for startups on getting customers and testing assumptions to achieve success. It emphasizes the importance of: 1) Finding early adopters and selling to them to gain initial traction. 2) Building a product customers love through constant iteration. 3) Avoiding premature scaling until a predictable customer acquisition model is established. The document stresses testing assumptions through customer interviews and validations before committing significant resources to growth.
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Session 5 - Ignitor Bootcamp - 3 July 2015
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- 3. Startup assumptions andrisks 1. CAN YOU… find early adoptors? 2. CAN YOU… sell early adoptors? 3. CAN YOU… build a product they love? 4. CAN YOU… get lots of customers? ?
- 4. Getting lots ofcustomers You have found a predictable and cost- effective way to acquire new customers
- 5.
- 6. If you succeed (cltv> 3x cac and is recovered in 12 months)
- 7. Example 1: dropbox $200to a little over free
- 8. Warning!!! groupspaces could neverattract customers at a low enough cost to scale
- 9. 0 500 10001500 2000 2500 3000 365 days 2500 days Do you want to waste 6 years?
- 10. What to test? 1.Paid acquisition (Google, YouTube, Facebook, traditional ads) 2. Virality (Word of mouth, viral tools, raving fans) 3. SEO (Website, content marketing) 4. Sales (Inbound, outbound) 5. Retail (Own stores, partner stores) 6. Distribution partners (Franchise, agents, wholesalers)
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- 13. ? ? ? The first sale What predicts success?
- 14. 1 Planning doesn’tpredict
- 15. Source: Lange, Mollov,Pearlmutter, Singh and Bygrave (2007) “new ventures launched with formal written business plans do not outperform ones launched without them.”
- 16. Business Plan? Source: Bhide(2000) 21% 79% Yes! No!
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- 23. Source: Shane (2009) IndustryNumber of Inc 500 firms Firm starts Percent of Starts Pulp mills 6 33 18.182 Computer and office equipment 99 2359 4.197 Guided missiles, space vehicles, parts 2 60 3.333 Nonferrous rolling and drawing 14 581 2.410 Railroad car rental 3 136 2.206 Measuring and controlling devices 49 2482 1.974 Paper mills 3 125 2.400 Search and navigation devices 6 310 1.935 General industrial machinery 26 2173 1.197 Photographic equipment and supplies 7 646 1.084 Manifold business forms 3 281 1.068 Household appliances 4 390 1.026 Electrical industrial apparatus 11 1080 1.019 Legal services 10 129207 0.008 Eating and drinking places 34 494731 0.007 Carpentry and floor work contractors 4 66383 0.006 Real estate operators 5 90042 0.006 Hotels and motels 2 39177 0.005 Painting and paper contractors 2 43987 0.005 Retail bakeries 1 22165 0.005 Grocery stores 5 112473 0.004 Used merchandise stores 1 24442 0.004 Automotive repair shops 5 124725 0.004 Beauty shops 3 79081 0.004 Residential care 1 27710 0.004 Videotape rental 1 27793 0.004 Industry choice vs. inc 500
- 24. Computer and OfficeEquipment (1/25) Eating and Drinking Places (1/14,550) Source: Shane (2009)
- 25. Computer and office equipment 582succeed Eating and drinking places 1 succeeds Source: Shane (2009)
- 26. Correlation between numberof startups in an industry and failure rate 0.77 Source: Shane (2009)
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- 30. 13.1% 54.2.% Source: Bruderl, etal. (1992) + > 5-year failure rate?
- 31. 90% 10% 1 founder 2 ormore founders Source: FinScope (2010) Team size south africa
- 32. 4 Advice seekingpredicts
- 33. 45% 80% No advice Source: Watson(2007) Advice from accountants 3+/yr 3-year survival rate
- 34. Source: Pretorius &Le Roux (2011) Successive entrepreneurship and no learning
- 35. Source: Pretorius &Le Roux (2011)
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- 37. 75% 25% Source: Fresser andWillard (1990) Inc 100 entrepreneurs with industry experience
- 38. Source: Bruderl, etal. (1992) 25.5 %Industry Experience No Industry Experience 54.5 % 5-year survival and industry experience
- 39. Strong Team (1) 3+ members (2) 50% joint experience (3) 3 year industry experience (19%) (73%) Source: Eisenhardt & Schoovenhoven (1990)
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- 41. “I'd just gosell it. I don't believe in market research. Somebody once told me the only thing you need is a customer." Source: Sarasvathy (2007)
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- 43. Source: Bhide (2000) 82% 8% 10%SomewhatInvolved Main Salesperson Heavily Involved Founders involvement in selling
- 44. Startup assumptions andrisks 1. Find early adopters 2. Sell early adoptors 3. Build something customers love 4. Get lots of customers ?
