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Startup Secrets
Workshops
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1. What’s Your Roadmap to Success?
2. Building a Compelling Value Proposition
3. Turning Products into Companies
4. Culture, Mission and Vision
5. Hiring A+ Talent
6. Game-Changing Business Models
7. Go to Market Strategies
8. Getting Behind the Perfect Investor Pitch
9. Funding Strategies to go the Distance
10. Have You Got What It Takes?
11. Mastering Mutual Mentorship
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Introductions
& Case
Examples
● Established
○ Google
● Startup
○ Acquia
○ Demandware
● Not-for-profit
○ One Laptop Per Child
○ Diagnostics For All (on the web)
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Agenda 1. Finding a Disruptive Business Model
2. Focusing on CORE differentiation
3. Multiply and Leverage it with innovation
4. Designing for high value
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What is your model for:
○ Creating
○ Delivering
○ Harnessing
VALUE?
Business
Model:
How do
you make
money?
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Today
Let’s get creative and think
specifically about startups!
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Business
Model as a
Disruptor
● Why?
○ Time to market
○ Market adoption
○ Sustainability
● Connecting the dots for you, as a founder:
○ Spend
○ Cash efficiency
○ Your ownership
○ Valuation
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The
Perfect
Startup
Storm
Disruptive
Business Model
Disruptive
Technology &
Defensible IP
New Market &
GTM
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● Change the game?
● Rewrite the rules?
● Cause an innovator’s
dilemma?
● Be as disruptive as
your technology?
New Game
New playing field
New boundaries
New rules
YOU choose players
How can
your
business
model...
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Symantec Antivirus for Mac (SAM)
Best seller – Licensed Product
Norton Antivirus for PC (NAV)
How to change the game
Best seller – Subscription Service
Example 1:
Symantec
– Many
Years Ago!
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● Dramatic!
● Game changing
○ Flipped the model on its head
■ Competitors caught off guard
○ Predictable profitable business model
● Led to solution leadership vs. battle: “Data Security”
○ Customer need met more effectively
○ More value extracted
○ 1.5 product / seat => 2.6x
Results?
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● Off balance sheet Publisher of US
products
○ Investment in Management,
Sales, Marketing, Support,
Translation & Localization
● Acquired back by US corporation
when profitable
○ Pooling of interest
○ Non-dilutive
○ Growing earnings
● Symantec example Win / Win
Example 2:
European
Software
Publishing
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Results?
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● Win / win / win
○ Customers = better local product, support, services
○ Publishers = accelerated, off balance sheet setup of
profitable business
○ Shareholders = 97x return on original investment
● Non-technology disruptive business model
○ Economies of scale
○ Pooling of interests (tax)
○ Time shifting expense → Accretive outcome
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● Process or Product?
● Software or Services?
● Open or Proprietary?
● Content or Data?
● Freemium or Premium?
● Subscription or License?
Business
Model:
Sample
Questions
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First key question!
Capabilities
Of
Really
Exceptional
Value
Focus on it!
C.O.R.E.
Value
What is
Your
Core
Value?
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Where is your CORE value?
■ Software/other technology
■ Data
■ Content
■ Service, support
■ User network
Disruptively monetize it!
○ To your competitive advantage
○ Where are others most vulnerable?
CORE
Cut to
the
CORE!
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● Google Apps vs. Microsoft office
○ What is the C.O.R.E for each?
■ Software, Data, Advertising?
● Don’t compete head-on
○ Microsoft Office = enterprise market
○ Google Apps = consumer market
○ Free vs. $500 license
○ Simple vs. Complicated
○ 80% solution vs. Professional Tool
Example 1:
Apps
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How can you compete with a market leader who has
80% to 90% market share?
● Don’t compete head-on
● Innovator’s Dilemma – go for low end
● Disruptive technology, business model, or market
approach
● Examples: Gmail, Google Apps, Chrome
Competing
with Market
Leaders
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● Apple vs. Google
○ What is the C.O.R.E for each?
■ Hardware, Software, Content?
● Others in Ecosystem
○ Samsung, HTC
● Alternative approaches
○ Amazon
Example 2:
Mobile
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● Who is winning?
● Why?
● Is technology the difference?
