2. Why Startups Succeed
Bill Gross did research on why startups succeed…
Five major things contribute to success:
1. 28% - Idea
2. 32% - Team
3. 24% - Business Model
4. 14% - Funding
5. 41% - Timing
3. 1. What’s a good idea?
• One that customers want
• One that customers need…now! (Urgency)
• One that solves a pain point (that people will buy)
• One that is scalable
• Incremental costs to add customers is low
• LTV is higher than acquisition cost (profitable)
• Ratio of employees to customers is low
• “Go a Billion or Go Home” (Nate Reis, Chargello)
• What attracts real VC $
• Getting Valley-type VC attention is all about Unicorns
• What is your addressable market? Is it worth it?
• Think big
5. 2. The Team
An Ideal Team Has:
2. Sales Guy -> Hustler
3. Magician -> Marketer
5. Hacker -> Builder
6. Enabler -> Operations Guy (Doing what needs to be done)
Not all are necessary to start. The idea and a builder will get things started.
Could be the same person.
Most VC people will say the Team is more important than the idea.
Mentors are important. Find a mentor, or several.
8. Where to begin
• Test, Test, Test
• Everything is a hypothesis until you get confirmation from your
• Steve Blank: Get out of the building (& talk to customers)
• Steve Blank: No plan survives first contact with customers
• Do Customer Discovery
• Cust Dev is a very specific kind of customer interviewing process
1. In Person (preferably, to gauge reactions)
2. Don’t tell them about your idea (you are there to learn, not sell)
3. Ask them how they currently solve the problem your idea addresses
4. What’s worst, best, hardest, etc.
5. Use the 5 whys method to get at root causes
6. When done, then let them know about your idea and get feedback
• Get 100 customer interviews before building anything
9. Get used to being wrong (you’re learning)
• Your first try at a startup will almost certainly evolve
• Every idea I had for a startup rapidly evolved into
something else, usually bigger
• Wondergroups: Remembering names to group management
• VoterBliss: National candidates to all candidates
• Listfitters -> Goings: Curate packing lists to full trip tool
• Be dogged but don’t be blind. Listen and be willing to
“pivot” toward a better solution, find the pain, find the $.
• Talk to non-customers and listen to their feedback too
• Beware of problems you cannot solve, no revenue, and
scalability issues – too many man hours to get customers.
11. Rookie mistakes we all make
• Thinking everyone is going to steal you idea
• No NDAs unless they need to understand your secret sauce
• Thinking you must have money to get started
• No need for fancy logos, lawyers, developers, pretty much anything
• Mock up idea on paper.
• Wireframe it using free resources online
• You can talk to potential customers BEFORE you do anything.
• If you’re awesome, and your customers NEED your product, you can
sell your product before it’s made and help pay for its development.
• Kickstarter model
12. Rookie mistakes we all make (2)
• Thinking you are a unique genius and nobody has thought
of your idea before
• Research your market & your competitors. Spend time on this.
Chances are, someone is doing something similar.
• If it’s a big enough market, and a big enough problem, others will be in
• Having a “build it and they will come” mentality.
• Remember, you need to sell it before it’s made.
• Not knowing your biggest obstacle
• Pro Tip: It’s inertia (getting people to change their habits)
• Selling features
• ProTip: You’re not selling features. You’re selling solutions.
• Think Jobs To Be Done (JTBD): https://jtbd.info/
14. How do you know it might work?
• Customer development is the first and most important job you have
1. Define your customers (BMC: Customer Segments)
2. Find access to them (BMC: Channels)
3. Interview them about the problem you are solving (BMC: Value Prop)
4. This process validates 1-3
• Look for the money
• Money usually follows the pain
• Find the pain points that you are solving
• Ask customer what it would be worth to solve their worst problem
• After interview, describe your solution
• You want about an 80% “want” rate unless your idea is totally new
• Do your customers’ eyes light up? Do they sit up, lean in?
• Do they ask you when they will be able to have your product?
• Gold Standard: Will they give you money now?
16. 4. Funding
• Always explore bootstrapping
• Building your company without taking VC (Read REWORK by Jason Fried)
• Will your customers fund your startup? Maybe! Ask.
• KickStarter? – usually not for software startups
• Thinking VC or Angel Funding? (Read Brad Feld’s Venture Deals)
• Think Traction first: have a growing customer base, with revenue
• Read “Traction, A Startup Guide to Getting Customers”
• Getting funds from others will usually require you to relocate nearer
the funding company
• Thinking local?
• Talk to me privately about intrinsic issues with local funding
• It’s not “get money to build it,” it’s “build it to get money.”
• Initial value is all about team + customers, revenue, and growth.
• Remember slide #1: Funding is only 14% of reasons for success.
18. 5. Timing
• Bill Gross says it’s the most important (41%)
• Look at emerging trends.
• Are they good for you or bad for you?
• There are things that are out of your control
• Don’t be afraid to pivot or move to an entirely new idea.
• Luck is a big part of (big) success
• ProTip: Don’t give up your day job until your company is
generating more revenue than you are making.
19. “Today, not starting is far, far worse than
being wrong. If you start, you've got a shot
at evolving and adjusting to turn your
wrong into a right. But if you don't start, you
never get a chance.”
― Seth Godin, Poke the Box
WHY STARTTUPS FAIL: https://www.cbinsights.com/blog/startup-failure-post-mortem/#20152update
WHY STARTUPS SUCCEED: https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed
Ash Maurya has a great free intro course to LEAN concepts on Udemy.
Here’s a great rundown of a VC’s perspective on what a Seed program is and how you, as a startup, fit in.
CUSTOMER VALIDATION CHEAT SHEET
From APP Sumo (Noah Kagan)
Sell your product before you build it:
BOOKS: Venture Deals, Traction, REWORK
Jobs to be Done (JTBD): https://jtbd.info/
STEVE BLANK’S Startup Tools
Your biggest obstacle with the customer is INERTIA (getting people to do things differently). Being able to concisely say WHY your customer NEEDS to use your solution is key. What is it going to do for them that’s DIFFERENT AND BETTER than what they do now. TEST TEST TEST...don’t just THINK SO.