national governors association july 2012
TRANSCRIPT
Growing The Next Big Idea
What We’ve Learned About Startups
What Have We Learned?
What Have We Learned?
Lesson 1: Types of Startups
Lesson 2: Ecosystem
Lesson 3: How to Fail Less
Lesson 4: Can we Teach Entrepreneurship?
Lesson 1: Types of Startups
Lifestyle Startups Work to Live their Passion
Startup
Lifestyle Startups Work to Live their Passion
• Serve known customer with known product
• Work for their passion
Social Entrepreneurship Startups
Large Non-Profit
Social Startup
Social Entrepreneurship Startups
• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Strategies
Small Business StartupsWork to Feed the Family
Small BusinessStartup
Small Business StartupsWork to Feed the Family
• Serve known customer with known product
• Feed the family
Small BusinessStartup
Exit Criteria- Business Model found- Profitable business- Existing team< $500K in revenue
Small Business StartupsWork to Feed the Family
• known customer known product
• Feed the family
Small BusinessStartup
Small Business Startups
• 5.7 million small businesses in the U.S. <500 employees• 99.7% of all companies• ~ 50% of total U.S. workers
http://www.sba.gov/advo/stats/sbfaq.pdf
Scalable Startup
ScalableStartup
Large Company
Scalable Startup
• In contrast a scalable startup is designed to grow big• Typically needs risk capital• What Silicon Valley means when they say “Startup”
Search Execute
ScalableStartup
Large Company
Scalable Startup
Goal is to solve for: unknown customer and
unknown features
Search
ScalableStartup
Large Company
Exit Criteria- Business model found- Total Available Market > $500M- Can grow to $100M/year
Scalable StartupBorn to Be Big
Search Execute
Buyable StartupBorn to Sell
ScalableStartup
$5 to 50M Acquisition
Buyable StartupBorn to Sell
Typically: Internet, Mobile, Gaming Apps
Search Sell
ScalableStartup
$5 to 50M Acquisition
Buyable Startup
Goal is to solve for: Internet and Mobile Apps
Search Sell
Sell to larger company
Transition Large Company
ScalableStartup
Sustaining Innovation
• Existing Market / Known customer• Known product feature needs
Large Company Sustaining InnovationInnovate or Evaporate
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• New Market• New tech, customers, channels
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• Build• Partner• Acquire - IP - Talent - Product - Customers - Business
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• Build• Partner• Acquire
= an internal corporate startup
Summary Lesson 1: Multiple Types of Startups
Policies, Funding and Tactics DifferTechniques to build them are the same
Lesson 2: History of a Startup Ecosystem
Silicon Valley Was a Series of Unintended Consequences
Outward-Facing Research University Building Weapons System
1946 – 1968 WWII/Cold War
Massive Government R&D Investment in Weapons Systems
1956 – 1980’s Cold War
One Professor Changes The System
1925 – 1965 University/Military/Industry
Sputnik Launches Venture Investing
1958 – SBIC Program
Regulatory Change Accelerates Venture Capital
1979 – Change in Employee Retirement Income Security Act
Pension Funds Pile In
Culture Embraced Technology Risk
1958 – Today
Recognized that 90% of startups fail
Culture Embraced Financial Risk
1968 – Today
Experienced Advice
Tolerance For Risk
Long Term Interest Aligned
So What Lessons Can We Learn To Build Innovation?
Without Cold War Funding
Technology Ecosystem: Infrastructure
Entrepreneurs VentureFinance
Crisis ProfitMotivation
24/7 UtilitiesPredictableEconomic System
Infrastructure StableLegal System
ResearchUniversities
Risk TakingCulture Entrepreneurial Outward-FacingTech Universities
Free flow ofPeople/Info
Customer Development
Management Tools
AgileDevelopment
Business ModelDesign
Technology Ecosystem: Culture
Entrepreneurs VentureFinance
Crisis ProfitMotivation
24/7 UtilitiesPredictableEconomic System
Infrastructure StableLegal System
ResearchUniversities
Risk TakingCulture Accelerators, Incubators
Outward-FacingTech Universities
Free flow ofPeople/Info
Customer Development
Management Tools
AgileDevelopment
Business ModelDesign
Technology Ecosystem: Tools
Entrepreneurs Risk Capital
Crisis ProfitMotivation
24/7 UtilitiesPredictableEconomic System
Infrastructure StableLegal System
ResearchUniversities
Risk TakingCulture Accelerators, Incubators
Outward-FacingTech Universities
Free flow ofPeople/Info
Customer Development
Management Tools
AgileDevelopment
Business ModelDesign
Technology Ecosystem: Motivation
Entrepreneurs Risk Capital
Crisis ProfitMotivation
24/7 UtilitiesPredictableEconomic System
Infrastructure StableLegal System
ResearchUniversities
Risk TakingCulture Accelerators, Incubators
Outward-FacingTech Universities
Free flow ofPeople/Info
Customer Development
Management Tools
AgileDevelopment
Business ModelDesign
Technology Ecosystem
Entrepreneurs Risk Capital
Crisis ProfitMotivation
24/7 UtilitiesPredictableEconomic System
Infrastructure StableLegal System
ResearchUniversities
Risk TakingCulture Accelerators, Incubators
Outward-FacingTech Universities
Free flow ofPeople/Info
Customer Development
Management Tools
AgileDevelopment
Business ModelDesign
Lesson 3: Making Startups Fail Less
Lessons From Silicon Valley and the National Science
Foundation
After 50 years of Silicon Valley
We Now Know How To Build Startups
More startups fail from a lack of customers than from a failure of product development
What We Used to Believe
Startups are Smaller Versions of Large Companies
What We Now Know
Startups are Not Smaller Versions of Large Companies
Startups SearchLarge Companies Execute
What We Used to Believe
All I Need to Do is Execute the Plan
Actual Photo of What Happens When
Plan Meets
First Contact With Customers
All I Need is the 5- Year Forecast
Previous 5-Year Plans
What We Now Know
No Business Plan Survives First Contact
With Customers
Searching comes before the plan
What’s A Startup?
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
© 2012 Steve Blank
But,Realize They’re Hypotheses
Customer Development is how you search for the model
Summary Lesson 3: Making Startups Fail Less
1. Startups Are Not Smaller Versions Of Large Companies
2. Customer Development & Business Models – Replace Business Plans
Lesson 4: Can We Teach This?
Can We Teach This?
Lean LaunchPad Class
8 Weeks, 100 Customer Calls
Can We Teach This?
Lean LaunchPad Class
National Science Foundation
The Data Says Yes You Can
Knowledge about Startups?Coming Into the Class
Knowledge About Startups?After the Class
The Data Says It Will Create New Companies
Knowledge About Building a CompanyComing Into the Class
Knowledge About Building a CompanyAfter the Class
What About the Other 99%
Will this Work on Main Street?
Small businesses are being built with business tools from the 1950’s
These Techniques Now Can Help Small Business Fail Less
In Closing:
So What Can States Do?
Recommendation 1
Encourage Fail Fast and Move Fast Culture
Recommendation 2
Encourage Incubators / Accelerators
Recommendation 3
Incent Risk Capital to Locate Next to Your Entrepreneurial Centers
Recommendation 4
Encourage Your Universities to build 21st Century
Entrepreneurship Curriculum
+
Recommendation 5
EncourageSmall Business Initiatives
to Adopt these Same Techniques
I’ve open-sourced all this material
Happy to share it
Curriculum, Syllabus, Slides, Teaching Guide and On-line Courses all available for free www.steveblank.com