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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)

Chasm

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

Mature

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

Scale

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

Build

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

$250M exit to Rakuten (2010)

First VC money

Top 30 global site

> 120m UU

Geoff Moore's Crossing the Chasm, 2000

AV seed

#2 in UK

Atlas Venture

Cambridge MA

@fdestin

freddestin.com

Co-founding investor

Board member

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

AV incubated

#1 ticket exchange

Steven Gary Blank (God)

"Four Steps to the Epiphany"

Launch

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

Job 1: Pick a great co-founder

Start

Single founder companies are hard to back

Two is the magic number, four is a crowd

Date first, test each other, be patient

Job 2: Set yourself up correctly

Zero fixed-cost setup

Make sure wife / family are on board

Sign a Pre-Nup with team members

Lawyer up

Reverse Vesting = Founder Friendly

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

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