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Advanced Entrepreneurship: Customer Development and the Lean Startup Introduction to the Course Steve Blank & Eric Ries [email protected] [email protected]

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Advanced Entrepreneurship: Customer Development and the Lean Startup

Introduction to the CourseSteve Blank & Eric Ries

[email protected]

[email protected]

You Are HerePlan Liquidity




Company Timeline

You Are HerePlan Liquidity




Company Timeline

How do You Get HerePlan Liquidity




Company Timeline


Logical Process


Logical ProcessIntuitive Passion

TodayPart 1: Introduction to the Course Part 2: Key Concepts

Course Introduction

Course Objectives Intro and Backgrounds How the Class Works Customer Development

Course Objectives

Learn how to:

Reduce product/market risk Organize sales, marketing and business development when bringing a product to market Understand its relationship with engineering

Have Fun Learn from Each Other

Course Prerequisites

Officially none Realistically:Experience in bringing a new product to market Entrepreneurship 295 or equivalent Have written a business plan

Introduction and Backgrounds

Steve Blank Eric Ries Guest Speakers Class

Introduction: Steve Blank8 startups in 20 years2 strikeouts 2 walks 2 singles 1 double 1 home run Non profits: Blog: Twitter: Rocket Science, Ardent ESL, Zilog Convergent, MIPS SuperMac E.piphany Audubon, POST, Coastal Commission, CLCV, Trustee UCSC sgblank

Introduction: Eric Ries

Author: Lean Startup, co/author Black Art of Java Game Programming Company: Co-founder/CTO IMVU Co-founder Catalyst Recruiting ericries

Blog: Twitter:

Introduction: ClassWhy are you taking the class?

How many of you have:

Been in start-ups? Been in a startup that failed? Raised or tried to raise money?

How many are:

Sales, marketing or business development? Engineers?

How the Class Works

Syllabus 3 Application Exercises Research Project Grading Research Project (50%) Application Exercises (25%) Class Participation (25%)

Class Issues

Tech-heavy Enterprise-heavy For-profit versus non-profit Startups versus existing companies Methodology focused on product/customer risk reduction

Doesnt work for technology risks (i.e Biotech)

Doesnt match your experience or opinion

LogisticsSteve Blank and Eric [email protected] [email protected]

How the Class WorksPart 1ClassClass 2/Jan 26th Class 3/Feb 2nd Class 4/Feb 9h Class 5/Feb 16th Class 6/Feb 23rd Class 7/Mar 2nd Class 8/Mar 9th

CaseIn & Out Burger E-Ink Webvan/ Amazon IMVU/ Linden Labs Motive Wildfire HPKittyhawk

Application Research Exercise Project

Three Types of Startups Customer Development Discovery - Part 1 Discovery Part 2 Discovery Part 3 Validation Part 1 Validation Part 2

Market Type

Think! Team Selection Draft Concept Approved Concept


How the Class WorksPart 2ClassClass 9/Mar 16th March 23rd Class 10/Mar 30th Class 11/Apr 6th Class 12/Apr 13th Class 13/Apr 20th Class 14/Apr 27th


Application Exercise

Research Project

Creation - Part 1 No Class Creation Part 2 Creation Cases Building - Part 1 Building - Part 2 Wrapup

Erox Tivo DocumentumInterviews Done

Customer Creation

Final Paper Due 5/4/09


All materials are on Study.NetSyllabus Reading Assignments Presentations (after each class)

ReadingClass Text: Four Steps to the Epiphany Assigned Reading: In Reader Blogs: www.steveblank.com

Presentations: Google Group: Twitter:

sgblank ericrieswatch for what you could be in store for

The CourseSteve Blank and Eric [email protected] [email protected]

Customer Development

Business Plans The Value of Models for an Entrepreneur Key Concepts

Market versus Technology Risks Vertical Markets Three Types of Startups

The Top Lies of Venture Capitalists1. 2. 3. 4. 5. 6. 7. 8. 9.

