Why accountants don’t run startups sllc
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Transcript of Why accountants don’t run startups sllc
Why Accountants Don’t Run Startups
Steve Blank Stanford - School of Engineering
U.C. Berkeley - Haas School Of Business
www.steveblank.com Twitter: sgblank
I Called It: Customer Development
Customer Discovery
Customer Validation
Company Building
Customer Creation
Pivot
When the Student is ready, the Master appears.
Buddhist proverb
When the Master is ready, the Student appears.
Steve Blank proverb
The Silicon Valley Funding Pyramid
Small VC Funds ($50-250M)
Union Square Ventures First Round Capital
Traditional VC Funds (>$250M)
Benchmark Sequoia
Angels & Incubators ($0-10M)
Y-Combinator TechStars
Seed Funds ($10-50M)
SoftTech (Clavier) Floodgate Felicis (Senkut) SV Angel (Conway)
Source: Dave McClure 500hats.com
Innovation in Financing
Small VC Funds ($50-250M)
Traditional VC Funds (>$250M)
Angels & Incubators ($0-10M)
Seed Funds ($10-50M)
Source: Dave McClure 500hats.com
Innovation is happening here
New Trends In Silicon Valley
• Internet startups - $500K is the new $5M – Driven by the top of the pyramid
• Seed Funds providing entrepreneurial education* – Ycombinator, TechStars, SeedCamp, LaunchBox, etc
• Customer Development/Lean Startup adoption – Methodology to test hypothesis and business model
*~100 startup accelerator programs: http://blog.shedd.us/321987608/
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- Business Model found - Profitable business - Existing team < $10M in revenue
Small Business Startups
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- Business Model found - Profitable business - Existing team < $10M in revenue
Small Business Startups
• 5.7 million small businesses in the U.S. <500 employees • 99.7% of all companies • ~ 50% of total U.S. workers
http://www.sba.gov/advo/stats/sbfaq.pdf
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- Business Model found - Profitable business - Existing team < $10M in revenue
Small Business Startup: Internet Edition
• The Internet allows a new class of Small Businesses • Not all businesses on the Internet are “Scalable Startups”
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- Total Available Market > $500m - Company can grow to $100m/year - Business model found - Focused on execution and process
Scalable Startup
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- Total Available Market > $500m - Company can grow to $100m/year - Business model found - Focused on execution and process - Typically requires “risk capital”
Scalable Startup
• In contrast a scalable startup is designed to grow big • Typically needs risk capital • What Silicon Valley means when they say “Startup”
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- Business Model found - Profitable business - Existing team < $10M
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- Total Available Market > $500m - Company can grow to $100m/year - Business model found - Focused on execution and process - Typically requires “risk capital”
Very Different Startup Goals
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Silicon Valley Venture Firms Invest in Scalable Startups
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What VC’s Don’t Tell You: The Transition
Search Build Grow
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- Founders depart - Professional Mgmt - Process - Beginning of scale
What VC’s Don’t Tell You: The Transition – Founders Leave
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- Business Model found - i.e. Product/Market fit - Repeatable sales model - Managers hired
What’s A Startup?
A Startup is the organization used to search for a scalable business model
The Search for a Business Model
• A Business Plan is static
• A Business Model diagrams how a company creates, delivers and captures value – it’s dynamic
• Or in English: How a company makes money
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- Business Model found - i.e. Product/Market fit - Repeatable sales model - Managers hired
The Search for the Business Model
Startups Search and Pivot
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- 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
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Traditional Accounting - Balance Sheet - Cash Flow Statement - Income Statement
The Execution of the Business Model
Metrics Versus Accounting
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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
The Search for the Business Model The Execution of the Business Model
Metrics Versus Accounting
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Sales - Sales Organization - Scalable - Price List/Data Sheets - Revenue Plan
The Execution of the Business Model
Customer Validation Versus Sales
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Customer Validation - Early Adopters - Pricing/Feature unstable - Not yet repeatable - “One-off’s”
Sales - Sales Organization - Scalable - Price List/Data Sheets - Revenue Plan
The Search for the Business Model The Execution of the Business Model
Customer Validation Versus Sales
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Product Management - Delivers MRD’s - Feature Spec’s - Competitive Analysis
The Execution of the Business Model
Customer Development Versus Product Management
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Customer Development - Hypothesis Testing - Minimum Feature Set - Pivots
The Search for the Business Model The Execution of the Business Model
Customer Development Versus Product Management
Product Management - Delivers MRD’s - Feature Spec’s - Competitive Analysis
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The Execution of the Business Model
Engineering Versus Agile Development
Engineering - Requirements Docs. - Waterfall Development - QA - Tech Pubs
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Agile Development - Continuous Deployment - Continuous Learning - Self Organizing Teams - Minimum Feature Set - Pivots
The Search for the Business Model The Execution of the Business Model
Engineering Versus Agile Development
Engineering - Requirements Docs. - Waterfall Development - QA - Tech Pubs
How Do Startups Search For A Business Model?
• The Search is called Customer Development • The Implementation is called Agile Development
The Lean Startup
• The Search is called Customer Development • The Implementation is called Agile Development
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- Business Model found - Product/Market fit - Repeatable sales model - Managers hired
- Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people
Startups Don’t Last Forever
You fail if you remain a startup!
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Alfred P. Sloan
General Motors, President/Chairman - Cost Accounting - MIT Sloan School - Sloan Foundation - etc.
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Billy Durant
- Leader in horse-drawn buggy’s - Fired by board, starts Chevrolet - Regains control of GM - Fired by board, GM ~$3.6 billion*
* GM Net sales in 1921 $304.5M = $3.6 Billion today
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- Execution - Strategy - Accounting - Products - Engineering - Management - Administrative
Business School
Business School Versus Entrepreneurship School
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Business School Versus Entrepreneurship School
Entrepreneurship School
- Hypothesis testing - Business Model testing - Customer Development - Agile Development - Metrics - Venture Finance - Hands-on
- Execution - Accounting - Products - Engineering - Management - Administrative
Business School
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Business School
Business School Courses Versus Entrepreneurship Courses
Courses - Managerial Finance/Accounting - Managing Groups and Teams - Financial Accounting - Operations - Modeling for Optimization - Global Value Chain Strategies
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Courses - Entrepreneurial Management - Creativity and Innovation - Technology Entrepreneurship - Patent Law for Entrepreneurs - Global Entrepreneurial Marketing - Entrepreneurial Finance
Business School
Business School Versus Entrepreneurship Courses
Entrepreneurship School
Courses - Managerial Finance/Accounting - Managing Groups and Teams - Financial Accounting - Operations - Modeling for Optimization - Global Value Chain Strategies
E-School Will Emerge
• Entrepreneurial Education will change radically
• E-School Students are not B-School Students
• Y-Combinator/Techstars first inkling
• Today ~100 startup accelerator programs
*~100 startup accelerator programs: http://blog.shedd.us/321987608/
E-School – Let’s Help Build It
• Startup Accelerators - great coaching/networking but minimal methodology
• Lean/Customer Development - great methodology but no education
• Need to be connected to Engineering School
• Stanford, Harvard and others get it…but…
*~100 startup accelerator programs: http://blog.shedd.us/321987608/