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Beyond the Business Plan: An Introduction to Lean Startup
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Who am I? Serial entrepreneur Venture and Angel Investor
Co-Founded or worked in 14 startup companies Seven exits Raised close to $100m Venture and Angel Investor Ran a $50m venture fund Helped launch and advised two seed funds Ran my on seed investing and advisory business for 15 years Launched multiple products Consumer internet, SAAS, Print Entrepreneurship instructor I-Corps, GWU, GMU
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You probably know who these guys are
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But you may never have heard of these guys
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Eric Ries: Author of The Lean Startup
Steve Blank: Father of the Customer Discovery Method Eric Ries: Author of The Lean Startup Alexander Osterwalder: Inventor of the Business Model Canvas
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They are leaders behind a revolutionary idea
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Placing customers at the center of the business startup and product development universe
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More startups fail from a lack of customers than from product / tech failure
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Do companies build product that nobody cares about?
Segway raised over $100MM USD in Used funds for tech development. Hired poorly. Hired logistics consultants to work on providing 10,000 Segways per week. At the end of 2 years they sold 6,000 TOTAL Segways. Without identifying a particular problem for a particular customer that they could solve, they were unable to market effectively. OF COURSE they do!
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What we used to believe
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Startups are smaller versions of larger companies
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What we now know
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Startups are smaller versions of larger companies
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Business plan, financial model
What we used to believe Business plan, financial model
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Best one I ever read…not simply because I wrote it, but it’s the only one I’ve ever front to back!
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Write the plan Best one I ever read…not simply because I wrote it, but it’s the only one I’ve ever front to back!
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Execute the plan Best one I ever read…not simply because I wrote it, but it’s the only one I’ve ever front to back!
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Create Financial Statements
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That’s not a forecast, that’s a $50M hockey stick!
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What we now know
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What history teaches us:
No plan survives first contact with the enemy Helmut von Moltke
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Everyone has a plan…
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…until he gets punched in the face.”
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No business plan survives first contact with customers
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So what IS a startup?
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What’s a Startup? A temporary organization designed to search for a repeatable and scalable business model
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… how a company creates, delivers, and captures value.
What’s a business model? … how a company creates, delivers, and captures value.
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…or how a company makes money!
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How do we build a Business Model?
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Get out of the building! Experiential immersion and team-based simulation.
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Tool of Choice: The Business Model Canvas
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Business Model Canvas
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Your idea is only the starting point
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Process based on Guesses
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…with customers at the center of the universe
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Our Focus is Here
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Our Goal Product – Market - Fit Fact Fact Fact Fact Fact Fact Fact Fact Fact Finding the right solution to the right customer problem with strong enough demand to warrant launching a business
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Who is the customer. What problem do they want solved
Who is the customer? What problem do they want solved? What value do they derive from the solution?
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Customer Development Process
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Search for Problem-Solution Fit
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Customer Discovery is not an exact science… Look for patterns and apply judgment when validating or invalidating hypotheses.
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Get to Know the Customer
Who are they? What do they do? How do they do it? Who do they work with?
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Uncover Problems Identify customer problems and needs…
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How Big is the Problem? focus on customer pains, desired gains, and jobs.
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You must become experts in your customers
Your customers do NOT exist to buy your TECHNOLOGY …
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Archetypes End users Your customers do NOT exist to buy your TECHNOLOGY …
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Archetypes End users Influencer
Your customers do NOT exist to buy your TECHNOLOGY …
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Archetypes End users Influencer Recommender
Your customers do NOT exist to buy your TECHNOLOGY …
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Archetypes End users Influencer Recommender Decision makers Payer
Your customers do NOT exist to buy your TECHNOLOGY …
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Archetypes End users Influencer Recommender Decision makers Payer
Saboteur Your customers do NOT exist to buy your TECHNOLOGY …
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Still not done….. Archetypes End users Influencer Recommender
Decision makers Payer Saboteur Still not done….. Your customers do NOT exist to buy your TECHNOLOGY …
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Customer sub-segments
Archetypes End users Influencer Recommender Decision makers Payer Saboteur Customer sub-segments Your customers do NOT exist to buy your TECHNOLOGY …
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different business models
Different segments often have different business models
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Iterate and Pivot
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Restate Your Guesses
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Repeat as needed Experiential immersion and team-based simulation.
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Exercise #1 Customers List a customer you intend to sell to
Describe the problem What are the current alternatives? Name two Archetypes you will have to deal with.
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Uncover the value Experiential immersion and team-based simulation.
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…describe the benefits your customers derive from your products or services.
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…describe the benefits your customers derive from your products or services.
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Product Features = Value Propositions
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Product Benefits = Value Propositions
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Simple VP Example
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Snowy Owl EX -60 Price: $1,079 Temperature Rating -60ºF / -51.1ºC
Dimensions 64" / 60" / 39" Length Reg: 6' 0" / 183 cm Long 6' 6" / 198 cm Sleeping Bag Shell Fabric Pertex® Shield EX waterproof/breathable Lining Fabric Pertex® 30 denier nylon taffeta Fill Power 850+ Goose Down Fill Weight Reg 52.9 oz / 1,501 g Long 55.7 oz / 1,580 g Average Weight Reg 5 lb 0 oz / 2,273 g Long 5 lb 4 oz / 2,403 g Packed Size 9" x 21" | 35L Zip Side Left Country of Origin Manufactured in the USA from imported materials
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But What is Value? This is not easy!!
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But What is Value? Is it: Warmest Sleeping Bag on the Planet? Full Loft (insulation) at head/shoulders? Inner zipper maintains seal if outer zipper fails? This is not easy!!
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Value = Survival But What is Value? Is it:
Warmest Sleeping Bag on the Planet? Full Loft (insulation) at head/shoulders? Inner zipper maintains seal if outer zipper fails? Value = Survival This is not easy!!
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If your product is “less expensive” than the Snowy Owl, is it more valuable?
This is not easy!!
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If your product is “less expensive” than the Snowy Owl, is it more valuable? To a Polar Explorer?
This is not easy!!
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If your product is “less expensive” than the Snowy Owl, is it more valuable? To a Polar Explorer? To a Weekend Camper? This is not easy!!
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Remember, as consumers, we don’t think in terms of Value Propositions
We think in terms of products and features This is why you will find it difficult to define your own value propositions This is not easy!!
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End Goal Fact Fact Fact Fact Fact Fact Fact Fact Fact
Product – Market - Fit Fact Fact Fact Fact Fact Fact Fact Fact Fact
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Exercise #2: Value Propositions
How does your solution address the customers problem? Why is your solution better than the current alternative? What value do you provide to the customer?
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Product and Process
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Product development Customers known Product known
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Product development Customers known Product known
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Product development
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MVP The Holy Grail!
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Lean Organization
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customer development team
Founders run a customer development team (No sales, marketing, or business development)
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Only founders can choose which problems to solve
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Only founders can pivot
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The Business Plan in 15 Seconds
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The Elevator Pitch or Business Thesis
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What is a Business Thesis?
Our company has a solution That helps our customer(s) Address a specific problem(s) (Pain/gain points) Providing them with value they seek Resulting in us making money
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Exercise #3: Business Thesis
Using your customer description and value proposition write a business thesis for your business How does your solution match with the customer need and sought value? Is there product market fit?
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Q&A
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