The startup owners manual sxsw

The Startup Owners Manual

Stanford - School of EngineeringU.C. Berkeley - Haas School Of Business

www.steveblank.comTwitter: @sgblank

Steve Blank

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This Talk is Based On• Business Model Generation• The Lean Startup• Four Steps to the Epiphany

This Talk is Based On• Business Model Generation• The Lean Startup• The Startup Owners Manual

Not all those who wander are lost

Bilbo Baggins

The Search for a Path

1602 - 1908

The Path to Business Execution

But Startups are Not Smaller Versions of Larger Companies

From Atoms to Bits

The Startup Path

Search Versus Execution

What’s a Startup?

What’s a Business Model?

Value Proposition

What Are You Building and For Who?

Customer Segments

Who Are They?Why Would They Buy?

Channels

How does your Product Get to Customers?

Customer Relationships

How do you Get, Keep and Grow Customers?

Revenue Streams

How do you Make Money?

Key Resources

What are your most important Assets?

Key Partners

Who are your Partners and Suppliers?

Key Activities

What’s Most Important for the Business?

Cost Structure

What are the Costs and Expenses

Turning Hypotheses Into Facts

The Four Steps – The Startup Path

Customer Development


There Are No Facts Inside The Building, So Get the Heck Outside


Test the Problem, Then the Solution


The Entrepreneurial Journey

Startup Owners Manual


National Science Foundation

• Yes there’s an E-Book version coming• Free autographed copies - Sunday

Startup America Salon E 1:30 -3pm


Examples from the Book

Examples from the Book

Step-by-Step fo

r both w

eb/mobile

and physical ch

annels

Customer Relationships

Customer Relationships Web/Mobile Products– Get Customers

© 2012 Steve Blank

Customer Relationships Web/Mobile Products– Keep Customers

© 2012 Steve Blank

Customer Relationships Web/Mobile Products– Grow Customers

© 2012 Steve Blank

Customer Relationships Web/Mobile Products Get/Keep/Grow

© 2012 Steve Blank

Customer Relationships Physical & Web Mobile Are Different

© 2012 Steve Blank

Customer Relationships Physical & Web Mobile Are Different

© 2012 Steve Blank

How Does This Really Work?

Lean LaunchPad Class

National Science Foundation

How Does This Really Work?

8 Weeks from an Idea to a Business

Team Dynamo

Final Presentation

Interviews: 252

Partner: 10

Survey: 76

Al Hassan HleilehMBA 2

MA in POL ECON SOC H

Elika MahdaviMS&E MS

BS in Indus.Eng.

Megh GautamMS&E MS

BTech in IT

Hung LeMS&E MS

BS in EE/CS

PICTURE

PICTURE PICTURE

PICTURE

THE TEAM

TABLE OF CONTENTS

1. Overview of our idea evolution

2. Our journey from week 1 to week 8

3. Current Idea

Archetype

Product vision

Partner

Channel & Demand Creation

Competitive Landscape

Market Sizing

4. Lesson learned and what next

Travel booking portal for Middle Easterns

Social travel planning

Ex-pat travel portal to Middle East

Travel inspiration - Social platform that nudges people to inspire and enrich their life

21 3 5 6

Safe travel portal for US travelers to M.E.

4

IDEA EVOLUTION THROUGH PIVOT

7 8

Nudge to enrich life

FocusCustomer Insights

Competition Market sizeCustomer Insights

Market size

Research

ScalabilityMarket size


1

Interviews: 20

Market understandingBest in class productRelationship with partnersHuman Capital

HotelsAirlinesEvents (Festivals)Car rentalsPromotion companiesDeal listingsState TourismTravel agentsConventions (CES)Business Schools (Study groups)

Product DevelopmentA/B testingRelationship with hotels; airlines; car rentalsSourcing dealsAcquisition, retain customers

Web and mailAdvertisingSocial MediaWord of MouthReferralsCustomer call centersMagazines

Lowest priceBest inventoryConvenientExperiential UISocial ValidationCreate a CommunityMultiple optionsBest Actionable dealsRelevant locations

Trusted relationships Successful partnershipsBrand awareness/ identificationPilotsCross pollinationEvents (Parties!)

Young and the affluentHigh disposable incomesWilling to explore

Young and singleDivergent origins Social media savvy

Young couples Trendsetting behavior

Young familiesBest education for kidsCultural experience Trendy destinations

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefunds

Percentage of booking costsPercentage of hotel/package (s)Advertising revenuesEvent of the monthExclusive partnership with events

WEEK 1 – MAKE MY DREAM NewRemain

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1

Middle East focused platform

Offer a booking platform with group discounts and flash-sales

Ramp up strategy through social conversations

Preserve memories of travel through photo sharing and quotes

Middle East focused Travel booking portal














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Too broad a platform

Too many value propositions

Lack of focus in value propositions














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The method we used was a top-down approach

We didn’t use net numbers (gross)

The lesson here is that if we were to do it again we would use bottom up / net figures

Market sizing problem














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We were not focused on a specific customer segment – too broad.

