This document summarizes five innovations that have changed the startup world: 1. Business model generation introduced the business model canvas as a way to conceptualize startups. 2. Applying the scientific method means startups empirically test hypotheses about their business model rather than relying on business plans. 3. Customer discovery focuses startups on understanding customer problems before developing solutions to ensure they build something people want. 4. The lean startup methodology advocates for building minimum viable products to rapidly learn from customers and iterate business models. 5. Together, these innovations define startups as temporary organizations that search for scalable and repeatable business models through experimentation rather than execution based on plans alone.

1. Startups 2013
how five innovations have changed
the startup world, forever
Keith McGreggor
Director of VentureLab @

4. America’s Best Engineering Graduate Schools 2012
1. ! Massachusetts Institute of Technology
2. ! Stanford University
3. ! University of California — Berkeley
4. ! Georgia Institute of Technology
5. ! California Institute of Technology (CalTech)
6. ! University of Illinois — Urbana-Champaign
7.! Carnegie Mellon University
8.! University of Michigan — Ann Arbor
9.! University of Texas — Austin
10.! Cornell University!
Eighth
Year!

8. VentureLab ATDC
Entrepreneurial Flow

9. VentureLab ATDC
Technology Startup
Entrepreneurial Flow

11. active startups 322+
external investment in 2012 $80M
annual revenue of startups $1.37B
startup jobs 5345
external investment since 1999 $2.45B
ATDC is the world’s oldest and largest university accelerator program
just celebrated its 32nd anniversary

12. April 2010
April 2010

14. inventions reviewed 250+
new projects 35+
ongoing projects 83
new companies created 30
external investment in new and
existing VL companies in 2012
$185M
total of angel & VC
investments in VL companies
$700M+
2012

16. 1 Rice Alliance for Technology and Entrepreneurship Rice University United States
2 VentureLab Georgia Tech United States
3 UB Technology Incubator State University of New York, Buffalo United States
4 NDRC LaunchPad Trinity College Dublin Ireland
5 SETsquared Universities of Bath... United Kingdom
6 Innovation Centre University of the Sunshine Coast Australia
7 Tech 20/20 University of Tennessee United States
8 ATP Innovations University of Sydney Australia
9 STING KTH Royal Institute of Technology Sweden
10 NCTU Innovation Incubation Center National Chiao Tung University Taiwan
11 Youngstown Business Incubator Youngstown State University United States
12 I3P Politecnico di Torino Italy
13 Vermont Center for Emerging Technologies University of Vermont United States
14 Jon Brumley Texas Venture Labs University of Texas at Austin United States
15 Startup Sauna Aalto University Finland
16 InNOLEvation Accelerator Florida State University United States
17 TEC University of Alberta Canada
18 ASU Venture Catalyst Arizona State University United States
19 Oxford Entrepreneurs Incubation Centre Oxford University United Kingdom
&
#1 Engineering/Science Incubator
#1 Early Stage Incubator

17. about startups ...

18. 1996 1998 2000 2002 2004 2006 2008 2010 2012
NASDAQ
1000
2000
3000
4000
5000

19. $1,000,000,000,000

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

21. we know something now that
we didn’t know before
we know how to build
startups

22. we know something now that
we didn’t know before
we know how to build
startups
engineer

23. five innovations

25. what is a company?

26. A organization which sells a
product or service in exchange for
revenue and profit

27. A bit of history...

28. Dutch West India Company 1620

29. 1856 - First Org Chart

30. 1908

31. Tools for the 20th Century
“Century of the Corporation”

32. ... but what about startups?

33. Startups are a Smaller Version
of a Large Company

34. Startups are a Smaller Version
of a Large Company

35. Startups are something else.

36. five innovations
what is a startup?

37. A startup is a temporary
organization designed to search for
a repeatable and scalable
business model.
innovation

38. Startups Search
Companies Execute

39. Business Model
Product/Service
Startups
Companies

40. Old School of Startups
(before 2010) ...

41. All I Need to Do is Execute the Plan

42. All I Need to Do is Make the Forecast

43. What we know now
(and have known all along)...

44. Business Plans
are
FICTION

45. "Everybody has
a plan until they
get punched in
the mouth."

