sitra portfolio company day 090711

SITRA Portfolio Company Day

Steve Blank

www.steveblank.com

Twitter: sgblank

Slides: www.slideshare.net/sblank

First

Observations From Abroad

Startups are Smaller Versions of Large Companies

#1

Startups are Smaller Versions of Large Companies

#1

×oops

A startup is all about focus and execution of the business plan

#2

A startup is all about focus and execution of the business plan

#2

No business plan survives first contact with customers✓

A startup is all about a great idea

#3

A startup is all about a great idea

#3

An A-team with a B-product always beats a B-team with an A-product✓

Companies execute business plans

Startups search for business models

#4



#3



#4

✓

A startup is a temporary organization designed to search

for a scalable and repeatable business model

#5

Startups need their own tools, different from those used

in existing companies

#6

Customer Development = process to search

Business Model Canvas is the Scorecard

Agile Engineering is How We Build Startups

#7

Customer Development =process to search

Business Model Canvas =the Scorecard

Agile Engineering is How We Build Startups

#8

• Research Labs

• Equipment Manufacturers

• Distribution Network

• Service Providers

• Technology Design

• Marketing

• Demo and customer feedback

• Cost Reduction

• Remove labor force pains

• Eliminate bio-waste hazards

• IP – Patents

• Video Classifier Files

• Robust Technology

• Farming conventions.

• Demo, demo, and demo!!

• Proximity is paramount

• Organic Farmers

• Weeding Service Providers

• Conventional Farmers

• Dealers• Direct

Service• Indirect

Service• … then

Dealers

• Asset Sale• Direct Service with

equipment rental• … then Asset Sale

Value-Driven

Customer Development is the process used to search

Business Model Canvas is the Scorecard

Agile Development is How We Build Startups

#9

How To Speed Up Growth?


Eliminate Wastemoney, time, …


Eliminate Wastemoney, time, …

By Doing Fewer Dumber Things

The Business Model:

Any company can be described in 9 building blocks

CUSTOMER SEGMENTS

which customers and users are you serving? which jobs do they really want to get done?

VALUE PROPOSITIONS

what are you offering them? what is that getting done for them? do they care?

CHANNELS

how does each customer segment want to be reached? through which interaction points?

CUSTOMER RELATIONSHIPS

what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

REVENUE STREAMS

what are customers really willing to pay for? how? are you generating transactional or recurring

revenues?

KEY RESOURCES

which resources underpin your business model? which assets are essential?

28

KEY ACTIVITIES

which activities do you need to perform well in your business model? what is crucial?

KEY PARTNERS

which partners and suppliers leverage your model?

who do you need to rely on?

COST STRUCTURE

what is the resulting cost structure? which key elements drive your costs?

31images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

sketch out your business model

sketch out your business models

But,Realize They’re Hypotheses

9 Guesses

Guess Guess

Guess

Guess

GuessGuess

Guess

GuessGuess

Customer Development

Get Out of the BuildingThe founders

^

Customer DevelopmentThe Search For the Business Model

CompanyBuilding

Customer

Discovery

Customer

Validation

Customer Creation

Pivot

• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most …

- orders, learning, feedback, failure…

The Pivot

• The heart of Customer Development

• Iteration without crisis

• Fast, agile and opportunistic

Pivot Cycle Time Matters

• Speed of cycle minimizes cash needs

• Minimum feature set speeds up cycle time

• Near instantaneous customer feedback drives feature set

The Pivot

A Pivot is the change of one or more Business Model Canvas Components

How to Speed Up Growth?

Pivot ExampleRobotic Weeding

Talked 75 Customers in 8 Weeks

Our initial plan

Confidential

20 interviews, 6 site visits…We got OUR Boots dirty

WeedingVisited two farms in Salinas Valley to better understand problem

Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator

MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and

lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)

Business Plan Autonomous Vehicles for Mowing & Weeding

We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)

Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider

Weeding- Farmers with manual weeding operations

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Mowing Dealers- Ag Dealers

- Innovation- Customer Education- Dealer training

Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Autonomous vehicles, GPS, path-planning

Found weeding in organic crops is HUGE problem; 50 - 75% of costs

Crews of 100s-1000

Back-breaking task

(Ilegal) labor harder to get

1-5 weedings per year/field

$250-3,500 per acre and increasing

Food contamination risk

Decision to make – mowing vs weeding

Application If ROI is < 1 yr they will

buy

Labor costs significant?