Our interview base was biased towards our network – needed a better sample.

Lack of focus in customer segments














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Focus is crucial – be it in your value proposition or in your customer segmentation

Market sizing – Use bottom up whenever possible

Get out of the building – in spirit and in action. Avoid bias

Key learning



1

Customer focus

2

Interviews: 20

Market understandingHuman CapitalRelationship with partners

Best in class product

Social NetworksTravel Publications

HotelsBusiness SchoolsTravel agentsAirlinesEventsDeal listings

Car rentalsPromotion companiesState TourismConventions (CES)

Customer Acquisition Customer RetentionProduct DevRelationship with key partnersSourcing deals

Word of MouthSocial Media

Web and mailAdvertisingReferralsCustomer call centersMagazines

Easy and pleasurable trip planningBest inventory

ConvenientExperiential UILowest priceMultiple optionsBest Actionable dealsRelevant locationsCreate a CommunitySocial Validation

Trusted relationships Successful partnershipsEvents (Parties!)

Brand awareness/ identificationPilotsCross pollination


Young and singleDivergent originsSocial media savvy

Young couplesTrendsetting behavior



Percentage of booking costs

Percentage of hotel/package (s)Advertising revenuesEvent of the monthExclusive partnership with events

WEEK 2 – SOCIAL TRIP PLANNING NewRemain

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Through our mentors, we really dug into our customers insights

They were telling us that they didn’t just want to go to the middle east

They wanted a seamless, social and enjoyable travel experience from A-Z

We pivoted to The Middle Easts travel booking portal with a ramp up focused on influential who want easy and pleasurable trip planning

Pivot to social travel planning for group traveling




















NewRemain

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2 WEEK 2 – SOCIAL TRIP PLANNING





















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When research for potential partners, we learned of several existing competitors with similar product

crowded

hypercompetitive

What was the problem?





















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We should have looked at the competitive landscape earlier

We should have spoken to industry / domain experts earlier

Key learning



2 3

Competition


1

Interviews: 64


Social NetworksHotelsBusiness SchoolsTravel agents

Travel PublicationsAirlinesEventsDeal listings



Local knowhow and content


Trusted relationships Successful partnerships

Events (Parties!)






WEEK 3 – EX-PAT TRAVELING NewRemain

RemoveWe

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3

Pivot to Ex-pat Community Travel Portal

We pivoted back to the original idea with focus on one customer segment

A travel planner for Ex-Pat students who frequently visit the Middle-East & other major cities.

We want to capture & publish their travel experience.









Events (Parties!)







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3









Events (Parties!)







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3

We interviewed 64 people and found:

The market was too small

There is little homogeneity in customer needs

Too low frequency of travel to justify target market










Events (Parties!)







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3

Market sizing is crucial

Key learning


3


4

Market size


2


1

Interviews: 33

Survey: 46


Social NetworksAlumni AssociationsHotelsBusiness SchoolsTravel agents


Customer Acquisition Customer RetentionProduct DevelopmentRelationship with key partnersSourcing deals


Safety propositionLocal knowhow and contentCommunity/Group Travel




-MBA Students



WEEK 4 – US TRAVEL TO Middle East NewRemain

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Pivot to US Traveler Portal to Middle East

We expanded our market to entire US travel market

Platform to facilitate Americans to travel to the Middle-East









MBA Students





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4

We surveyed 46 people and interview 33 more

Young & Affluent Americans traveling to the Middle East need local insight.

We’ll be the trusted source!

Young affluent market










-MBA Students




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4









MBA Students





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4

Launched website with full basic booking functionalities

Ebtism.com went live

Full basic functionalities (login, browse deals and book trips)

4 sourced deals from agencies

42 GSB students booked

Exclusive loginDeals selection (real sourcing)

Value proposition Ability to book trips









MBA Students





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4

We spoke to Christos Stergiou, founder of truegreece.com (Greece Analogue)

10 years of development

$5M idea










MBA Students





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4

Market size need to be VENTURE SCALE

We want to DISRUPT the Travel Space.

Let’s Re-think the Entire Idea!