46. Five year forecast?
MAGICAL
THINKING

47. Crystal ball...
2007 2013

48. Previous
5-Year Plans

49. Business
Model
Business
Plan>

50. five innovations
what is a business
model?

51. Business Model Generation
segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
innovation

52. the Canvas
segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial

53. still fiction...
segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
?
? ?
?
?
?
?
?
?
?
?
?
?
?
?
?

54. ... and we want facts!
segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
✔
✔ ✔
?
✔
✔
?
✔
✔
✔
✔
✔
?
✔
?
✔

55. How?

56. pick one...
segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
?
? ?
?
?
?
?
?
?
?
?
?
?
?
?
?

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

58. run it in the world ...
segments
value
prop.
revenue streams
customersoffer
relationships
channels
financial
?
? ?
?
?
?
?
?
?
?
?
A controlled
experiment
generally
compares the
results obtained
from an

59. ... and iterate!
segments
value
prop.
revenue streams
customersoffer
relationships
channels
financial
✔
? ?
?
?
?
?
?
?
?
?
A controlled
experiment
generally
compares the
results obtained
from an

60. five innovations
the scientific method
applies to business

61. ©2006
innovation

62. 62
the key idea
There are
NO FACTS
in the building!

63. 63
the big secret
Conduct
100+
Interviews

64. 64
A man
who carries
a cat by the
tail learns
something he
can learn in
no other way.

65. Why do Startups fail?

66. Startups
don’t fail
because they
fail to make
something...

67. Startups don’t fail
because they
fail to make
something.
Startups fail
because they
fail to make
something
someone
wants to buy
from them.

68. segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
Business Model

69. segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
Product / Market Fit

70. “If you build it, he will come...”

71. Tools for managing
Engineering Risk
Tools for managing
Customer Risk
?
Waterfall Development
Porter’s Five Forces
SWOT Analysis
Project Management
Baseline Risk Assessment
Stress Testing
Concentration Methodology
Quantitative Risk Management
...

72. five innovations
how to reduce
customer risk

73. Customer Discovery
innovation

74. Customer Discovery
Startups
Search
Companies
Execute

75. Customer Discovery
Understand the Problem
then
Develop the Solution

76. This may sound familiar...
Understand the Problem
then
Develop the Solution
... but it’s actually
the inverse

77. Customers want
your technology.
MYTH

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

79. Customer Discovery
key idea
Customer POV

80. Customer Discovery
WHO CARES?
WHY will they BUY?

82. segments
value
prop.
revenue streams
customersofferinfrastructure
cost structure
activities
partners
resources
relationships
channels
financial
Product / Market Fit

83. How do you know you have
product / market fit?

84. METRICS

85. METRICS
Vanity

86. METRICS
Vanity

87. five innovations
build to measure
measure to learn
learn to build

88. Lean Startup Methodology
innovation

89. Agile Development

90. MVPMinimum Viable Product

91. LOW
FIDELITY
HIGH
FIDELITY
Minimum Viable Product
MVP
Built to LEARN
Not to SELL

92. Moneyball!
METRICS
Actionable

93. the Pipeline
$$$

94. METRICS
AARRR

95. acquisition activation retention revenue
referral

96. the equation that matters...
segments
value
prop.
REVENUE
customersofferinfrastructure
COST
activities
partners
resources
relationships
channels
financial
<

97. ... is this one: CAC << LTV
acquisition activation retention revenue
referral
CAC LTV

98. if
CAC << LTV
COST < REVENUE
and
then COMPANY!

99. five innovations
define: “startup”
business model generation
the scientific method
customer discovery
lean startup methodology

100. Customer Discovery
Business Model Generation
Lean Startup Methodology
Startup Engineering

101. venturelab.gatech.edu
@venturelab / @keithmcgreggor
keith@venturelab.gatech.edu
75 Fifth St NW, Suite 202, Atlanta GA 30308