Steve blank sxsw new rules for the new bubble 031211

New Rules for the New Bubble

Stanford - School of Engineering

U.C. Berkeley - Haas School Of Business

www.steveblank.comTwitter: sgblank

Steve Blank

I Write a Blog www.steveblank.com

I Drew This

CustomerDiscovery

CustomerValidation

Company Building

Customer Creation

I Called It:

Customer Development

CustomerDiscovery

CustomerValidation

Company Building

Customer Creation

I Wrote This

A Few People Read It

This Talk is Based On• Business Model Generation• Four Steps to the Epiphany

• Lean Startup

Premise

• Beginning of another tech bubble• Rules are different in a bubble• What are they?• How do they differ from what you did before?

A Few Short Stories

How Did We Get Here?

Paths to Startup Liquidity

• 1970 – 1995 build a business (revenue)• 1995 – 2000 flip the business (concept IPO)• 2001 – 2010 build a business (M&A)• 2011 – 2014 flip a built business (M&A / IPO)

1970 – 1995

Building a Business

Startups Are Small Versions of A Large Company

1970 - 1995 Building a Startup the Hard Way

• $Millions’s to start (Proprietary hdwr/sftwr)

• Long product dev cycle (Waterfall)

• Thousands customers (Businesses)

• Liquidity = IPO (5 qtrs revenue/profit)

• No repeatable methodology (Smaller big company)

1970 - 1995Making Money the Hard Way

• Goal was long term company success• VC’s/Founders were company builders• Exits were IPO’s• Founders and VC success ≤ $10 million

1970 – 1995 Playbook

Product Introduction Model

Concept/Seed

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Product Introduction Model

Concept/Seed

Product Dev.

Alpha/Beta Test

Launch/1st Ship

The Leading Cause of Startup Death

Product Introduction Model:Two Implicit Assumptions

Customer Problem: known

Product Features: known

Concept/Seed

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Tradition – Hire Marketing

Concept/Seed

Product Dev.

Alpha/Beta Test

Launch/1st Ship

- Create Marcom Materials- Create Positioning

- Hire PR Agency- Early Buzz

- Create Demand- Launch Event- “Branding”

Marketing

Tradition – Hire Sales

Concept/Seed

Product Dev.

Alpha/Beta Test

Launch/1st Ship

• Build Sales Organization

Marketing

Sales• Hire Sales VP• Hire 1st Sales

Tradition – Hire Bus Development

Concept Product Dev.

Alpha/Beta Test

Launch/1st Ship

• Hire Sales VP• Pick distribution

Channel

• Build Sales Channel / Distribution

Marketing

• Hire First Bus Dev

• Do deals for FCS

Business Development

Tradition – Hire Engineering

Concept Product Dev.

Alpha/Beta Test

Launch/1st Ship

• Hire Sales VP• Pick distribution

Channel

• Build Sales Channel / Distribution

Marketing

• Hire First Bus Dev

• Do deals for FCS

Business Development

Engineering • Write MRD

• Waterfall

• Q/A • Tech Pubs

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

1995 – 2000

Flipping A Business

The Dot.com Bubble

1995 - 2000The Dot-com Bubble

• 10’s $millions to start (get big fast, create a brand)

• Long product dev cycle (ship beta, 1st mover adv)

• Millions customers (1st consumer internet wave)

• Liquidity - IPO (Little/no revenue, no profits)

• Repeatable methodology (brand, hype, flip or IPO)

1995 - 2000The Dot-com Bubble – Making Money

• Goal = short term exit• VC’s engineering financial transactions• Founders hyped their company• “Musical Chairs” – last one standing looked dumb• Everyone else got absurdly rich

1995 – 2000 Playbook

Netscape

2001 – 2010

Why Startups Are Not Small Versions of A Large Company

2001 - 2010The Lean Startup

• ≤ $½ million to start (open source, commodity hdwr)

• Short product dev cycle (Agile Development)

• 100’s millions Customers (Social networks, consumer)

• Liquidity -M&A (revenue & network of users)

• Repeatable methodology (Agile + Cust Dev)

ScalableStartup

Large Company

- Business Model found- i.e. Product/Market fit- Repeatable sales model- Managers hired

What’s A Startup?