Key learning


3


4


2


1

Social platform that nudges people to travel

5

Market size

Interviews: 17

Survey: 10

User dataHuman CapitalRelationship with partners

Social NetworksTravel Websites

Alumni AssociationsTravel agentsBusiness SchoolsHotels

Customer Acquisition Customer RetentionProduct DevelopmentRelationship with key partners

Sourcing deals


Enrichment (Travel)Leads


Trusted relationshipsSuccessful partnerships

Online travelersTravel Websites

MBA Students


Human CapitalProduct DevelopmentAdvertising costsMaintaining relationships

Refunds

LeadsAdvertising


WEEK 5 – TRAVEL NUDGE Paying partner sideEnd-user side

RemoveWe

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5

Pivot to travel inspiration

We pivot to a brand new market

Inspire people to travel more through recommendation

Relevant based on social graph and travel history





Sourcing deals






MBA Students



Refunds

LeadsAdvertising



RemoveWe

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5

Inception of Nudge by looking at the competitive landscape

Revisedlater





Sourcing deals






MBA Students



Refunds

LeadsAdvertising


Paying partner sideEnd-user side

RemoveWe

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5 WEEK 5 – TRAVEL NUDGE





Sourcing deals






MBA Students



Refunds

LeadsAdvertising



RemoveWe

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5

Bottom-up estimation

Market = population x nudge frequency x CTR x CPC

With leads revenue sharing model, TAM is based on assumptions of nudges frequency and conversion

Target market is justifiable with an annual revenue of $267 million with 31% market penetration

Sizeable potential market

SOM = $267M

SAM = $373M

TAM = $900M

WEEK 5 – TRAVEL NUDGE





Sourcing deals






MBA Students



Refunds

LeadsAdvertising



RemoveWe

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5

Mock up of the product for customer interview



3


4


2


1


5 6

Interviews: 52 + 3 partners





Enrichment (Travel)Customer Acquisition

Leads




Cost per acquisition

LeadsAdvertising


RemoveWe

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6






Leads





LeadsAdvertising


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6

Partner

Reach out to Travelocity (Jim Hornthal)

Customer insights differed

Technological challenges (e.g. cookies)

Revenue share instead of lead generating

Reach out to Expedia and Bookingmarkets

Confirm revenue share model (5% - 10%) and we even got a standard term







Leads





LeadsAdvertising


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6

Then we went out of the building to interview 50 people at Stanford Mall

What prevents people from traveling is time, not imagination or laziness (seasonal)

People don’t want to be nudged too often (1 per month)

Referrals from close friends more valuable than referrals from strangers

The customers value relevance of nudges



3


4


2


1


5 6 7

Nudge to enrich

life

Market size

Interviews: 16


Social NetworksTravel WebsitesEvent WebsitesUniversity EventsMerchants



Enrichment (Activities + Travel)Customer Acquisition

Enrichment (Travel)


StudentsGraduatesYoung Families

Travel Websites

Online travelers



WEEK 7 - NUDGEW

ee

k 7

Expand from travel to include activity nudges

We expanded our nudges to include activities, events, social reminders than just travels

Keep user more engaged with relevant frequent nudges






Enrichment (Travel)



Travel Websites

Online travelers



WEEK 7 - NUDGEW

ee

k 7






Enrichment (Travel)



Travel Websites

Online travelers



WEEK 7 - NUDGEW

ee

k 7

We went out of the building to interview 20 people

People also want to be nudged in other things than just travel

Mobile is the most effective medium to increase engagement

The customers want diverse nudges






Enrichment (Travel)



Travel Websites

Online travelers



WEEK 7 - NUDGEW

ee

k 7


3


4


2


1


5 6 7 8

Nudge to enrich life

Interviews: 15

Partners: 7

Pilot nudges: 20





Sourcing deals






MBA Students



Refunds

LeadsAdvertising


NUDGE Paying partner sideEnd-user side

RemoveWe

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5

nudge /nəj/

verb:to push slightly or gently, especially with the elbow, to get someone's attention, prod someone into action, etc.

noun:a slight or gentle push or jog, especially with the elbow.

Creating NUDGE








Travel Websites



WEEK 8 (FINAL) Paying partner sideEnd-user side

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CUSTOMER ARCHETYPES

Ashley Clair Alex

Age: 26 Stanford Student Worked in Hollywood Loves Adventures Wants to be nudged

relevantly, and inspired!

