1. Lean Startup Basics
© Are held by their respective owners, Eric Reis, Steve Blank, David Skok, Dave McClure and others
Evidence-Based EntrepreneurshipTM
By Kelly Schwedland
kellys@elevateventures.com

2. ~Drew Houston, CEO Dropbox

3. Key Points
1. A Business Model,
Not a Business Plan
2. Fast Learning Loops:
Build-Measure-Learn
3. Business Model Validation:
Get Out of the Building!
4. MVP - It’s Not What You Think
5. The Lean Startup Path

4. 1. A Business Model,
Not a Business
Plan

5. No business plan
survives the first
customer contact

6. If you build it, they will not come.

7. 9 Out of 10
Startups
Fail!

8. • Building on Invalid Assumptions
• Premature Scaling
• Lack of Customers and Markets
• Change Your Business Model at
Scale
• Run Out of Money
The Path to Disaster

9. Discover a
Business Model
that works before
you run out of
Money and Time.
(Nail it, then Scale it.)
Your Job as an
Entrepreneur:

10. Questions
• Is this problem worth solving?
• Who’s problem are you solving?
• How are they solving it now?
• Does anyone care about your solution?
• Will they buy it?
• How do you create value for your customers?
• How will you grow?
• What’s your unfair advantage?
• What channels will you use to get to your customers?
• What are your acquisition costs per customer?
• What is the lifetime value of your customer?
• What’s your unit cost model? Unit revenue model?

11. Enter the Lean Startup

12. 2. Fast Learning Loops

13. The “Lean Startup” Model

14. But this is still Chaotic!
• How can we organize
these loops into an
orderly process?

15. Business Model Canvas
http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

16. Steve Blanks online course: udacity.com/course/ep245

17. 3. Business Model Validation:
(Get Out of the Building)
The Lean Launchpad /I Corp Approach

18. Get Out of the Building
Go To The Source
Get Pupil Dilation
(Not surveys or focus groups, Talk to customers)

19. Validating Product/Market Fit

20. Key Partners
Who are our Key
Partners?
Who are our key
suppliers?
Which Key
Resources are we
acquiring from
partners?
Which Key Activities
do partners perform?
Key Activities
What Key Activities
do our Value
Propositions require?
Our Distribution
Channels?
Customer
Relationships?
Revenue streams?
Value
Propositions
What value do we
deliver to the
customer?
Which one of our
customer’s problems
are we helping to
solve?
What bundles of
products and services
are we offering to
each Customer
Segment?
Customer
Relationships
What type of
relationship does
each of our Customer
Segments expect us
to establish and
maintain with them?
Customer
Segments
For whom are we
creating value?
Who are our most
important customers?
Key
Resources
Do our Value
Propositions
require?Distribution
Channels, Customer
Relationships,
Revenue Streams?
Channel
Through which
Channels do our
Customer Segments
want to be reached?
Cost Structure
What are the most important costs inherent in our
business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to
overall revenues?
Customer/Value Hypotheses
?
?
?
?
??
??
?

21. Customer Interviews
• Customer Demographics (Discover
Subsegments)
• Validate Their Top Three Problems
• Discover New Problems
• Rank the Problems
• How Do They Solve Them Now?
• Document existing workflow.
1
2
3
4
5
How to do customer interviews videos: http://vimeo.com/groups/204136/videos/

22. Solution Hypotheses
Key Partners
Who are our Key
Partners?
Who are our key
suppliers?
Which Key
Resources are we
acquiring from
partners?
Which Key Activities
do partners perform?
Key Activities
What Key Activities
do our Value
Propositions require?
Our Distribution
Channels?
Customer
Relationships?
Revenue streams?
Value
Propositions
What value do we
deliver to the
customer?
Which one of our
customer’s problems
are we helping to
solve?
What bundles of
products and services
are we offering to
each Customer
Segment?
Customer
Relationships
What type of
relationship does
each of our Customer
Segments expect us
to establish and
maintain with them?
Customer
Segments
For whom are we
creating value?
Who are our most
important customers?
Key
Resources
Do our Value
Propositions
require?Distribution
Channels, Customer
Relationships,
Revenue Streams?
Channel
Through which
Channels do our
Customer Segments
want to be reached?
Cost Structure
What are the most important costs inherent in our
business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to
overall revenues?
Online model tool http://canvanizer.com/new/business-model-canvas

23. Solution Design

24. Solution Interviews
• Recap Demographics and Problem
• Describe and Show Solution (don’t
sell it!)
• Does it Resonate?
• What’s most important, what’s
missing, what can you take away?
• How do they find out about
solutions to this problem?
• Will they pay $X?
1
2
3
4
5
6

25. Problem/ Solution Validation

26. Drill down to
Minimum Viable Product (MVP)
1
2
3
4
5
X
X
6

27. 4. MVP - It’s Not What You
Think!