A Startup is a temporary organization used to search for a repeatable and scalable business model

Search Execute

ScalableStartup

Large CompanyTransition

- Founders depart- Professional Mgmt- Process- Beginning of scale

What VC’s Don’t Tell You:The Transition – Founders Leave

ScalableStartup

Business Model found by founders- customer needs/product features found i.e. Product/Market fit- Repeatable sales model- Managers hired

The Search for the Business Model

Startups Search and Pivot

ScalableStartup

- Business Model found- Product/Market fit- Repeatable sales model- Managers hired

- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people

The Search for the Business Model The Execution of the Business Model

Startups Search, Companies Execute

ScalableStartup

LargeCompanyTransition

Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement

The Execution of the Business Model

Metrics Versus Accounting

ScalableStartup

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

Metrics Versus Accounting

ScalableStartup

Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan

Customer Validation Versus Sales

ScalableStartup

Customer Validation- Early Adopters- Pricing/Feature unstable- Not yet repeatable- “One-off’s”

Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan

Customer Validation Versus Sales

ScalableStartup

Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup

Agile Development- Continuous Deployment- Continuous Learning- Self Organizing Teams- Minimum Feature Set- Pivots

Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup

Business Plan- describes “knowns”- features- customers/markets- business model

Startups Model, Companies Plan

ScalableStartup

- Business Model- describes “unknowns”- customer needs- feature set- business model- found by iteration

The Search for the Business Model

Startups Model, Companies Plan

- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model

2001 - 2010The Lean Startup

• IPO market ~closed, M&A liquidity path• Build for long term but take short term sale• Founders learn Lean skills• Focus on building customers• Minimum hype

2001 - 2010 Playbook

• Four Steps to the Epiphany• Many Agile Texts

But We Were Still Using This

No Business Plan survives first contact with customers

So Search for a Business Model

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?

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?

57images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

How Do Startups Search For A Business Model?

• The Search is Customer Development• The Implementation is Agile Development• The Sum is the Lean Startup

Customer Development

Get Out of the BuildingThe founders

Customer DevelopmentThe Search For the Business Model

CompanyBuilding

Customer

Discovery

Customer

Validation

Customer Creation

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

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

Test Hypotheses:• Product• Market Type• Competition

Turning Hypotheses to Facts

Test Hypotheses:• Problem• Customer• User• Payer

Test Hypotheses:• Channel

Test Hypotheses:• Demand

Creation

Test Hypotheses:• Product• Market Type• Competitive

Test Hypotheses:• Pricing Model / Pricing

Test Hypotheses:• Size of Opportunity/Market• Validate Business Model

Test Hypotheses:• Channel• (Customer)• (Problem)

Creation

Test Hypotheses:• Channel• (Customer)• (Problem) Customer

Development Team

Agile Development

Creation

Test Hypotheses:• Channel• (Customer)• (Problem) Customer

Development Team

Agile Development

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most …orders, learning, feedback, failure…

• MVP + Customer are the first two you need to nail

• MVP is just 1 of the 9 parts of your model

The Pivot

• The heart of Customer Development

• Iteration without crisis

• Fast, agile and opportunistic

How Does This Really Work?

Stanford Lean LaunchPad Class

Pivot ExampleOn-line Social Buying Platform

Talked to 250 Customers in 8 weeks

OURCRAVE is an online social shopping platform where customers can make their own deals on products or services of their

choosing with sellers who can offer them in bulk at a discounted price.

Business Canvas #1

- Powerful sellers

- Server providers

- Variable costs: server and traffic maintenance costs

- Fixed Cost: rent, salaries

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Maintaining online

buyer/seller communities

and credibility of

transactions

- Promotion of website and

- Physical resources (IT

infrastructure)

- Existing social

networks -Buyer and

seller communities,

- Brand awareness

- Web & App sales

- Online social networks

Seller:

- Access to large online

customer pool

- Bulk sales with

reduced commission

Buyer:

- Better discounts

- Automated services

- Communities of buyers

and sellers

- Co-creation of value

through customer

feedback

Multi-sided platform

Seller:

Pro-sellers in Amazon

and eBay who sell

electronics

Buyer:

Online shoppers

Seller Side Test with a fake E-MAIL

57%showed interest

Give me a quotefor a bulk sale!

