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Startup Lifecycle, by Fred Destin

An in-depth look at what it takes to start, launch and grow a startup, borrowing from current best practice in the filed and Lean principles
by Fred Destin on 1 May 2013

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Transcript of Startup Lifecycle, by Fred Destin

Start Launch Build Chasm Scale Mature $250M exit to Rakuten (2010) First VC money
Top 30 global site
> 120m UU AV seed
#2 in UK AV incubated
#1 ticket exchange Atlas Venture
Cambridge MA
@fdestin
freddestin.com



Co-founding investor
Board member Job 1: Pick a great co-founder Single founder companies are hard to back
Two is the magic number, four is a crowd
Date first, test each other, be patient 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/ 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% 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 Welcome to LEAN The Lean Holies Steven Gary Blank (God)
"Four Steps to the Epiphany" Eric Ries (Jesus)
Startus Lessons Learned Alex Osterwalder (Mary ?)
Business Model Canvas 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. "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 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 Are only evangelists crazy enough to buy ?
Can you develop a repeatable sales model ? 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/ "The only thing that matters
... getting to product / market fit"


pmarca *ARCHIVE* - bit.ly/1z2b3V “If I had asked people what they wanted, they would have said faster horses." Henry Ford What's wrong with this picture ? What do to with all this conflicting advice ?
JFDI Jessica Hady, Thisisindexed Tool Up You cannot manage what you cannot measure
Every startup talks the talk, most suck on metrics Dave McClure's Metrics for Pirates
Focus on Activation and Retention first B2B ? David Skok's blog, For Entrepreneurs 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 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. David Skok on gigaom 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) Skok, forentrepreneurs.com Broadening the thinking to
"whole business validation" 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 Geoff Moore's Crossing the Chasm, 2000 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 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" 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 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. Americans do it better STARTUP LIFECYCLE
Your company, from idea to maturity

Fred Destin, July 2011
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