Autonomous would solve

problem?

TAM

Mowing of large fields

Yes.Professionally

run organizations

Yes Yes Adjusted up toxxx

Weeding in Agriculture

Agri Industry: YES!

Large Growers: Yes

Small Growers: No

YES! for organic crops

They are spending $500/ac!

Not necessarily

Key need is weed vs. crop differentiation

TAM increased to $2.6 B (Total

organic)

Target Market (organic

specialty) 162 M/yr

18%/yr growth

Autonomous vehicles WEEDING

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Ag Dealers- Ag Service providers


Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Dealers- Ag Service providers

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Machine VisionTwo problems:- Identification- Elimination

1 Week – 1 CarrotBot

Confidential

CARROTBOT

Machine Vision data collection platform Monochrome & Color

Cameras Laser-line sweep

(depth measurement)

Encoders (position/velocity)

Onboard data acquisition & power

CarrotBot 1.0

The Business Plan Canvas Updated

• Research Labs





• Marketing• Demo and

customer feedback

• Cost Reduction



• IP – Patents• Video

Classifier Files





• Organic Farmers


• Conventional Farmers

• Dealers• Direct Service• Indirect

Service• … then

Dealers• Asset Sale• Direct Service

with equipment rental

• … then Asset Sale

Value-Driven

Visit Highlights

Above: Organic Carrots, 7wks. Top right: Conventional carrotsBottom Right: Very weedy. Will require multiple passes of hand weeding

Visit Highlights

Carrot vs. WeedsDue to small root systems, carrots have no chance against

weeds

Visit Highlights

Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked

Visit Highlights

State of the Art in Weeding Technology for Organic Crops

Customer Hypothesis

Hypothesis Confirmed• Growers interested in own

equipment • Industrial (10,000s of acres) • Large (1,000s of acres)• Willing to pay $100k for one

unit

• Smaller growers (100s of acres) usually subcontract the labor services or rent equipment

• All purchases through local dealers• Customer service is essential

Pre-Test

Post-Test

Customer Map #1 – Industrial Growers

Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr

• Equipment Operator

• Director, Ag Technology

• Justin Grove, interviewed

• VP, Growing Operations

• CFO, CEO (Jeff Dunn)

• Local Farm Mgr• Cliff Kirkpatrick, visited

Equipment Operator

Cliff, Farm Mgr

Customer Map #2 – Service Providers

Example: Ag Services – Service Provider, Salinas Valley

• Equipment Operator

• Service Mgr

• ?? (service mgr’s boss)

Me (left), Marty (middle, Service Mgr), Doug (right, Grower)

• Grower


• Research Labs






customer feedback

• Cost Reduction




Classifier Files





• Mid/Large Organic Farmers

• Agricultural corporations


• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• ($1,500/d; 120d/yr )• Low density:

$1,500/d• High density:

$6,000/d

Value-Driven

World Ag Expo interviews:the need is real and wide spread

• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude

competitor sells for $171 K

• Revenue Stream– Mid to small growers prefer a

service– Large growers prefer to buy, but

OK with service until technology is proven

– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)

Confidential


• Research Labs

• Equipment Manufacturer



• 2 or 3 Key Farms



customer feedback

• Cost Reduction




Classifier Files





• Mid/Large Organic Farmers

• Agricultural corporations


• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• Low density: $1,500/d

• High density: $6,000/d

Value-Driven• R&D• Bill of Materials• Training &

Service• Sales

Autonomous weeding - Final

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Direct- Provide high quality service at competitive price

Direct - Alliance with service providers- Eventually sell through dealers


Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Service providers

- Research Institutes (eg UC Davis, Laser Zentrum Hannover)

- 3-4 key farms

Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale

Engineers on Machine VisionTwo problems:- Identification- Elimination

Role the Board

• Dumb Money• Smart Money• Connections• Connections to more money• Hire/Fire the CEO• Advice• Good Advice• Wisdom

Board Meetings Haven’t Evolved

We Act Like It’s the 19th Century

• Why do we need to get together in one room?

• Why do we need to wait a month to see progress?

• Why don’t we have standards for what you want?

• Why haven’t we adopted the tools we build/sell?