28. More on MVP
• Not one snapshot,
but a progression
of experiments
• Early experiments
have no product.
• At some point, you
need to start
development.
That’s where Agile
comes in

29. Groupon: Wordpress Blog, Widget from The Point, PDF Coupons via
email.
Foursquare used Google Docs to collect customer feedback. No code,
no maintenance.
Grockit puts up a notify-me-when-you-release form on steroids.
Auto e-commerce site uses manualation and flintstoning for their
backend.
Allicator uses Facebook ads: “Ditch Digger? Feeling spread thin? Click
here to complete a survey and tell us about it.”
ManyWheels uses Microsoft Visio to build clickable web demos for
prospective customers.
Cloudfire uses a classic customer development problem presentation.
Example MVPs

30. Key Partners
Who are our Key
Partners?
Who are our key
suppliers?
Which Key
Resources are we
acquiring from
partners?
Which Key Activities
do partners perform?
Key Activities
What Key Activities
do our Value
Propositions require?
Our Distribution
Channels?
Customer
Relationships?
Revenue streams?
Value
Propositions
What value do we
deliver to the
customer?
Which one of our
customer’s problems
are we helping to
solve?
What bundles of
products and services
are we offering to
each Customer
Segment?
Customer
Relationships
What type of
relationship does
each of our Customer
Segments expect us
to establish and
maintain with them?
Customer
Segments
For whom are we
creating value?
Who are our most
important customers?
Key
Resources
Do our Value
Propositions
require?Distribution
Channels, Customer
Relationships,
Revenue Streams?
Channel
Through which
Channels do our
Customer Segments
want to be reached?
Cost Structure
What are the most important costs inherent in our
business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Revenue Streams
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to
overall revenues?
Continue Validating Hypotheses
7
8
1
4
23
5
9
6

31. Use Canvas As a Weekly Scorecard
Week 3
Week 2
Week 1
Useful tool for tracking weekly updates: https://www.launchpadcentral.com/

32. 5. The Lean Startup Path

33. Lean Startup:
Two Fast Feedback Loops

34. Launch?

35. Validate Business Model
You Need to Get Here!
Replicable/Scalable Fit:
LTV/3 >= CAC
You Are Here
You’ve only just begun
Metrics that Matter

36. Post Launch Goal:
Decrease CAC and Increase LTV

37. Post Launch
Fast Feedback Loops
You have real users and precise usage data
- Analyze it! (By cohort)
Make small changes fast
(hours, not weeks to get into production)
When you make changes
- A/B test (or multivariate w/ traffic.)

38. Get/Keep/Grow – Customer Relationships
Web/Mobile Products
Metrics that Matter

39. Investment Readiness Level
Mkt Size/Competitive analysis
Complete first-pass canvas
Problem/Solution Validation
Low Fidelity MVP Experiments
Validate Product/Market fit
Validate right side of canvas
Prototype High-Fidelity MVP
Validate left-side of canvas
Validate metrics that matter
Friends and Family
Angel investors
Venture Capital
None
Validation Stage Investment Type

40. $1B+ Market?
Scalable Solution?
Recurring Revenue?
Past Successes?
Full team?
(Hipster, Hacker, Hustler)
Traction?
Investment Interest Level

41. What Does Traction Look Like?
*cost of acquisition is less than 1/3 lifetime value;
$1 in, $3+ out
Typical AngelList Investments $1M raise (2013)
• Enterprise: 1000 seats @ $10/seat/mo.,
• Big Enterprise: 2 pilot contracts and some $
• Social: 100,000 downloads/signups
• Marketplace: $50,000 revenue/mo.
• E-Commerce: $50,000 revenue/mo.
LTV > 3X CAC?

42. Common Mistakes
• Too Broad a Segment
• Not a Big Enough Problem
• Surveys Instead of Interviews
• Conflate Problems and Solutions
• Confuse Users and Customers
• Build Too Much (Fat Experiments)
• Don’t Test Revenue Model Early Enough
• Stop Experimenting When You Have Customers (No Metrics)
• No UX and No Agile

43. Summary
1. A Business Model,
Not a Business Plan
2. Fast Learning Loops:
Build-Measure-Learn
3. Get Out of the Building!
4. MVP - It’s Not What You Think
5. The Lean Startup Path

44. Questions?
slideshare.net/KellySchwedland
KellyS@elevateventures.com

45. Resources
steveblank.com
udacity.com/course/ep245

46. Customer Development
Search Execution

47. Get/Keep/Grow – Customer Relationships
Physical Products