Electronics Sellers on

Amazon/Ebay

FAKE CEO(Steve Feiberg)

90%sell products on Amazon

• 56% paid 10~20% transaction fee

• 22% paid 5~10% transaction fee

• 78% agreed it was too much

• 33% actually provided discount proportional to group size

Seller SideInterview with Industry Specialist (LG Electronics)

BestbuyTarget, Walmart Associations of

Regional Big Sellers25%25% 40%

Main Target

User Side

Discount on products Power to choose products

Buyer community feedback

: Online User Survey

Business Canvas #2

- Powerful sellers

- Sellers who need more

traffic

- Server providers

Seller side:

- transaction fees

Buyer side:

- targeted ads

and credibility of

transactions

infrastructure)

- Existing social

networks -Buyer and

seller communities,

- Brand awareness

- Web & App sales

Seller:

- More customer traffic

- Bulk sales with

reduced commission

Buyer:

- Better discounts

- Power to choose

product deal

- Buyer community

feedback on products

and sellers

through customer

feedback

Seller:

Trustworthy online sellers

with verifiable websites

Buyer:

Online shoppers who are

willing to wait to get

significant discounts on

products

Key Question for Business Canvas #2

HOW CAN WE ATTRACT BUYERS?

CUSTOMER ACQUISION COST?

Best Marketing Channel for having buyers is Facebook Wall : 144 Unique Visits, 10 e-mail subscriptions for 3 days

Facebook Wall Google Adwords Facebook Ads

0.08% 0.005%(CTR)

$0 $4.88

(COST)

Buyer Demand Test

Business Canvas #3

traffic

-Server providers

Established services

- Online Marketing :

Google/Facebook

-Variable costs: server and traffic maintenance costs

- Online ad campaigns

Seller side:

- transaction fees

Buyer side:

- targeted ads

and credibility of

transactions

infrastructure)

- Existing social

networks -Buyer and

seller communities,

- Brand awareness

- Web & App sales

- Online advertising

Seller:

- Bulk sales with

reduced commission

Buyer:

- Better discounts

- Power to choose

product deal

- Buyer community

feedback on products

and sellers

through customer

feedback

Seller:

Buyer:

products

Key Question for Business Canvass #3

HOW CAN WE ATTRACT SELLERS?

COOPERATION WITH SELLERS?

Seller Contact

Deal with sellers failed because no group pricing or discount too low.

Contact popular online sellers 3 products: HD camera, protein drink, videogame Videogame was for pre-order

Most sellers: no group discounts Discounts offered < 10% With shipping and tax still >= Amazon price David vs. Goliath problem

Organize Real Group Deal

Result

To Pivot or Not to Pivot?Although dismayed at seller response, we did not give up.

Deal with sellers disappointing Seller problem intractable? Teaching staff: Pivot or else…

Lost one battle, but not the war! Only contacted larger sellers Sellers need more value Show them a real website

Beaten, but not defeated

What do do?

Filter advice and stay determined!

No Pivot

Solution 1 : Rapid Implementation

Implement seller & buyer side features to give sellers fuller experience.

Improved site design Buyer facebook login Online social networking integration Seller login and registration Seller bidding Seller group deal creation page

Site Upgrade Frenzy

Solution 1 : Rapid ImplementationHumble beginnings

Solution 1 : Rapid ImplementationThe Real Deal

Deal creation by sellers Bidding dialog

Main page Facebook connect

Solution 1 : Rapid Implementation

Solution 2 : More seller value & spammingAdd value for sellers based on mentor and industry expert interviews

Massive seller e-mail campaign (16,000 in total) Stanford takes notice and issues warning (oops) Enumerate value propositions Show live website Hand out registration codes

Low transaction fees Customer contact information Cross-selling products Ad banners Power to create group deal

Add Seller Value

The Art of Spam

Seller Invitation Result

# of sellers who signed up 180 sellers

# of deals made by sellers

80 deals(below Amazon price)