● Apple, Google, & Microsoft strategies
○ Always play to your strength
○ Apple Mac, Google Search, Microsoft
Windows
Android
vs.
iPhone
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● Disrupt the market leader
○ Apple disrupted carriers and manufacturers
■ Verizon, Sprint, Nokia, Motorola, RIM,
Symbian
○ Android allowed them to fight back
● Disruptive business model
○ Android is free
○ Advertising business model
○ Search, Maps, Local, Wallet, YouTube
Android
vs.
iPhone
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Be Open and Extensible (e.g., Software APIs)
● Enabling external multipliers to your value
● Building on yourself
● Eating your own cooking
● Being your own customer
Startup
Secret!
Co-Creating
Value
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Be Open and Extensible (e.g., Software APIs)
● Enabling external multipliers to your value
● Building on yourself
● Eating your own cooking
● Being your own customer
Open Source
● Leverage through community
● Make the customer the product manager
○ Scratching their own itch
Startup
Secret!
Co-Creating
Value
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Dries Buytaert
Founder and Project Lead Drupal
Co-Founder and CTO Acquia
http://buytaert.net
@Dries
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27. Meet Dries 12 years ago when he started work on Drupal ...
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Compiler books
Collection of stamps
Chess board
Assembly books
All furniture is from IKEA
Student dorm in Antwerp
where I started Drupal
28. 1 out of 50 websites in the world
10,000+ modules
300,000+ downloads/month
1.5M unique visitors/month
FREE
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29. 71 of the World's Top 100 Universities Use Drupal
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30. 1. Freedom to run the program
2. Freedom to study the program
3. Freedom to modify the program
4. Freedom to re-distribute the program
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Open Source is a Software License
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Joseph Schumpeter
Economist, 1883-1950
Drupal and Open Source are Catalysts for
“Creative Destruction”
● Changes how we develop
software
● Changes how we build websites
● Changes a multi-billion dollar
industry
● Open Source enables business
model innovation
● Bonus: allows people to do well,
and do good
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Multiply and Leverage your CORE
Multipliers:
● Increase revenue
● Increase reach
● Increase coverage
Levers:
● Reduce time
● Reduce costs
● Reduce resources
CO
RE
Levers
Multipliers
Startup
Secret!
Multipliers
and Levers
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Multipliers:
● Added functionality
● Community reach
Levers:
● Community development
● Community marketing
Multiply AND Leverage CORE
Drupal
and
Open
Source
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CO
RE
Levers
Multipliers
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Multiplier Examples:
● Sales & Marketing
○ Tiered Pricing
○ Freemium
○ Channel partners
● Product
○ Slippery products *
○ “Russian Doll” Packaging *
○ Technology stacks
Lever Examples:
● Sales & Marketing
○ Web
○ Inside
○ Inbound
○ Viral
● Product, Support
○ Offshoring
○ Outsourcing
○ Crowdsourcing
○ Co-creation *
○ Technology stacks
* Covered in this presentation
Examples in Software:
CO
RE
Levers
Multipliers
Startup
Secret!
Multipliers
and Levers
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Get Multipliers and Levers
Working Together!
Strategies that enable Multipliers and Levers to work together
around your CORE are the real winners.
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● Provider of cloud-based
solutions and support for
enterprises using the open
source product Drupal
● 2000+ customers
● 250+ employees
● 150% 4 year CAGR
● Global operations
● Highly predictable and
repeatable model
● Land and expand strategy
Acquia
at a
Glance
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Acquia
Business
Model
● Drupal is FREE
● It is also Open Source
● So how do you make money from FREE and Open
IP?
○ Create valuable products and services around
the CORE of Drupal
○ Use FOSS as multiplier and a lever in R&D,
sales and marketing
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Free and
Open
Source
Software
(FOSS)
As a multiplier AND a lever
(in R&D, sales, marketing, and more)
Example Multipliers:
● Upsell value added
products & services
● Cloud & SaaS
Example Levers:
● Target installed base
● Expand usage through
partners
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CO
RE
Levers
Multipliers
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● Product feeds the business model:
○ User experience
○ Supportability
○ Maintenance, updates (= lifecycle)
○ Upgrades
○ Upsells
● Leads to two startup secrets:
○ Russian Dolls and SLIPPERY products
Designing
for
Success
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• Simple
• Low to no initial cost
• Installs easily
• Proves value quickly
• Plays well with others
• Easy to use
• ROI is obvious
• Your customers can’t live without it
Think of how this improves
the Gain/Pain Ratio in our
Value Proposition Workshop
Gain
Pain
Startup
Secret!
