how to start your startup 28 may2015
TRANSCRIPT
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How to Start Your StartupGot Startup Meetup May 28, 2015
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Why Startups Fail
• Most startups fail
• Within 3 years, 92% of startups fail
• Of failed startups, 74% failed due to
premature scaling
Startup Genome Report
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Some Startup Failure is Avoidable
“Startups die in many ways, but in the past couple of years
I’ve noticed that the most common cause of death is what I
call ‘Startup Suicide’, a phenomenon in which a startup’s
founders and its management kill the company while it’s
still very much breathing.”
Justin Kan
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Top Reasons for Startup
Failure
Why startups fail,
according to their
Founders,
Erin Griffith,
Fortune, 9/25/14
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# 1 Product/Market Fit
• 42% of failed startups cite to lack of market demand for their
product or service
• Need to achieve product/market fit
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# 2 – Running out of Money
• Inadequate funding is a frequent source of failure
• Cash flow management is key
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#3 – Not the Right Team
• Inadequate management team
• Poor leadership
• Poor team dynamics
• Poor hiring/firing practices
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#4 – Poor Product Strategy
• Improperly positioning the product
• Mispricing the product
• Poor quality control
• Poor cost control
• Poor timing of product release
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#5 – Loss of Focus
• Poor marketing
• Inadequate attention to sales
• Inadequate attention to customers after sale
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Successful Startups Realize
• That the business model is the product
• That product failure is part of the startup process
• That product pivoting may be required
• The goal is to quickly achieve a product/market fit
• People are important
• That teamwork and focus
• That customer attention
• Cash flow is critical
• Funding
• Sales
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The Business Model is the
Product• “If you Build It, They Will Come” only works in
the movies
• Webvan – grocery delivery
• Went public in 1999 with a valuation of $4.8B
• Went bankrupt in 2001
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Fail often, fail fast
• Push ahead with a product as soon as possible to gather
feedback and learn about opportunities
• The Minimum Viable Product (MVP) may be used to test
product viability
• Quickly discard products that don’t have a good reception
(e.g. 40% say “they must have it”)
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Product Pivoting
• Don’t be wedded to a particular product
• If a product doesn’t have traction, try again
• To pivot you must have learned something from
your previous failure
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Product/Market Fit is the Foundation
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People Are Important
• Managers
• All key roles filled
• Not too many, not too few
• CEO, CFO, CTO are key for a tech startup
• Employees
• Right fit
• Hire slow, fire fast
• Customers
• Customer support
• Customer feedback
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Cash Flow Pitfalls
• Not documenting your cash-flow projections
• Being on budget but out of cash
• Being profitable but broke
• Seasonal sale fluctuations
• Unanticipated expenses & emergencies
• New businesses aren’t given much credit
• Sales volumes don’t keep up with marketing expenses
• Slow Accounts Receivable
• Growing too fast
• Withheld funds by missing banker/investor milestones
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“What We Learned”
• Biggest risk: making something no on wants
• Not launching is painful, but not learning is fatal
• Put something in user’s hands and get real
feedback ASAP
• Know where your target audience hangs out &
speak with them in an authentic way
Drew Houston, CEO Dropbox
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Key Points
• Develop a business model, not a business plan
• Fast learning loops: build-measure-learn
• Business model validation – get out of the
building!
• MVP – it’s not what you think
• The Lean Startup Path
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The Lean Startup
• Method for developing businesses and
products
• Steve Blank in mid-1990 created the
“Customer Development” methodology
• Eric Reis (a student of Blank) popularized
the Lean Startup movement in 2011 as a
technique for “Validated Learning”
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The Business Model Canvas
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Another Representation
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Three tips for success
1) Realize that your business method is the
product
2) People are an essential ingredient for a
successful company
3) Cash flow is king