Seller Invitation Result

# of sellers who replied to our email

200 sellers# of sellers who made suggestions on OURCRAVE

50 sellers

Business Canvas #4

traffic

-Server providers

Google/Facebook

-Payment Gateway :

Paypal

- Customer Service

(Front side

webservice) : Self

- Customer Service

(Product side) : Sellers

- Delivery : Sellers

Seller side:

- transaction fees

Buyer side:

- targeted ads

and credibility of

transactions

infrastructure)

- Existing social

networks -Buyer and

seller communities,

- Brand awareness

- Web & App sales

Seller: - More customer traffic

-Bulk sales with reduced commission

- Access to customer contact information

- Cross-sell their products.- Site advertising- Power to create deals

Buyer: - Better discounts

- Power to choose product deal

- Buyer community feedback on products and sellers

and sellers

through customer

feedback

Seller:

Buyer:

products

Key Question for Business Canvass #4

Key Activities for Next Stage

Can we make enough money?

Key Activity – Seller ManagementWe should manage main feedbacks from sellers by making basic function,

1. Convenient System

2. Building credibility

• Auto Sales Tax Calculator

• Bulk List Uploading Function

• Notification to Sellers for relevant cravebags

• Cross selling Option

• Seller Advertisement Feature

• FAQ List for Sellers

• Share buyer information

• F2F meeting with big sellers

3. More Incentives

Key Activity – Initial AdvertisementBy price comparison site and online ads, test our early service model. Then, Crazy deals needed for jumping

1st Passive : Online Ads

2nd Active : Crazy Deals

• Google / Facebook / Yahoo Ads

• Price Comparison Site ( very important)

• 20~30 % sales for Promotion Deals

• Very very very famous products

Key Activity – Encouraging Buyer’s ViralWe will implement incentive system for sharing deals and help buyers communicate with each other in our service

Incentive for sharing Buyer Community

• OurCrave Point

• Extra Discount

• Free shipping or tax Coupon

22% 14%People who willing to share deals in FB*

People who shared dealsIn FB*

* OurCrave User Survey in 2/3 weeks

• Live comment on cravebags

• Weekly Best cravebag vote

• Youtube Ads Competition

Revenue / Cost Source

Revenue Cost

Product Ads

Transaction Fee ( Main )

Float Money

Site Maintenance

Marketing ( Main )

Customer Support

15% of transaction

3~5% ( paypal)

Server/Traffic/Mobie Apps

Outsourcing20%/60days*

* google/groupon’s rule, we are asking sellers about this rule.

Ads for buyerSeller Management

Business Canvas Final

traffic

-Server providers

Google/Facebook

- Payment Gateway :

Paypal

- Customer Service

(Front side

webservice) : Self

- Customer Service

(Product side) : Sellers

Seller side:

- transaction fees

Buyer side:

- targeted ads

- float money

- Growing and maintaining online buyer/seller communities and credibility of transactions- Promotion of website and brand

- Establishing credibility

infrastructure)

- Existing social

networks -Buyer and

seller communities,

- Brand awareness

- Web & App sales

Seller: - More customer traffic

-Bulk sales with reduced commission

- Access to customer contact information

- Cross-sell their products.- Site advertising- Power to create deals

Buyer: - Better discounts

- Power to choose product deal

- Buyer community feedback on products and sellers

and sellers

through customer

feedback

Seller:

Buyer:

products

Business Canvas – Week 1

- Powerful sellers

- Server providers

- Fixed costs: rent, salaries

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Platform/Network

management (maintaining

online buyer/seller

communities and credibility)

- promotion of website and

infrastructure)

- Existing social networks -

Buyer and seller communities,

- Brand awareness

- Web & App sales

Seller :

- Bulk sales

- Lower transaction fees

Buyer :

- Better discounts

- Communities of buyers and

sellers

- Co-creation of value through

customer feedback

Seller : pro-sellers on Amazon

and eBay

Buyer :

Online shoppers

- Powerful sellers

- Server providers

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

Seller :

- Bulk sales

- Brand name marketing

Buyer :

- Better discounts

- Power to choose product

sellers

customer feedback

Seller : pro-sellers on Amazon

and eBay

Buyer :

Online shoppers

- Powerful sellers

- Regional sellers

- Server providers

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

Seller :

