Sunday - LaunchWeekend - Session 4 - Effectuation
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Sunday - LaunchWeekend - Session 4 - Effectuation
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Sunday - LaunchWeekend - Session 4 - Effectuation
- 3. WHAT PREDICTS SUCCESS? The first sale ๏ฑ ? ๏ฑ ? ๏ฑ ?
- 4. 1 Planning doesnโt predict
- 5. โnew ventures launched with formal written business plans do not outperform ones launched without them.โ Source: Lange, Mollov, Pearlmutter, Singh and Bygrave (2007)
- 6. Business Plan? 21% Source: Bhide (2000) 79% Yes! No!
- 7. No!
- 8. No!
- 9. No! No! No!
- 10. Doh!?!
- 13. INDUSTRY CHOICE VS. INC 500 Source: Shane (2009) Industry Number 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
- 14. Computer and Office Equipment (1/25) Eating and Drinking Places (1/14,550) Source: Shane (2009)
- 15. 582 succeed Computer and office equipment 1 succeeds Eating and drinking places Source: Shane (2009)
- 16. 0.77 Correlation between number of startups in an industry and failure rate Source: Shane (2009)
- 17. 2 Team Predicts
- 20. 13.1% 54.2.% 5-YEAR FAILURE RATE? > Source: Bruderl, et al. (1992) +
- 21. 90% TEAM SIZE SOUTH AFRICA 10% 1 founder 2 or more founders Source: FinScope (2010)
- 22. 3 Advice seeking predicts
- 23. 45% 80% 3-YEAR SURVIVAL RATE Advice from accountants 3+/yr No advice Source: Watson (2007)
- 24. SUCCESSIVE ENTREPRENEURSHIP AND NO LEARNING Source: Pretorius & Le Roux (2011)
- 25. Source: Pretorius & Le Roux (2011)
- 27. INC 100 ENTREPRENEURS WITH INDUSTRY EXPERIENCE 75% 25% Source: Fresser and Willard (1990)
- 28. No Industry Experience Industry 25.5 % Experience Source: Bruderl, et al. (1992) 54.5 % 5-YEAR SURVIVAL AND INDUSTRY EXPERIENCE
- 29. Strong Team (1) 3 + members (2) 50% joint experience (3) 3 year industry experience (19%) (73%) Source: Eisenhardt & Schoovenhoven (1990)
- 30. 5 Traction
- 31. โI'd just go sell it. I don't believe in market research. Somebody once told me the only thing you need is a customer." Source: Sarasvathy (2007)
- 33. FOUNDERS INVOLVEMENT IN SELLING Heavily Involved Somewhat Involved 10% Source: Bhide (2000) 82% 8% Main Salesperson
- 34. 6 Avoid Pre-mature Scaling
- 36. DONโT SKIP THE ASSUMPTION TESTING AMAR BHIDE No Facts Idea Build
- 37. paulshawsmith scientific business strategy
- 38. paulshawsmith scientific business strategy
- 39. of high growth internet start ups fail due to premature scaling. Source: Start Up Genome Report(2011)
- 40. Startups that scale properly grow about times faster than startups that scale prematurely Source: Start Up Genome Report(2011)
- 41. 8 Community
- 43. Mayans Hutu Greeks Romans Egyptians Vikings Khoisan Persians TRIBES
- 44. YPO MBAs Gamers Sports centers The Sharks KIPP Music Scools Rhodes Rowing TRIBES
- 45. THE BREAKTHROUGH COMPANY 7000inc 500 companies assessed 9best performers chosen for a study 4belonged to YPO
- 46. THE OLD BOYS CLUB
- 47. โWhile some attribute YC dominate to Paul Grahamโs excellent selection of founders, or his ability to coach founder to raise every-higher valuations, ort he branding for YC alumni, and their willingness to support, mentor and fund each other to success. In my humble opinion, this is what is really valuable about YC, and why itโs difficult for other to copy.โ - Dave McClure, 500startups founder
- 48. 9 Values Predict
- 49. WHAT ARE VALUES?
- 50. VALUES DEFINITION How importance or precious something is to a person
- 51. ELON MUSK VALUES Time: How does a person spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business
- 52. 8:00: Heads to SpaceXโs office in his Model S. How does Elon Musk spend his time?
- 53. HOW DOES ELON MUSK SPEND HIS TIME? 8:00: Morning phone calls. Marketing VP, journalists, job candidates or conference calls 10:45: Week status review on the Falcon 9
- 54. HOW DOES ELON MUSK SPEND HIS TIME? 12:30: Propulsion schedule meeting 12:30: Building operations meeting
- 55. HOW DOES ELON MUSK SPEND HIS TIME? 16:30 Visits the rocket factory
- 56. HOW DOES ELON MUSK SPEND HIS TIME? 19:00 Interviewed by Sarah Lacy from Pando Daily Attends premier of a film he has produced
- 57. HOW DOES ELON MUSK SPEND HIS MONEY?
- 58. RICHARD BRANSON VALUES Time: How does a person spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business
- 59. WHAT GIVES RICHARD BRANSON ENERGY? โA business has to be involving, it has to be funโ โMy general attitude to life is to enjoy every minute of every day. I never do anything without a feeling of, โOh God, Iโve got to do this todayโ
- 60. WHAT DOES RICHARD BRANSON SPEND HIS MONEY ON?
- 61. RICHARD BRANSON VALUES Time: How does a person spend their time? Business Energy: What activities gets the person excited? Business Money: How do they spend their money? Business
- 62. Values predict your AMAR BHIDE future!
- 63. AMAR BHIDE Business and investing Family and friends Baseball Becoming a great investor
- 64. Eating Movies ? Partying AMAR BHIDE Outcome 1 Outcome 2 Outcome 3
- 65. Business Career ? Investing AMAR BHIDE Outcome 1 Outcome 2 Outcome 3
- 67. GROWTH COMMITMENT? Source: Barringer et al. (2005) 54% 80% FAST GROWTH SLOW GROWTH
- 68. IF YOU SALES DOUBLED HOW WOULD IT IMPACT ON YOUR: โข Your workload โข Extend to which preferred tasks would dominate โข Your employee well being โข Ability to control operations โข Independence from customers, suppliers, etc. โข Ability to survive a crisis โข Ability to keep up quality products and services
- 69. โWe will create products that become pervasive around the worldโฆ 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.โ
- 70. โI will build a motor car for the great multitudeโฆ 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.โ
- 71. ACTION LIST โข Validate you have a real opportunity โข Find co-founders โข Get an advisory board and listen โข Donโt scale until P/M fit โข Get traction โข Join a community โข Value your business โข Have a vision
- 72. SESSION TO DO LIST (09:30 TO 14:00) Goals โข Run at least 2 experiments (1 to 2 hrs per experiment) โข At least 10 to 40 customer interactions (At least 5 customers per hour) Prepare to announce โข Number of experiments run โข Number of customer interactions * Pick up some lunch while you are interviewing customers
Editor's Notes
- 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 donโt 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.
- Also, when you look at the best.
- Neither did the founder of Intel corporation the largest manufacture of micro-processors build a
- Baby in topless bar. Julius Malema in builders warehouse.
- 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.
- What is pre-mature scaling. No it is not scaling the fish before itโs dead, or getting on the bathroom scale before it is ready for you.
- It is when you start growing a business before you have found product-market fit.
- One of the best examples of pre-mature scaling was webvan.
- 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.
- 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 donโt want to start making moves on that girl until you know she is very interested and will be willing to stick around.
- 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.
- Is has been shown that your attitude to growth will impact how likely you are to set real growth goals. Often