Making communications land - Are they received and understood as intended? we...
Sxsw New Rules for the New Bubble 031211
1. New Rules for the New Bubble Steve Blank Stanford - School of Engineering U.C. Berkeley - Haas School Of Business www.steveblank.com Twitter: sgblank
11. 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)
12. 1970 – 1995Building a BusinessStartups Are Small Versions of A Large Company
13. 1970 - 1995 Building a Startup the Hard Way $Millions’sto start(Proprietary hdwr/sftwr) Long product dev cycle (Waterfall) Thousands customers (Businesses) Liquidity = IPO (5 qtrsrevenue/profit) No repeatable methodology(Smaller big company)
14. 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
34. 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)
35. 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
37. 2001 – 2010Why Startups Are Not Small Versions of A Large Company
38. 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)
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40. i.e. Product/Market fit- Repeatable sales model - Managers hired What’s A Startup? Search Execute A Startup is a temporary organization used to search for a repeatable and scalable business model
107. Customer DevelopmentThe Search For the Business Model Company Building CustomerDiscovery CustomerValidation Customer Creation Pivot
108. Customer Discovery CustomerDiscovery CustomerValidation Company Building CustomerCreation Stop selling, start listening Test your hypotheses Continuous Discovery Done by founders
137. 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.
143. User Side : Online User Survey Power to choose products Discount on products Buyer community feedback
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146. Key Question for Business Canvas #2 HOW CAN WE ATTRACT BUYERS? CUSTOMER ACQUISION COST?
147. Buyer Demand Test 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 5% 0.08% 0.005% (CTR) $7.52 $4.88 $0 (COST)
200. Revenue / Cost Source Revenue Cost Product Ads Transaction Fee ( Main ) Float Money Site Maintenance Marketing ( Main ) Customer Support Server/Traffic /Mobie Apps 15% of transaction Ads for buyer Seller Management 3~5% ( paypal) Outsourcing 20%/60days* * google/groupon’s rule, we are asking sellers about this rule.
205. Business Canvas – Week 1 Seller : - More customer traffic - Bulk sales- Lower transaction feesBuyer : - Better discounts - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand - Powerful sellers - Server providers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller :pro-sellers on Amazon and eBayBuyer :Online shoppers - Web & App sales - Online social networks - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries Seller side:- transaction fees Buyer side:- targeted ads
206. Business Canvas – Week 2 Seller : - More customer traffic - Bulk sales- Lower transaction fees- Brand name marketingBuyer : - Better discounts - Power to choose product deal - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand - Powerful sellers - Server providers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller :pro-sellers on Amazon and eBayBuyer :Online shoppers - Web & App sales - Online social networks - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries Seller side:- transaction fees Buyer side:- targeted ads
207. Business Canvas – Week 3 Seller : - More customer traffic - Bulk sales- Lower transaction fees- Brand name marketingBuyer : - Better discounts - Power to choose product deal - Buyer community feedback on products and sellers - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand - Powerful sellers -Regionalsellers - Server providers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller : Sellers on Amazon and eBayBuyer :Online shoppers who are willing to waitto get significant discounts on products - Web & App sales - Online social networks - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries Seller side:- transaction fees Buyer side:- targeted ads
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209. Business Canvas – Week 5 - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand Seller : - More customer traffic - Bulk sales- Lower transaction fees- Brand name marketing - Access to customer contact information - Ability to cross-sell products - Site advertising Buyer : - Better discounts - Power to choose product deal - Buyer community feedback on products and sellers - Sellers who need more traffic -Regionalsellers - Server providers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller : Sellers on Amazon and eBayBuyer :Online shoppers who arewilling to waitto get significant discounts on products - Web & App sales - Online social networks - Onlineadvertising - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries - Online ads Seller side:- transaction fees Buyer side:- targeted ads
210. Business Canvas – Week 6 Seller : - More customer traffic - Bulk sales- Lower transaction fees- Access to customer contact information - Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand - Sellers who need more traffic -Regionalsellers - Server providers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller : Sellers on Amazon and eBayBuyer :Online shoppers who arewilling to waitto get significant discounts on products - Web & App sales - Online social networks - Onlineadvertising - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries - Online ads Seller side:- transaction fees Buyer side:- targeted ads - float money
211. Business Canvas – Week 7 Seller : - More customer traffic - Bulk sales- Lower transaction fees- Access to customer contact information - Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers - Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- Promotion of website and brand - Sellers who need more traffic - Regionalsellers - Server providers Established services- Online Marketing : Google/Facebook -Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platformSeller :Sellers on Amazon and eBay Seller: Trustworthy sellers with verifiable websites.Buyer :Online shoppers who arewilling to waitto get significant discounts on products - Web & App sales - Online social networks - Onlineadvertising - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries - Online ads Seller side:- transaction fees Buyer side:- targeted ads - float money