- Bulk sales

Buyer :

- Better discounts

- Buyer community

feedback on products and

sellers

customer feedback

Seller :

Sellers on Amazon and eBay

Buyer :

willing to wait to get significant

discounts on products

traffic

- Regional sellers

- Server providers

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

Seller :

-Bulk sales

- Lower transaction

- Brand name

marketing

Buyer :

- Better discounts

- Buyer community

sellers

customer feedback

Seller :

Buyer :

traffic

- Regional sellers

- Server providers

- Online ads

Seller side:

- transaction fees

Buyer side:

- targeted ads

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

Seller :

- Bulk sales

- Access to customer

contact information

- Ability to cross-sell

products

- Site advertising

Buyer :

- Better discounts

- Buyer community

sellers

customer feedback

Seller :

Buyer :

traffic

- Regional sellers

- Server providers

- Online ads

Seller side:

- transaction fees

Buyer side:

- targeted ads

- float money

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

sellers

customer feedback

Seller :

Buyer :

Seller :

- Bulk sales

contact information

- Cross-sell their products.

- Site advertising

- Power to create deals

Buyer :

- Better discounts

- Buyer community

sellers

traffic

- Regional sellers

- Server providers

Google/Facebook

-Payment Gateway : Paypal

- Customer Service (Front

side webservice) : Self

- Customer Service (Product

side) : Sellers

- Online ads

Seller side:

- transaction fees

Buyer side:

- targeted ads

- float money

- Platform/Network

online buyer/seller

infrastructure)

- Brand awareness

- Web & App sales

sellers

customer feedback

Seller : Sellers on Amazon and

Seller:

Trustworthy sellers with

verifiable websites.

Buyer :

Seller :

- Bulk sales

contact information

- Site advertising

Buyer :

- Better discounts

- Buyer community

sellers

traffic

Google/Facebook

-Payment Gateway : Paypal

- Customer Service (Front

side webservice) : Self

- Customer Service (Product

side) : Sellers

- Online ads

Seller side:

- transaction fees

Buyer side:

- targeted ads

- float money

- Platform/Network

and growing online

and credibility)

- Establishing credibility

infrastructure)

- Brand awareness

- Web & App sales

sellers

customer feedback

Seller:

Trustworthy sellers with

verifiable websites.

Buyer :

Seller :

- Bulk sales

contact information

- Site advertising

Buyer :

- Better discounts

- Buyer community

sellers

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)

Confidential

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

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

THE BUSINESS PLAN CANVAS UPDATED

• 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

• Research Labs

• Equipment Manufacturers

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

2011 – 2014

Rules for the New Bubble

New Bubble Hypotheses

• We’re in one• Rules are different in 2011 then 2006• Exits will be IPO and M&A

– Unlike last bubble initial IPO’s will be “real”– Quality of IPO pipeline will diminish rapidly– Acquirers can be “targeted”

• You can “engineer for an acquisition”

2011 – 2014The New Bubble

• Short product dev cycle (Agile Development)

• Customers 10’s/100’s millions (Social networks, consumer)

• Liquidity through M&A & IPO (revenue & network of users)

• Repeatable methodology (Agile + Cust Dev + Bus Model)

• Target acquirers (Adoption, Visibility, order of battle)

2011 - 2014Rules for the New Bubble

• Founders/VC’s can engineer financial transactions

• Transactions economically or usage accretive• Still require Agile, Cust Dev & Bus Model• Add: Adoption, Order of Battle and Visibility

2011 - 2014 Playbook• Business Model Generation• Four Steps to the Epiphany

• Lean Startup• Liquidity Strategy

Lean & Pivots is the Minimum Entry

• Continuous Customer Discovery• Rapid Bus Model iteration• Extreme Agile Development

2011 – 2014Order of Battle

• Each market has a finite number of acquirers• Each with a finite number of deal makers• Each looking to fill specific product/market holes• Each read/go to finite number of blogs/conferences

• This is not an NP-complete problem

2011 – 2014Adoption

• Get wide adoption (freemium, low costs, etc) • Go for massive distribution• Monetize later• Can only be done Lean, requires Pivots