I liked your company, but my partners didn't. If you get a lead, we will follow. Show us some traction, and we'll invest. We love to co-invest with other venture capitalists. We're investing in your team. I have lots of bandwidth to dedicate to your company. This is a vanilla term sheet. We can open up doors for you at our client companies. We like early-stage investing.

Source: Guy Kawasaki

The Top Lies of Entrepreneurs1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Our projections are conservative. (Big name research firm) says our market will be $50 billion in 2010. (Big name company) is going to sign our purchase order next week. Key employees are set to join us as soon as we get funded. No one is doing what we're doing.. No one can do what we're doing. Hurry because several other venture capital firms are interested. Oracle is too big/dumb/slow to be a threat. We have a proven management team. Patents make our product defensible. All we have to do is get 1% of the market.

Source: Guy Kawasaki

One Way to Plan a Startup

Business Plans Why?

Why write a plan?VCs require it Planning (Strategic/Financial/Ops) Articulate Bus Model/Assumptions

Whats wrong with a plan?Static Execution Oriented

The Value of Models

Model = shorthand for complicated idea This class teaches a model for product introduction How to reduce risk for customer/market fit Side effect is rethinking timing in Sales, Marketing & Business Development

Timmons Model of Entrepreneurship(The Business Plan)Communication


Business Plan





Moore Model of Entrepreneurship(Chasm + Life Cycle)

New Product IntroductionsWhats the Model?

New Product introduction modelsChecklist of what to and when to do it Market size and business case Models try to ensure that product matches market Technology and development gates

StageGate Model(New Product Introduction)

Steve Blank Model of Entrepreneurship)

Venture Capital Model of a Startup(Execution)

Concept/ Bus. Plan

Product Development

Alpha Test/ Beta Test

Launch/ 1st Ship

New Product IntroductionIt Doesnt Always Work

New Product Development Process Works great for some new products, fails miserably for others Products usually are late, over cost Typically fails to understand and satisfy customer needs Why?

Issues in New Product Intros

Current models:Confuse product development process with customer needs Treat all startups as the same

We need a New Product Intro ProcessReduces Market Risk\Simple, understood by all Founders commitment Cross function organization Solid homework

What is a startup?

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.

Nothing to do with size of company, sector of the economy, or industry

Entrepreneurship is management

Our goal is to create an institution, not just a product Traditional management practices fail

general management as taught to MBAs

Need practices and principles geared to the startup context of extreme uncertainty

Value vs. Waste

In a lean transformation, question #1 is which activities are value-creating and which are waste? In traditional business, value is created by delivering products or services to customers In a startup, the product and customer are unknowns We need a new definition of value for startups

Traditional Product DevelopmentUnit of Progress: Advance to Next StageWaterfall Requirements


Problem: known Solution: known





Agile Product DevelopmentUnit of Progress: A line of Working Code

Product Owner or in-house customer

Problem: known Solution: unknown

Product Development at Lean StartupUnit of Progress: Validated Learning About Customers ($$$)Customer Development

Problem: unknown Solution: unknown

Hypotheses, Experiments, Insights Data, Feedback, Insights

Two Kinds of Waste

Type 1 waste activities which generate no value but are currently necessary to create valueRequires a change in structure How do we prioritize?

Type 2 waste activities which create no value and could be eliminated immediatelyRequires only a change in behavior Usually caused by best practices

Speed Wins IDEAS






Customer DevelopmentTurns Market Risk/Product Fit Hypothesis into FactsCustomer Discovery Customer Validation Customer Creation Company Building

Discovery: Test hypotheses i.e. problem and product Validation: Build a repeatable and scalable sales process Creation: Create end-user demand and fill the sales pipeline Building: Scale via relentless execution

Lean Startup AdvantagesCustomer


Builds low-burn companies by design "

Low cost market risk testing"Agile



Organized around learning and discovery" Right model for current conditions"

The next wave of capital efcient startups!

This is Our Class

Problem: unknown Solution: unknown

Hypotheses, Experiments, Insights Data, Feedback, Insights