212. Business Canvas – Week 8 Seller : - More customer traffic - Bulk sales- Lower transaction fees- Access to customer contact information - Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers - Platform/Networkmanagement (maintaining and growing online buyer/seller communities and credibility)- Promotion of website and brand - Establishing credibility - Sellers who need more traffic Established services- Online Marketing : Google/Facebook -Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers - Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback Multi-sided platform Seller: Trustworthy sellers with verifiable websites.Buyer :Online shoppers who are willing to wait to get significant discounts on products - Web & App sales - Online social networks - Onlineadvertising - Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness - Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries - Online ads Seller side:- transaction fees Buyer side:- targeted ads - float money
228. Business Plan Autonomous Vehicles for Mowing & Weeding Dealers sell, installs and supports customer Co. trains dealers, supports dealers - Innovation - Customer Education - Dealer training Mowing - Owners of public or commercially used green spaces (e.g. golf courses) - Landscaping service provider Weeding - Farmers with manual weeding operations We reduce operating cost - Labor reduction - Better utilization of assets (eg mow or weed at nights) - Improved performance (less rework, food safety) - Dealers (Mowing and Ag) - Vehicle OEMs (John Deere, Toro, Jacobsen, etc) - Research labs - Mowing Dealers - Ag Dealers Engineers on Autonomous vehicles, GPS, path-planning Dealer discount COGS seek a 50-60% Gross Margin Heavy R&D investment Asset sale Our revenue stream derives from selling the equipment
229. Autonomous vehiclesWEEDING Dealers sell, installs and supports customer Co. trains dealers, supports dealers - Innovation - Customer Education - Dealer training - Low density vegetable growers - High density vegetable growers - Thinning operations - Conventional vegetables We reduce operating cost - Labor reduction (100 to 1) - Reduced risk of contamination - Mitigate labor availability concerns - Ag Dealers - Ag Service providers - Research labs - Ag Dealers - Ag Service providers Engineers on Machine Vision Two problems: - Identification - Elimination Dealer discount COGS seek a 50-60% Gross Margin Heavy R&D investment Asset sale Our revenue stream derives from selling the equipment
284. 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
316. 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”
317. 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)
318. 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
319. 2011 - 2014 Playbook Business Model Generation Four Steps to the Epiphany Lean Startup Liquidity Strategy
323. 2011 – 2014Adoption Get wide adoption (freemium, low costs, etc) Go for massive distribution Monetize later Can only be done Lean, requires Pivots
324. 2011 – 2014Visibility Be everywhere Look larger than life Conference, blogs, social networks PR is your best friend, invest in it
325. 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, Customer Development & Bus Model Add: Adoption, Order of Battle and Visibility
330. something-something-something.com Original idea Invincible Business Model: Version 1.0 SHORT TERMResearchers Lawyers Scientists LONG TERMAvid book readers Professionals FB/TW posts from users you know Company blog, FB, TW, support forums Import, organize and share thousands of papers Targeted marketing Product development Constant iteration & testing Libraries, Universities, Research Centers Bloggers and media targeting customer segment Academic Database providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
340. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
351. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
356. Cloud compute marketplace Build a cloud marketplace Many different customer segments on buy-side and sell-side Direct sales to both buyers and sellers Huge dependency on technical platform
358. Cloud Services Match Maker Pivot away from technical platform Help buyers find the best provider Removed financial, consumer segments Act as channel for sellers
378. Customer Segment: Corporate The Drivers: Are you questioning our expertise? Archetypes Users International, local, large, and small companies Influencers and Recommenders Economic Buyers, Decision Makers Saboteurs
459. City Budget PlanLearn about city approval Process City Values Planning Commission Technical Evaluation and Recommendation Back to the envelop metrics IDEA Request for Quote City Council Approval City Council “Pet-Project” Finance Approval
(gray out non bolded items)Talk about highlightsSingle Family Homeowners: Target customer are single family homeownerPayback period: We offer a renewable electricity generation device that has a much faster payback period than competitors. Manufacturing: We can offer this because our product is cheaper than competitors, due to our unique manufacturing process, without compromising performance and aesthetics. Direct Sales: We will sell our product directly to the customer to maximize savings to the customer. Partners: In order simplify the installation of our product, we will need to partner with local permitting officials to facilitate the permitting process. The idea is once the planning department is comfortable with our product, then there no longer needs to be a lengthy review for each installation.
Due to many limitations with residential market for wind turbine applications – decided not right market
Week 6 – ChannelsWhat we learnedNew customer segment -> cities instead of home-ownersRetrofit streetlights with VAWT, with faster payback period than alternatives and competitorsDecrease customer acquisition costChange relationship with City Council – need to get their approvalHOA not as powerful
Interviewed city staff members and utility commissioner to understand if they are interested in product (Assistant Director of Utilities,Purchasing Admin,Project Manager LED-Retrofit,Former City Council Member and Mayor)Came to understand city and its processes to see how to sell to city.City has long review process for project. Large projects need to fit under cities budget plan, which are planned out 2-5 years in advanceSaboteurs can include staff members or city residents who don’t want changeCity’s typically not interested in owning large amount of electrical generation assets, In CA, utilities also typically do not own their own generation units b/c of decoupling industry?Wind developer would own assets, potentially funded through investment bank or nontraditional sourcesDo we want to be manufacturer or wind developer?We will need to initially be the developer for initial pilot projects to prove concept works, before getting large amounts of investments to scale-up businessHigh liability to be developer b/c wind potential difficult to predictBusiness model that relies on cities to own asset is problem They don’t have the budgetConstantly evaluate your value prop