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- 47. AMAR BHIDE Idea Build No Facts Don’tskip the assumption testing
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- 50. of high growthinternet start ups fail due to premature scaling. Source: Start Up Genome Report(2011)
- 51. times faster thanstartups that scale prematurely Startups that scale properly grow about Source: Start Up Genome Report(2011)
- 52. Startup assumptions andrisks 1. Find early adopters 2. Sell early adoptors 3. Build something customers love 4. Get lots of customers ? Do this last!
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- 56. YPO MBAs Gamers Sports centers The Sharks KIPP RhodesRowing Music Scools tribes
- 57. 7000inc 500 companiesassessed 9best performers chosen for a study 4belonged to YPO The breakthrough company
- 58. “their willingness tosupport, mentor and fund each other to success. In my humble opinion, this is what is really valuable about YC” - Dave McClure, 500startups founder
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- 61. How importance orprecious something is to a person Values Definition
- 62. Time: How does aperson spend their time? Show Energy: What activities gets the person excited? Show Money: How do they spend their money? Show Determining Values
- 63. Time: How does aperson spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business Elon Musk Values
- 64. 8:00: Heads toSpaceX’s office in his Model S. How does Elon Musk spend his time?
- 65. 8:00: Morning phonecalls. Marketing VP, journalists, job candidates or conference calls 10:45: Week status review on the Falcon 9 How does Elon Musk spend his time?
- 66. 12:30: Propulsion schedule meeting 12:30:Building operations meeting How does Elon Musk spend his time?
- 67. 16:30 Visits therocket factory How does Elon Musk spend his time?
- 68. 19:00 Interviewed bySarah Lacy from Pando Daily Attends premier of a film he has produced How does Elon Musk spend his time?
- 69. How does ElonMusk spend his money?
- 70. Time: How does aperson spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business Richard Branson Values
- 71. “A business hasto be involving, it has to be fun” “My general attitude to life is to enjoy every minute of every day. I never do anything without a feeling of, ‘Oh God, I’ve got to do this today” What gives Richard Branson energy?
- 72. What does RichardBranson spend his money on?
- 73. Time: How does aperson spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business Richard Branson Values
- 74. AMAR BHIDE Values predictyour future!
- 75. AMAR BHIDE Becoming agreat investor Business and investing Family and friends Baseball
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- 79. Source: Barringer etal. (2005) 54% 80% FAST GROWTH SLOW GROWTH Growth commitment?
- 80. “We will createproducts that become pervasive around the world… We will be the first Japanese company to go into the US market and distribute directly.. Fifty years from now, our brand will be as well know as any in the world.”
- 81. “I will builda motor car for the great multitude… It will be so low in price that no man making a good salary will be unable to own one. The horse will have disappeared from our highways, the automobile will be taken for granted.”
- 82. Action list 1 Validateyou have a real opportunity 2 Build a team 3 Seek advice 4 Develop your industry knowledge 5 Don’t scale until P/M fit 6 Get traction 7 Join a community 8 Value your business 9 Have a vision
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- 84. 2-minute pitch 1 Whatdoes your company do? 2 How big is your market? 3 How much traction do you have? 4 How many customers did you talk to? 5 What did you learn this weekend?
- 85. 2-minute pitch 1 Whatdoes your company do? Ignitor helps entrepreneurs succeed using coaching and mentoring. 2 How big is your market? We are targeting the R10B that is spent on business support in SA 3 How much traction do you have? We have landed 4 major sponsors and helped 400 entrepreneurs 4 How many customers did you talk to? 5 What did you learn this weekend?
- 86. Last customer interview& Prepare pitch • Last customer interviews (B-to-B: 15; B-to-C 30) • Prepare a 2-minute pitch • Test your pitch on 5 people in the room (and phone your mum) • Pitching begins at 16:00 1 What does your company do? 2 How big is your market? 3 How much traction do you have? 4 How many customers did you talk to? 5 What did you learn this weekend?