2011 – 2014Visibility

• Be everywhere• Look larger than life• Conference, blogs, social networks• PR is your best friend, invest in it

Closing Thoughts

• We’re at the beginning of another tech bubble• Rules for making money are different in a bubble• Founders & VC’s can engineer financial transactions• Transactions need to be economically or usage accretive• Still require Agile, Cust Dev & Bus Model• Add: Adoption, Order of Battle and Visibility

Thanks

www.steveblank.com

BACKUP

Pivot ExamplePersonal Libraries

Version 1.0: Personal Libraries

something-something-something.com

Original idea

SHORT TERMResearchersLawyersScientists

LONG TERMAvid book readersProfessionals

Import, organize and share thousands of papers

FB/TW posts from users you know

Company blog, FB, TW, support forums

Affiliate program

SEO/SEM/SM

IE/FF/Chrome App Stores

Targeted marketing

Product development

Constant iteration & testing

DevelopersMarketers

Libraries, Universities, Research Centers

Bloggers and media targeting customer segment

Academic Database providers

Affiliate program feesLicensingSubscription feesAd revenue

AWS InfrastructureSEMEng & Marketing OpEx

Invincible Business Model: Version 1.0

Got out of the building

• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests• Rapid Iteration

Version 2.0: Trusted Advice

Original idea

Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

Discover online goods recommended by friends at the lowest possible price from trusted vendors

Company blog, FB, TW accounts

Affiliate program

SEO/SEM/SM

Developing trusted advice and advisors

Web marketing

Affiliate partnerships

DevelopersMarketersContent LibraryInstall baseReadership base

Bloggers and Media targeting customer segment

Retail marketing partners

IE/FF/Chrome teams

Affiliate Program Providers

New Hypotheses

Here’s What We DidVersion 2.0: Trusted Advice

Got out of the building, again

• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis• Two Prototypes• Refined Personas

Version 2.0: Trusted AdviceTop ~6M US Influentials (~$9B/year)

Original idea

Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

Discover online goods recommended by friends at the lowest possible price from trusted vendors

Affiliate program

SEO/SEM/SM

Web marketing

IE/FF/Chrome teams

The adventure continues

Trusted Advice 2.0

Protection against SEO-spammers

Next Experiments: • Trusted Lead Gen • Trusted Advice

website powered by Shopping Add-in

Original idea

PAT THE PROFESSIONALUpwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

TRUSTED ADVICE Discover online goods recommended by friends at the lowest possible price from trusted vendors

Foil advertorial spammers polluting the Interweb with toxic pseudo-content

Affiliate program

SEO/SEM/SM

Web marketing

IE/FF/Chrome teams

Pivot ExampleCloud Services

Week 1

Cloud compute marketplace

Build a cloud marketplace

Direct sales to both

buyers and sellers

Many different customer segments on buy-side and sell-sideHuge

dependency on technical

platform

Week 2

Cloud Services Match Maker

Pivot away from technical platform

Help buyers find the best

provider Removed financial, consumer segmentsAct as

channel for sellers

Week 3

Automated Cloud Capacity Planning

Pivot 1:Capacity Planning Pivot 2:

Focus on enterprises

with variable workload

Week 4

Week 5

Week 6

Week 7

Capacity Planning· High variability in usage Service Matching• Companies

unfamiliar with using cloud infrastructure

SLA Monitoring• Companies

with high SLA requirements with their customers

· Integrators / consultants specialized in cloud infrastructure

• Inside sales and field sales· Development Costs· Infrastructure costs – AWS· Support costs

• Subscription charge to buyers• Pricing table scales based on # of servers

and # of seats, with tiers

· For enterprise segment, higher touch model with field sales force

· Reduced cloud infrastructure cost· Better compute needs matching· Increased visibility on service level

Integrators:· Increased budget for consulting services

• Design and refine capacity planning and match making algorithms

• Develop and maintain cloud infrastructure vendors relationships

• Develop brand as go-to place for cloud lifecycle management

· Technology partners – cloud vendors, management tools· System integrators / Consultants · Intellectual property –

prediction algorithm· Developers· Inside sales force· Field sales force · Biz dev (channel partners and technology partners)