How to Run a Board Meeting

• Logistics– Send out board materials 2 days before, have board dinner– Approve minutes, stock grants

• Business Highlights/Lowlights– summary of key events since last meeting

• Financials versus Budget– waterfall charts

• Management asks the board to help– strategy, markets, key hires, introductions.

• Executive session– Meet without management to discuss performance

How to Run a Board Meeting

• Logistics– Approve minutes, stock grants

• Business Highlights/Lowlights– summary of key events since last meeting

• Financials versus Budget– waterfall charts

• Management asks the board to help– strategy, markets, key hires, introductions.

• Executive session– Meet without management to discuss performance

• Misc– Send out board materials 2 days before, have board dinner

Why?

What’s Wrong With a Board Meeting?

• Time between meetings (every 4-6 weeks)– Strategy-to-tactic-to implementation lag– Often no follow-up on the outcomes

• Diffuse board member attention (sits on 6-12 boards)

• Punctuated Exec Staff Performance– “The Get Ready for the Board Meeting” drill– It’s often a performance rather than a snapshot

• No standards for what each side does– What is the entrepreneur supposed to be doing?– What are the board members supposed to be contributing?

What’s Wrong With a Board Meeting?

• Time between meetings (every 4-6 weeks)– Strategy-to-tactic-to implementation lag

• Diffuse board member attention (sits on 6-12 boards

• Punctuated Exec Staff Performance– “The Get Ready for the Board Meeting” drill– It’s often a performance rather than a snapshot

• No standards for what each side does– What is the entrepreneur supposed to be doing?– What are the board members supposed to be contributing?

Why?

Solution:Make The Boardroom Bits

We Can Do This Via the Net

We Can Do This Via the Net

24/7

Focus on What’s Important

• It’s about the search for the business model– Not income statement, cash flow, balance sheet

• Advice/Guidance about metrics around the search– What are the Business model hypotheses?– What are the most important hypotheses to test now?– Progress of validating each hypotheses– What are the iterations and Pivots – and why?

We Made Students Blog Their Progress

How?

• Customer Development– The Process

• Narrative– Interviews– Surveys– Videos– Prototypes

• Business Model Canvas– Scorekeeping

• Real-time Feedback• Physical Reality Checks

– Skype– Face-to-face

We Made Students Blog Their Progress

It Changed Everything

Interview

Photos Videos

Surveys

Interview& Photos

Competitive Analysis

Key Findings

A/B Test Results

Key Question

Strategy

Business Model Canvas as the Scorecard

Business Canvas Change Progress

1


2


3


4


5


6


7

Demo

Ben Mappen

Lean LaunchLab

Product Demo

CANVAS diagram is interactive and “stateful”


Enter your hypotheses here


Test your hypotheses andrecord learnings in blog format



InterviewsSurveysVideosPhotosetc



Invite your advisors and investors to your project




They can view progressby flipping thru your CANVAS diagrams




They can view progressby flipping thru your CANVAS diagrams

They can post feedback and leave comments inline




They can view progressby flipping thru your CANAVAS diagrams


Get email alert when newfeedback comes in




They can view progressby flipping thru your CANAVAS diagrams


Get email alert when newfeedback comes in

The LeanBoard

Meeting

Sign up for private beta (FREE)http://www.leanlaunchlab.com

@leanlaunchlab

Ben [email protected]

http://www.leanlaunchlab.com/

mailto:[email protected]

What Does this Change?For Angel-Funded Startups

• Angel funded startups can now get experienced advice– No longer requires board commitment for involvement

– Encourages investors who need visibility

– Ends repetition at each investor coffee

• Turns adhoc startups into strategy-driven startups– Invites investor participation in the process

– Professionalize the “throw it against the wall and see if it sticks”

• Highly time-efficient for investor and founders

• Eliminates Geography as a barrier to investment!

What Does this Change?For VC’s and Angels

• For the first time a structure for “search”

• Real-time monitoring of startup progress

• Zero-lag for coaching and course-correction

• Immediate follow-up on board meeting outcomes

• Allows a single VC to multiply their reach and/or depth

• Eliminates Geography as a barrier to investment!

Thanks

sitra portfolio company day 090711

Education

business models

repeatable business

business planno business

business plansstartups

customer development

searchbusiness model

existing companies

customer feedback