Editor's Notes
- #9 Looking back at 7 years with my startup GroupSpaces Today I announced that I’m joining the team at Stripe, after 7 years working on my startup, GroupSpaces. The decision to join Stripe was by no means easy, to say the least. The journey bringing GroupSpaces from a college-room idea has been the best ride of my life - an unbeatable learning experience full of the hardest challenges, the opportunity to work with people I have the utmost respect for, and the creation of a product of which I’m immensely proud. I’m indebted to all the mentors, advisors, investors and all who’ve supported us along the way. Going back to when I first started working on the ideas that became GroupSpaces - before we formed a company, lost and gained team members, reformed a new company, took time out of university and raised investment - it’s been a 7 year journey for me. 7 years ago, my cofounder David and I knew nothing about business or startups. We had no connections to anything like the ecosystem that exists today in London. 7 years is a long time in any context, particularly for a business that has not become the proverbial billion dollar success. But I’m at one with what Ian from Songkick (who I highly respect for being down to earth in the face of much of the hype and hubris of the startup scene) had to say about being open and proud about the length of time it takes to build our companies. In this manner we fought a long hard graft, assembling the cliche’d airplane on the way down. Today, GroupSpaces is a sustainable small business, doing that old-fashioned thing of making more money than it spends, and continuing to grow user base and revenue. A fascinating diversity of organisations use GroupSpaces to ease management of their membership, communications and activities - from professional associations to sports clubs, local hobby groups to prominent international campaigning organisations, campus-based student societies to community groups and charities. While disappointed that the business grew slower than we hoped in financial returns, I’m hugely proud of the contribution and impact we’ve made, and I remain dedicated to seeing GroupSpaces continue to thrive and achieve the best it can. We started GroupSpaces with the ambition to build a global internet-scale company, and it’s in this light that it’s now time for me to move on to tackle the next challenge. However I’ll continue to be involved in supporting the business, while my departure from the day-to-day has made room for fresh blood to drive it forward in new ways. I look forward to seeing GroupSpaces continue to grow, either standalone or in time with an appropriate partner. With the bittersweet benefit of hindsight, I’ve been able to dwell on the key mistakes we made and how they affected our progress. For the possible benefit of others - along with bringing no small amount of closure for myself - I’ve detailed my thoughts on these mistakes and learnings as follows: - Failing to appreciate a lack of product-market fit as we moved into new markets GroupSpaces originally started out serving the student market, where we achieved considerable success. We designed a tool to solve our own problems, discovered that there were many like us, and with the benefit of the closely-linked geographically-concentrated nature of universities and colleges we spread often like wildfire though campuses in the UK. A stand-out memory was signing up a single organisation at the London School of Economics at the beginning of the semester; with no further marketing we had 100 organisations using the platform by the end of that term. The problems came when we followed this by focusing on marketing and distribution when expanding into other markets beyond students, failing to identify early on our issues with significantly different activation rates due to issues such as far less recognition, peer endorsement and good old-fashioned offline word of mouth. As a result we ploughed on for too long “pushing uphill” without going back and ensuring our product was fully appropriate for these new markets. - Insufficient focus, focus, focus I firmly believe startups should choose their One True Thing as early as possible and aim to do that one thing well. With a small team that peaked around 12 people, we simultaneously tried to work on the product, while scale up user acquisition and paid marketing channels, while building out a business model consisting of 3(!) different revenue streams - all while attempting to fit our achievements into a framework that would enable us to demonstrate progress and hit milestones that we could use to raise further funding. This had the inevitable effect that we ended up scoring straight Cs - sub-standard product, sub-standard metrics, sub-standard traction. The irony is that at the time we believed we understood this point, and considered ourselves to be very focused - we’d learned to say “no” to most opportunities and suggestions, and had a very clear idea of our target customer, our product and what we were not. Our problem was that our “one thing” had many multiple parts. I cringe when I recall our spreadsheet models that had customer lifetime value as a messy fudge blending multiple different metrics, each of which depended on other metrics - and ultimately too many assumptions to meaningfully test. I believe a startup needs to achieve a single A grade in one thing to advance to the next stage - if I could go back, the advice I would give myself would be to force ourselves to limit our focus to one thing - a single KPI at a time - to which all our efforts should directly and measurably contribute. - A confused strategy, attempting to hedge ourselves Following on the point about focus, looking back we were very confused about which milestones we needed to hit in order to be able to progress to the next stage and raise subsequent funding. We ended up hedging ourselves - attempting to limit the downside in the case the upside didn’t work out, attempting to have multiple stories and metrics on which we could raise if we didn’t hit other targets. Predictably, there’s no such thing as a free lunch - we simply ended up in no-mans’ land with our straight C grades - no massively scaling