Week 8

Capacity Planning· High variability in usage Service Matching• Companies

new to cloudSLA Monitoring• Companies

with high SLA requirements

· IaaS Integrators / consultants

• Inside and field sales· Development Costs· Infrastructure costs – AWS· Support costs

• Subscription charge to buyers• Pricing table scales based on # of servers

and # of seats, with tiers

· For enterprise, higher touch model with field sales

Customers· Reduced cloud infrastructure cost· Increased visibility on service level

Integrators:· Increased revenue

• Develop capacity planning algorithm

• Develop IaaS vendor relationships

• Marketing and sales

· Technology partners – cloud vendors, management tools· System integrators / Consultants

· IP– prediction · Developers· Inside sales force· Field sales force · Biz dev (channel and technology partners)

Agora – FINAL

Cloud Lifecycle Management

Partner with Integrators

Leverage both inside and field

Position product for

lifecycle management

Pivot ExampleUser Generated

Real-Time Traffic Info

Initial Product Idea

Shanghai Lahore

Bangkok Jakarta

Mobile application providing crowd-sourced real time traffic map in

developing countries

Business Canvas Change Progress

Customer Segment: Corporate

Influencers and Recommenders

Economic Buyers, Decision Makers

Archetypes

Saboteurs

The Drivers:Are you questioning our expertise?

International, local, large, and small companies

Pass/Fail

Business Canvas Change Progress

Pivot Example

Residential Wind Turbines

Business Model Canvas #1

• Cheap wind• Green status

symbol• Diversify energy

portfolio • Faster payback

than alternatives

• Single family homeowner

• House rental groups

• Contractors in home remodeling

• Direct sales• Web site• Home Depot

• 5 yr full service Warranty

• Want re-buy from customers

• Asset sales

• Wind• Cheap manufacturing

process - Intellectual property

• Need Initial capital• Endorsements by

environmental groups, and local governments

• Continue R&D• Get certifications• Get approvals from

city councils

• Environmental, bird, wildlife groups (regulations, publicity)

• City councils (new regulations, permits).

• Contractors

• Cost-driven model to provide inexpensive, quality product

• Direct sales

• Faster payback than alternatives

Initial Idea

Affordable

New home appliance

Status

Business Model Canvas # 2

• Retrofit wind turbine for street and highway lamps.

• Create own wind turbines with pole manufacturers

• Be owner of cheap green status symbol

• Diversify green energy portfolio

• Fast payback than alternatives

• Single family wealthy, green home and land owner in CA, TX ,CO, WI, NY

• Cities• Lighting

Companies• Direct sales to

cities • Web site• Home Depot

• 5 year full service Warranty

• After 5 years, service charge

• Utility to manage after warranty expiration

• Extended warranty option

• Direct Sales• Service Calls• Leasing

• Cheap manufacturing process - Intellectual property

• $1.5 MM of capital to start manufacturing and distribution for year 1 and 2

• Manufacturing Parts• Endorsements by

• Continuous advertise and recruit new customers (city councils)

• Build relationship with city engineers and council members

• Understand customer, influencers, motivations, problems, competitors

• Form partnerships for maximum reach

• Submit bids for city RFPs• Continue R&D• Get certifications• Gain Credibility

• City councils not HOA(new regulations, permits).

• Lighting Manufacturers

• Electricians and Contractors for Installation/Maintenance

• Research Labs• Turbine Certifiers

• Cost-driven model to provide inexpensive, quality product• Manufacturing costs and customer acquisition costs. • May consider in-house leasing option, if upfront costs is large

obstacle for customer and sufficient funding obtained (must be in future)

• Cities

• Build relationship with city engineers and council members• City councils not

City Process

Learn about city approval Process

City Values

• Policies• Community Culture• State Mandates• City Budget Plan

Back to the envelop metrics

Request for

Technical Evaluation and Recommendati

City Council Approval

City Council “Pet-

Project”

Finance Approval

Planning Commission

Business Model Canvas – Final

• Cities (pilot)• Cities leasing• Lighting

Companies• Developer ->

Utilities -> City

• Direct sales to cities (long term) PILOTS

• Small Wind Developer

• 5 year full service Warranty,

• Leasing, PPA• Direct Sales to wind developers?