Age: 28 Works at mobile start-up in

San Francisco, originally from Montana

Single & dating Plays soccer, runs

marathons Likes to cook/host dinner

with friends when possible

Age: 38 Married, 1 child (4 y.o. Clay) Investment professional in

New York Volunteer coach for son’s

hockey team Commutes for work to

Manhattan every day Goes out of town to the

country for break once/month with his family

NUDGE TYPES

social push serendipity

Nudges from friends as a social push OCCURING EVENTS

(REALITY)

EVENTS YOU ARE AWARE OF(CONSCIOUS)

DESIRE(SUBCONSCIOUS)

Discovering nudges

Highest conversion rate nudges

nudge

SIMULATED NUDGE

“ As long as there is transparency between advertisers, the suggestion database and its users, this is an innovative idea. Otherwise, it is a rather subversive tool for consumer and social trends. An interesting concept either way!

”

“ Love the product idea!

”

“ This is awesome! I love it!! Just told me to walk the dish today! phenomenal and stunning all in one shot!!

”

We did a pilot to test how many people sign up for nudge

103 people try the product

42 people left email (41% signup for service rate)

NUDGE: "it's 4 months till you graduate, take your best friend out for a coffee at Coupa, and share some of the good times you have had at GSB"

SIMULATED NUDGE

We carefully selected people we know to send them tailored nudges

We sent tailored nudge to 25 people with 40% conversion rate

10 people actually like the nudge and go

4 people may take the trip in the future

11 people didn’t respond

NUDGE: "Visit the Rodin Sculpture Garden this week and get inspired. Located next to the Cantor Arts Center but accessible at all hours, the Rodin Sculpture Garden houses one of the largest collection of Rodin sculptures”

RECOMMENDING PLATFORM

Computational Matrix factorization Collaborative

filtering

Crowd-sourcedSocial nudging

Curated

Data miningSocial networks

Geography

Context-based

Customized user preference

Time

Past behaviors

Input Model

Revenue sharing (CPA)

PARTNERS

Partner

Gifts

Event + Activities

Travel

University Events

Restaurants

Facebook Ad

Facebook Fan Page

YouTube Video

Views

273,380

Unique

120,173 82

Clicks

0.030%

CTR

$0.38

CPC

83

Like

Free

CPCEngage

46

Website

Unique

430 62%

Bounce rate

2:22min

Avg time

DEMAND CREATIONW

ee

k 7

370

Days

900

89860

3

7

30

COMPETITIVE LANDSCAPE

Inspiration Planning Sharing Q&A Flash DealCommunity

Reminder

INCOME STATEMENT

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013User growth projection 2,000 20,000 50,000 500,000 1,000,000 2,000,000 4,000,000

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013Revenues Advertising N/A N/A N/A N/A N/A N/A N/A Rev. Share * $10,000 $100,000 $250,000 $2,500,000 $5,000,000 $10,000,000 $20,000,000 Total Revenue $10,000 $100,000 $250,000 $2,500,000 $5,000,000 $10,000,000 $20,000,000 Cost of Sales Customer Acquisition $60 $600 $1,500 $15,000 $30,000 $60,000 $120,000 Advertising & Promotions $1,000 $1,000 $1,000 $3,000 $3,000 $3,000 $3,000 Total Cost of Sales $1,060 $1,600 $2,500 $18,000 $33,000 $63,000 $123,000 Gross Profit $8,940 $98,400 $247,500 $2,482,000 $4,967,000 $9,937,000 $19,877,000 Expenses Development ** $645,000 $645,000 $645,000 $940,000 $1,115,000 $1,290,000 $1,465,000 Hosting $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 Other Wages *** $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 Travel $5,000 $5,000 $5,000 $10,000 $10,000 $15,000 $15,000 Office + Utilities $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 Total Expenses $763,250 $763,250 $763,250 $1,063,250 $1,238,250 $1,418,250 $1,593,250 Net Income ($754,310) ($664,850) ($515,750) $1,418,750 $3,728,750 $8,518,750 $18,283,750

California Universities

Local beta at Stanford

Go global !

Focus is key – segmentation is important

Market sizing is crucial!!!!

There is nothing more important than good team environment and culture

Mentorship is hugely important, we couldn’t have got where we are without

our Mentors help

We should be open to pivot – even at an earlier stage and trade off: The need

to be loyal to our old ideas vs. new innovations that could solve problems

based on our customer insights

Distilling insights and listening to experiments

Looking past ourselves

We have a heightened awareness of confirmation bias and try and assuage

that in our different experiments

LESSON LEARNED

WHAT’S NEXT

Incubators

CRITICAL SUCCESS MILESTONESNEXT 6 MONTHS

Initiate Cohort Analysis

Expand Beta testing to entire Stanford Campus

Test Gamification iteration and Badges

Develop machine learning and curation technology and resources to

enable scalability

Hire key resources (software developer, data scientist, marketing,

business development, social animal) and space

Why Do We Do This?

Make Your Lives Extraordinary

Date post:	19-Aug-2015
Category:	Education
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The startup owners manual sxsw

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