user base on the social side and mediocre numbers on the business model. We fell into this trap in part though the history of the company: we spent the first years of the company building a smaller business with mentors and investors focused on safety and predictability of building a solid company. Our ambitions led us to raise a VC round where the game becomes the go-big-or-go-home play (aka. throw-stuff-against-the-wall-and-see-what-sticks..). Not to say that either would have been a better or worse path to choose, but our mistake was not to make the jump to a boom-or-bust game fully, and instead get stuck in in the middle - a murky territory without clear strategy where every decision feels at odds with another, and our hedging to limit the downside definitely held us back from achieving the upside. - Premature scaling It follows on from the points above, but we most definitely committed the all-too-common sin of premature scaling. Driven by the desire to hit significant numbers to prove the road for future fundraising and encouraged by our great initial traction in the student market, we embarked on significant work developing paid marketing channels and distribution channels that we could use to demonstrate scalable customer acquisition. This all fell flat due to our lack of product/market fit in the new markets, distracted significantly from product work to fix the fit (double fail) and cost a whole bunch of our runway. - Moving too slowly after we raised our Series A (Back in 2010 when we closed the round, $1.3m was still known as Series A - there was none of that seedy talk you get nowadays..) In hindsight it’s painful that we were not up to speed with the full team we wanted to hire until a full 8 months after we closed our VC round. We proudly described how we’d spent 3 months “learning how to hire” - by doing everything we could to learn from others, interview carefully and ensure we hired the right people. “Hire slow, fire fast” was the advice on many a respected startup blog. Well, not to add to the problem - but as I now know: “hire fast, fire fast” is for sure the better plan. Nothing struck me as such a comparison as when a friend more recently made a hire for her startup on the spot after an interview that went well, extended to 90 minutes and then - done. When I mentioned this to her she said simply “I need to hire 20 people in the next month”. Granted not how it goes in every situation, but another piece of advice I would give my earlier self would be to trust my gut sooner without dragging out an interview process to multiple rounds as standard or because “regardless, we should spend some time making this hire to see who else comes along”. We should have closed our round being able to name the 3 people we wanted to hire next, and being moving forward producing product and traction with a full team (not necessarily large, but balanced) within 2 months. At the time it was easy to feel like all our time on the meta-aspects of building a company was well spent. But for too long we were not 100% focused on the only things that ultimately mattered - customers, product/market fit, traction - and all the while our monthly burn was - well - burning. What we did right Despite all the above, we certainly did a number of things right. You may note that nowhere have I mentioned the key ideas behind GroupSpaces as among the things I consider mistaken. With GroupSpaces we have provided a great product that provides significant value to our many loyal users, and more continue to sign up as customers each day. I still believe a place exists for GroupSpaces or a similar service to scale to serve the market of the millions of membership organisations that currently rely on the unhappy marriage of a Yahoo/Google Group coupled with an Excel spreadsheet/google doc for member records, in addition to their own website and other services for events or payments. I hope to write more about my learnings as time allows, but for now it just remains for me to restate my heartfelt thanks to those who have supported us in the journey with GroupSpaces, and look forward to what the future holds for both GroupSpaces and Stripe.
- #16 This is one thing were the idea of business plan as spread all over. Of the studies that have looked at business plan nearly all of them show that business plans don’t have an impact on performance, or worse they actually hinder performance. And there are very real reasons why spending a week or 2 writing a business plan is a bad idea.
- #17 Also, when you look at the best.
- #20 Neither did the founder of Intel corporation the largest manufacture of micro-processors build a
- #21 Baby in topless bar. Julius Malema in builders warehouse.
- #40 Take for an example a 6 year study they did on Silicon chip manufactures start ups in the US. They compared teams which started with more then tree members, at least 50% of the team had joint experience and had three years industry experience in the team. The difference was massive a full 73% in six years become successful companies were only 19% with weak times become successful.
- #47 What is pre-mature scaling. No it is not scaling the fish before it’s dead, or getting on the bathroom scale before it is ready for you.
- #48 It is when you start growing a business before you have found product-market fit.
- #49 One of the best examples of pre-mature scaling was webvan.
- #51 A recent study done last year by a group of researchers in silicon valley 3,200 internet start ups found that a full 74% of internet start ups failed because they tried to grow the business. Before they had found product market fit.
- #52 They also found that business that found product-market fit grow at about 20 times faster than startups that scale to early. The bottom line is you don’t want to start making moves on that girl until you know she is very interested and will be willing to stick around.
- #80 In 2005 three researchers did a study on 100 businesses, 50 fast growth business and 50 slow growth businesses, using the data gained from case studies they found that only a little over half of the slow growing business were committed to growth, were as over 80% of the fast growing business were committed to growth.