Friction
Free,
SLIPPERY
Products
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● Simple: Update your site from the browser
● Low to no initial cost: free
● Installs easy: Windows/Mac installers + SaaS
● Proves value quickly: Distributions + Start using
immediately
● Plays well with others: Lots of integrations with other
platforms
● Easy to use: Web-based
● ROI is obvious: Better, faster, cheaper
● Your customers can’t live without: flexibility and
extensibility
What
makes
Drupal
SLIPPERY?
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Multi purpose strategy
○ Packaging
○ Pricing
○ Distribution
○ And more!
Startup
Secret!
Build a
Russian
Doll
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Free
Adoption
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Limited
Personal
Work Group
Corporate
Enterprise
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Startup
Secret!
Build a
Russian
Doll
Gives you, your partners and
your customers:
▶ Digestible starting point
▶ Up-sell Options
▶ Channel Flexibility
…and more
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Addiction before Adoption
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Acquire
On-board
Upsell /
Cross Sell
Acquia example = increasing LTV
“Land & Expand”
Startup
Secret!
Build a
Russian
Doll
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Addiction before Adoption
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Basic
Startup
Model
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CO
RE
Levers
Multipliers
● Lifetime Value of Customer (LTV)
● Cost of Acquiring Customer (CAC)
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● Repeatable
● Scalable – with leverage
● Profitable / Sustainable
● Predictable
● Valuable
What
makes for
a GREAT
business
model?
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Development Target
Gross Margin 80%
R&D 100%+ 15%
Sales & Marketing 10%
G&A 45%
Profit (Loss) -100% 20%
Example: Phases of a software companyPercent
of
Revenue
Spent
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● Today:
○ 70% of all bookings are renewable subscriptions
○ 30% are consulting services (key differentiator)
○ 85%+ annual renewal rate for non-project work
● Long-term Model:
○ 80% renewable subscriptions
○ 20% consulting services
○ 90% annual renewal rate for non-project work
Highly
Predictable
and
Repeatable
Model
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New Geographies
New Partners
New Verticals
Potential M&A
Cross-sell
Up-sell
New Sites
New Products
New Customers Existing Customers Total Revenue
Result: Disruptive Business Model for Continued Growth
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Basic
Startup
Model
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CO
RE
Levers
Multipliers
● Lifetime Value of Customer (LTV)
● Cost of Acquiring Customer (CAC)
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The Model
Refined –
Enabling
Retention &
Upsell
Lifecycle Value of Customer (LCV)
Cost of Acquiring & Re-Engaging Customer (CARC)
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CORE
Levers
Multipliers
Re-Trial
Up-sell
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Re-
Engagement
Costs
● Must be included in CARC
● Example:
○ Support
○ Customer Service
○ Professional Services
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Connecting
it to
Gain/Pain
● They are two views of the same principle:
○ Customer view = Gain/Pain
○ Vendor view = LCV/CARC
CO
RE
Levers
Multipliers
Re-Trial
Up-sell
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A
Typical
Product
Life
Cycle
But it doesn’t have to be this way !
See Try Buy Fly Die
Long, costly (CAC), slow payback, short lifetime value (LTV)
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Adding
Retention
and
Upsell
See Try Buy Fly Die
Re-TrialUp-sell
Extended
Lifecycle
Long, costly (CAC), slow payback, EXTENDED lifetime value (LTV)
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Web
Self service
On demand
SaaS
Subscription
Open source
A
Disruptive
and
Valuable
Lifecycle
See Try Buy Fly Die
Up-sell
Extended
Lifecycle Re-Trial
Up-sell Extended
Lifecycle
Short, low cost (CARC), quick payback, extended lifecycle value (LCV)
Re-Trial
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Applied
to
Software
● Installed by IT
● Customized
● Infrequent upgrades
● Proprietary
● License
1990+ 2010+
✓ On demand, SaaS
✓ Web based
✓ Self service
✓ Open Source
✓ Subscription
…a fundamentally
disruptive and
more valuable
business model!
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Summary
● Disruptive Business Model – as
significant as Technology
● Focus on CORE differentiation
● Multiply and Leverage it with
innovation like:
○ Co-Creation
○ Strategic Partners
○ Russian Doll Packaging
○ And Friction Free, SLIPPERY
products
● Design for high value using LCV &
CARC
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