• R&D talent• Endorsements by

• Finance

• Continuously advertise and recruit new customers (city councils)

• Form partnerships (developers, cities, installers, maintenance) for maximum reach

• City council (new regulations, permits).

• Research Labs• Turbine Certifiers• Small Wind

Developers• Utilities

• Cities leasing

• Developer -> Utilities -> City

• Finance

Business Model Canvas – Week 1

• Cheap affordable wind turbine for the everyday American

• Diversify energy portfolio,

• Fast payback than alternatives, < 5 yrs

• Contractors in home remodelling

• Want re-buy from customers

• Sale of Product

• Need initial capital• Endorsements by

city councils

• Contractors

• Cost-driven model to provide inexpensive, quality product

• Single family homeowner in CA, TX ,CO, WI, NY

• Want rebuy from customers

• Direct Sales• Leasing• Service Calls

• Need Iniitial capital• Endorsements by

• Continuous advertise and recruit new customers

city councils

• City councils and neighborhood/??? (new regulations, permits).

• Contractors

• Cost-driven model to provide inexpensive, quality product • May consider in-house leasing option, if upfront costs is large

obstacle for customer and sufficient funding obtained.

• Additional Maintenance after

• Need Iniitial capital (600k)• Manufacturing Facilities and

Areas• Endorsements by

city councils • Gain Credibility

• Contractors

• Cost-driven model to provide inexpensive, quality product • May consider in-house leasing option, if upfront costs is large

• Cheap product more readily available

• Additional Maintenance after

• Need Iniitial capital (600k)• Manufacturing Parts• Endorsements by

city councils • Gain Credibility

• Contractors

• Cheap product more readily• Retrofit wind turbine for street

and highway lamps. • Create own wind turbines with

pole manufacturers• Be owner of cheap green

status symbol• Diversify green energy

portfolio• Fast payback than alternatives

Companies• Utilities

• Direct sales to cities (long term)

• Web site• Home Depot

• Direct Sales• Service Calls• Leasing

• Manufacturing Parts• Endorsements by

• Continuous advertise and recruit new customers (city councils)

• Use competitive, local, renewable energy, strong green symbol

• Fast payback than alternatives.

Companies• Utilities• County –

State Level

• Direct sales to the city or utility, and forming long term relationship for maintenance and replacements.

• 5 year maintenance and warranty

• After 5 years, service charge• Utility to manage after warranty

expiration• Extended warranty option

• Asset sales and service calls• Leasing and PPA? (under review)

• Endorsements by environmental groups, city consortiums for renewable energy, public utilities, city council planning department

• Submit bids for city RFPs

• Light manufacturers, installers to package product/services

• Electricians, contractors, light maintenance for additional workforce

• Cost-driven model to provide inexpensive, quality product • Manufacturing costs and customer acquisition costs. • May consider in-house leasing option, if upfront costs is large

• Use competitive, local, renewable energy, strong green symbol

• Fast payback than alternatives.

• Cities• Utilities• County –

State Level

• Direct sales to the city or utility, and forming long term relationship for maintenance and replacements.

• 5 year maintenance and warranty

• After 5 years, service charge• Utility to manage after warranty

expiration• Extended warranty option

• Asset sales and service calls• Leasing and PPA (Future)

• Endorsements by environmental groups, city consortiums for renewable energy, public utilities, city council planning department

• Submit bids for city RFPs

• Environmental, bird, wildlife groups

• Light manufacturers, • Installers/maintainers• Research Labs• Turbine Certifiers

• Cost-driven model to provide inexpensive, quality product • Manufacturing costs and customer acquisition costs. • May consider in-house leasing option, if upfront costs is large

Business Model Canvas – Final

• Cities (pilot)• Cities leasing• Lighting

Companies• Developer ->

Utilities -> City

• Direct sales to cities (long term) PILOTS

• Small Wind Developer

• 5 year full service Warranty,

• R&D talent• Endorsements by

• Finance

• Continuously advertise and recruit new customers (city councils)

• Form partnerships (developers, cities, installers, maintenance) for maximum reach

• City council (new regulations, permits).

• Research Labs• Turbine Certifiers• Small Wind

Developers• Utilities

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