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STARTUP LIFECYCLE
Your company, from idea to maturity
Fred Destin, July 2011
Are only evangelists crazy enough to buy ?
Can you develop a repeatable sales model ?
Being lean is a mean, not an end - Ben Horowitz
I have never, not once, been successful with an investment in a company that raised a boatload of money before it found traction and product market fit with its primary product. - Fred Wilson
"I believe that too much money in a startup is not only unnecessary, it's actually toxic" - Mike Maples Jr.
Premature scaling is the #1 cause of startup death
Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely (Startup Genome Project)
Wake up and smell the coffee:
- Bad things happen to well-funded startups who run out of money when they're not supposed to
- Founders get wiped, CEO's get replaced in companies with 25 million in revenues
- High burn, tired investors and chasm trouble can lead to distressed recovery exits with mature businesses
No one can give you back your twenties
Life is not a dress rehearsal
- Steve Kane
Think full lifecycle
Scaling refers to the period in a startup's life when management and board feels like they can systematically accelerate growth with confidence that the resources they put in will yield great and measurable results.
Too many startups miss greatness by not changing gears when the time is right
The art of scaling is to automate everything that can be, but to continuously fight organizational creep.
Treat recruiting like an industrial problem, because you will be recruiting lots.
Build and hone a repeatable cutomer process,
... from understanding a sales process or conversion funnel to onboarding and supporting a customer, to ongoing CRM activities.
Build a solid infrastructure of systems,
... for example billing and invoicing to recovering money owed by partners and customers
... or industrialized frameworks for A/B testing your front-end, to rapid bug resolution methods and properly documented code and processes
Build your team and capital base
... raise an appropriate amount of capital to support the generally inevitable cash-flow need that an agressive scaling strategy requires
... hqve a team that grown with you as your business moves from early startup heroic to a consistent an focused execution engine
If you do not automate the backend, the more you sell or acquire customers, the more strain you will put on your organisation as you grow.
Vicious circle of non-profitable growth
Having serious money on your balance sheet is likely to impact your behavior, warp your perception of your own greatness, and possibly lead you to attempt to scale too early.
There is such a thing as investing too late
It's a difficult determination to make. At some point, go for it and "seize the moment"
Americans do it better
Tool Up
You cannot manage what you cannot measure
Every startup talks the talk, most suck on metrics
There is no "golden gut", metrics tend to beat grand visions
Don't fall for the Entrepreneur as Hero myth
Caveats:
- Be data informed, not data driven (Adam Mosseri, fb designer)
- Consistency matters (lots of small changes, very few big bets)
- Data must have meaning: understand statistics, MVT, inference
AND
- Human intuition trumps data for some of the important stuff
such as ...
- Brand
- Aesthetics
- Values
- Positioning
Dave McClure's Metrics for Pirates
Focus on Activation and Retention first
You are fundamentally doing 3 things:
- searching and honing a repetable model of customer acquisition
- slowly strengthening your team
- putting in place a framework for scale (people, processes, systems)
Broadening the thinking to
"whole business validation"
B2B ? David Skok's blog, For Entrepreneurs
David Skok on gigaom
Skok, forentrepreneurs.com
Geoff Moore's Crossing the Chasm, 2000
The Lean Holies
Focus on customers and markets from day one
"Data lives outside the building"
Find out that you're wrong BEFORE you run out of money
Lean and Discover before you execute
Move from Product Centric to Customer centric Development
Steven Gary Blank (God)
"Four Steps to the Epiphany"
What's wrong with this picture ?
Eric Ries (Jesus)
Startus Lessons Learned
Alex Osterwalder (Mary ?)
Business Model Canvas
"The only thing that matters
... getting to product / market fit"
pmarca *ARCHIVE* - bit.ly/1z2b3V
USING LEAN AS A STRATEGY
Principles
Assume unknown problem and unknown solution
A business model is not more than a set of hypotheses
Continuously derive data, feedback, insights
Useful concepts from Eric Ries:
Validated Learning
The importance of well-structured experiments to confirm or disprove hypotheses about uncertain business model elements,
Minimum Viable Product
The smallest set of product features and business initiatives needed to secure the next round of validated learning.
Iterations
The value of rapidly iterating the MVP based on customer feedback obtained through interviews, focus groups, usability tests, customer support interactions, etc.
Pivoting
Changing a startup’s business model based on validated learning. When they pivot, startups retain some elements of their prior model to avoid waste. Lean startups may make many small pivots or a few big ones.
Get a Stanford education for free:
http://www.slideshare.net/sblank
The theoretician
Ries on http://www.startuplessonslearned.com/
The practitioner
Sean Ellis on http://startup-marketing.com/
Most startups fail — usually due to lack of customer demand, not product development problems. These new ventures burn through their capital, wasting money on engineering and marketing before discovering they have built a product no one wants.
“If I had asked people what they wanted, they would have said faster horses." Henry Ford
Welcome to LEAN
"Lean" is a set of methods to rapidly and iteratively test assumptions about a new venture’s business model based on customer feedback
Inspiration = Toyota: rely on short product development cycles to eliminate waste and gain rapid market feedback
What do to with all this conflicting advice ?
JFDI
Jessica Hady, Thisisindexed
Single founder companies are hard to back
Two is the magic number, four is a crowd
Date first, test each other, be patient
Zero fixed-cost setup
Make sure wife / family are on board
Sign a Pre-Nup with team members
Lawyer up
Tim
Not Quite the Hacker he said he was 15%
I think I met 35 people before I met the right co-founder. I planned it like a campaign.
- John Prendergast, Blueleaf
http://venturehacks.com/articles/pick-cofounder
http://www.quicksprout.com/2009/11/04/finding-the-right-business-partner/
Your buddy Mikael
DJ-ing in Ibiza
22%
You, office, 5AM, 27%
Feeling like a schmuck
Equity is Scarce, Use it but Wisely
It's OK (better) to be the Boss
Embrace your role of leader
Every step you take shapes your future
Every little decision matters