387 Million Ways For a Startup to Fail… and How to Avoid Them

1. 387 Million Ways For a Startup to Fail…and How to Avoid Them Steve Blank www.steveblank.com Twitter: sgblank

2. I Write a Blog www.steveblank.com

3. Startups Fail Because They Confuse Search with Execute

4. What’s A Startup Search Execute Scalable Startup Large Company >$100M/year Goal is to search for: unknown customer and unknown features

5. What’s A Startup? Scalable Startup Large Company Search • Business Model found • i.e. Product/Market fit • - Repeatable sales model • - Managers hired A Startup is a temporary organization used to search for a scalable and repeatable business model

6. Startups Fail Because They Execute When They Should Search

7. Startups Search and Pivot The Search for the Business Model Scalable Startup Transition Large Company • Business Model found • customer needs/product features found • i.e. Product/Market fit • Found by founders, not employees • Repeatable sales model • - Managers hired

8. Startups Search, Companies Execute The Execution of the Business Model The Search for the Business Model Scalable Startup Transition Large Company - Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people • Business Model found • Product/Market fit • - Repeatable sales model • - Managers hired

9. Metrics Versus Accounting The Execution of the Business Model Scalable Startup Transition Large Company • Traditional Accounting • Balance Sheet • Cash Flow Statement • Income Statement

10. Metrics Versus Accounting The Search for the Business Model The Execution of the Business Model Scalable Startup Transition Large Company • Startup Metrics • Customer Acquisition Cost • Viral coefficient • Customer Lifetime Value • Average Selling Price/Order Size • Monthly burn rate • etc. • Traditional Accounting • Balance Sheet • Cash Flow Statement • Income Statement

11. Customer Validation Versus Sales The Execution of the Business Model Scalable Startup Transition Large Company • Sales • Sales Organization • Scalable • Price List/Data Sheets • Revenue Plan

12. Customer Validation Versus Sales The Search for the Business Model The Execution of the Business Model Scalable Startup Transition Large Company • Customer Validation • Early Adopters • Pricing/Feature unstable • Not yet repeatable • “One-off’s” • Done by founders • Sales • Sales Organization • Scalable • Price List/Data Sheets • Revenue Plan

13. Customer Development VersusProduct Management The Execution of the Business Model Scalable Startup Transition Large Company • Product Management • Delivers MRD’s • Feature Spec’s • Competitive Analysis • Prod Mgmt driven

14. Customer Development Versus Product Management The Search for the Business Model The Execution of the Business Model Scalable Startup Transition Large Company • Product Management • Delivers MRD’s • Feature Spec’s • Competitive Analysis • Customer Development • Hypothesis Testing • Minimum Feature Set • Pivots • Founder-driven

15. Engineering Versus Agile Development The Execution of the Business Model Scalable Startup Transition Large Company • Engineering • Requirements Docs. • Waterfall Development • QA • Tech Pubs

16. Engineering Versus Agile Development The Search for the Business Model The Execution of the Business Model Scalable Startup Transition Large Company • Engineering • Requirements Docs. • Waterfall Development • QA • Tech Pubs • Agile Development • Continuous Deployment • Continuous • Minimum Feature Set • Pivots

17. 387 Million Ways to FailAnd the 5 Key Reasons Why

18. Business Model Universe 387 Million Choices (9x9x9x9x9x9x9x9x9) choices

19. More startups fail from a lack of customers than from a failure of product development

20. Failure 1No Business Plan survives first contact with customers

21. You Need a Scientific Method to Search this Space

22. So,Structure the Searchwith a Business Model

33. Any Business Model in 9 Boxes

34. Failure 2Assume Your Business Model is Correct

35. So,Realize They’re Hypotheses

36. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

37. Failure 3There Are No Facts Inside Your Building

38. So,Formalize Testing Hypotheses Outside

39. Testing the Business Model =Customer Development

40. Turning Hypotheses to Facts • Test Hypotheses: • Product • Market Type • Competition

41. Test Hypotheses: • Problem • Customer • User • Payer

42. Test Hypotheses: • Channel

43. Test Hypotheses: • Demand Creation • Test Hypotheses: • Problem • Customer • User • Payer • Test Hypotheses: • Product • Market Type • Competitive • Test Hypotheses: • Channel • (Customer) • (Problem) • Test Hypotheses: • Channel • Test Hypotheses: • Size of Opportunity/Market • Validate Business Model • Test Hypotheses: • Pricing Model / Pricing

44. Test Hypotheses: • Demand Creation • Test Hypotheses: • Problem • Customer • User • Payer Agile Development • Test Hypotheses: • Product • Market Type • Competitive • Test Hypotheses: • Channel • (Customer) • (Problem) Customer Development Team • Test Hypotheses: • Channel • Test Hypotheses: • Size of Opportunity/Market • Validate Business Model • Test Hypotheses: • Pricing Model / Pricing

45. Test Hypotheses: • Demand Creation • Test Hypotheses: • Problem • Customer • User • Payer Agile Development • Test Hypotheses: • Product • Market Type • Competitive • Test Hypotheses: • Channel • (Customer) • (Problem) Customer Development Team • Test Hypotheses: • Channel • Test Hypotheses: • Size of Opportunity/Market • Validate Business Model • Test Hypotheses: • Pricing Model / Pricing

46. Testing the Business Model is Customer Development Search Execution CustomerDiscovery CustomerValidation CustomerCreation Company Building Pivot

47. Customer Development is the Search Search CustomerDiscovery CustomerValidation Pivot

48. Failure 4A Mistaken Hypothesis Creates A Crisis

49. So,Pivots are Business Model Changes Without Crisis

50. The Pivot Turns Failure Into Insight • The heart of Customer Development • Business Model changes without crisis • Fast, agile and opportunistic