StartupQ8: Learn startup presentation

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Presentation on Lean Startup methodology for StartupQ8 meetup November 7th 2012. For more information on StartupQ8, visit http://startupq8.com About the author: Mijbel F. AlQattan is a founding partner at Cubical Services, where he provides advisory and incubation services for startups (both technology and traditional). His areas of expertise include business model development, business plan analysis and financial analysis for startups. For more information, visit http://www.cubicalservices.com

Transcript of StartupQ8: Learn startup presentation

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The Learn Startup MethodologyMijbel F. AlQattanHead of Business DevelopmentCubical Services

What is a Startup?A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.Eric Ries, The Lean Startup

A startup is not a smaller version of a large company. A startup is a temporary organization in search of a scalable, repeatable, profitable business model.Steve Blank, The Startup Owners ManualThe story of AirbnbHumble beginnings in a San Francisco apartment.Debut at SXSW.Pivot in the business model.The rest is history..

What is Lean Startup?Lean Startup is a working methodology developed by Eric Ries that defines a framework for operating a startup.

The goal is to form a set of hypothesis around your main idea, construct a minimum viable product to test those assumptions, test and analyze the results, then iterate.

The goal is NOT to get bogged down in defining all features of the product before launch.

Who is Eric RiesFormer Silicon Valley entrepreneur who worked at IMVU 2004-2008.Originally posted his ideas on Lean Startup in an anonymous blog.After positive response, revealed his identity and wrote a book.

Build-Measure-Learn LoopCentral to the Lean Startup Method is the Build-Measure-Learn feedback loop:

You have IDEAS to test so you BUILD a PRODUCT that can MEASURE customer feedback, and use the DATA to learn the validity of the ideas, and develop new IDEAS..

Why Build-Measure-LearnGo through the Build-Measure-Learn loop as fast and as often as you can. Each iteration removes a layer of uncertainty from the business model.Make validated learning the aim of your startup. This can only be achieved with experiments.Focus on the value proposition you will be delivering to customers. It is NOT what the customers tell you they want verbally, but what the SHOW you they want behaviorally.Ideas to BUILD a ProductCritical assumptions to test are:The value creation hypothesis: Is what youre suggesting adding value to customers?The growth hypothesis: Can you deliver whats wanted at a price thats profitable and sustainable?Start with a clear set of hypothesis to test.Build a minimum viable product to test these assumptionsThe MVPThe Minimum Viable Product is one that has enough features to test your assumptions and allow you to have validated learning.Depending on which iteration of Build-Measure-Learn were on, MVP can be as basic as google ads or a paper sketch up to multiple versions of a live product. There is no formula.When in doubt, simplify.

Product to MEASURE DataInnovation Accounting in three steps:Use the MVP to establish real data on where the company currently is.Attempt to shift the engine from baseline towards ideal.Decide whether to pivot or persevere.

Metrics used to measure must be actionable (can be done), accessible (can be understood), and auditable (can be believed).

Establish a baselineSingle or multiple MVP products to establish baseline metrics for the company.Tuning the EngineEvery product development or business development initiative is done with the aim of improving the growth drivers.Examples:Improving the design to make the product easier to use (metrics: activation rate, average time spent on site).Changing the pricing points of a product (metrics: customer lifetime value, % of customers who are regular users).

Be Wary of Vanity MetricsSep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12Monthly user5506086807398008459019551007Daily users293327372417457483526552584Revenue (millions)4677317318959541131105811841262Revenue per user$0.90$1.26$1.14$1.26$1.24$1.38$1.21$1.28$1.29Monthly vs. Daily UsersTotal Revenue vs. Revenue Per UserPivot or PersevereSimply put, if the changes implemented when testing the hypothesis and fine-tuning the engine dont improve the metrics from baseline to desired, it is time to consider pivoting one or more aspects of the business model.Data to LEARN IdeasEvery entrepreneur eventually faces an overriding challenge in developing a successful product: deciding when to pivot and when to persevere. Eric Ries.

A pivot is a change in one of the key business model assumptions: Value proposition, customer relationships, customer segments, channels, revenue streams, key activities, key resources, key partners, or cost structure.Some Pivot TypesZoom-in pivot: Where a single feature becomes the product.Zoom-out pivot: Vice-versa.Customer segment pivot: Building a solution for a different customer (e.g., moms).Customer need pivot: Solve other problems for the customer.Platform pivot: Change from platform to app or vice versa.Business architecture pivot: Low volume/high margin to high volume/low margin or vice versa.Value capture pivot: Change your revenue model or how you monetize your product.Engine of growth pivot: Change between paid, viral or sticky growth.Channel pivot: Deliver the product via a different distribution channel. Technology pivot: Change the technology to something that offers superior price or performance.Pivot type examplesWhat pivot was applied in each of these cases:Facebook pivot 1 (hotornot to thefacebook)AirbnbFacebook pivot 2 (university students to everyone)InstagramFacebook pivot 3 (introduced advertisements)AccelerateAfter many Build-Measure-Learn iterations on your product, youll reach a stage where you are ready to accelerate the growth.Scale in small batches to control cost of scaling.Determine your sustainable growth metric (paid, sticky or viral), and direct energy towards growing it.Build an adaptive organization and keep teams nimble and agileQuestions?You can reach me at:Email: mijbel@cubicalservices.comTwitter: @MijbelF