Class 6 / 12

March 23, 2014

Jen van der Meer | jd1159 at nyu dot edu

Josh Knowles | chasing at spaceship dot com

LEAN LAUNCHPAD AT NYU ITP

6:30 – 7:30: Activities, Resources and Costs and Financials

7:30 – 8:30 – Presentations

8:30 Focus on MVP – Josh

9:00 – 9:30 Alex Herrity – Signals

TODAY:

.

CLASS TIMEFRAME 2015

2/2Business ModelsCustomer Development

2/9Value Proposition Research tools

2/16President’s Day

2/23Customer SegmentsResearch Tools

3/23Spring Break

3/9Customer RelationshipsProduct Development

3/23ResourcesActivities + Costs

3/30Product DevelopmentUX and User InterfaceDesign

4/6UI UX Part 2

4/13Product DevelopmentUser test

4/20Product development

4/27Product MVP

May!Delicious CelebrationLessons Learned

3/2Revenue StreamsDistribution Channels

Financial

Physical

Intellectual

Human

KEY RESOURCES

FUNDING: YOU USED TO HAVE TO PICK A LANE

NOW IT’S A PARADOX OF CHOICE

WHICH MAKES SENSE FOR YOUR .CO OR .ORG?

KEY DIFFERENCES

WHICH WILL YOU CHOOSE

BOTH REQUIRE MONEY (AND LOVE) TO SUSTAIN AND GROW

ENTREPRENEURSHIP IS ACTUALLY DOWN

http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf

A sharp uptick in early-stage firm failure rates are playing an increasing role over time. The failure rate of firms aged one year—the youngest firms in our data outside of freshly launched ones—increased from a low of 16% in 1991 but rose steadily and persistently to reach 27% by 2011.

IN TECH FIRMS ESPECIALLY (VS. WHAT WE BELIEVE FROM TECH INDUSTRY COVERAGE)

http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2014/02/declining_business_dynamism_in_us_high_tech_sector.pdf

Less well known is that the share of young firms in the high-tech sector has exhibited amore pronounced secular decline in the post-2002 period than in the rest of the economy. Consistent with that pattern, we have found that the pace of business dynamism, as measured by the pace of job reallocation, has declined in the high-techsector in the post-2002 period at a pace that exceeds that of the overall economy.

Tech firms = 4.1% of all US firms

NON PROFITS ARE 5% US GDP, 10% JOBS

http://www.nytimes.com/2014/03/09/business/for-nonprofits-a-bigger-share-of-the-economy.html?_r=0

All told, roughly 1.6 million nonprofits employed 10 percent of the domestic work force in 2010 and accounted for 5 percent of G.D.P. Nonprofits are all exempt from corporate taxes.

Financial

Equity

Friends Family

Angel

VC – growth

Social impact investing

Equity Crowdfunding

Convertible Debt

Debt that converts to equity

Debt

Small business loans

Trade finance

Working capital debt

Line of credit

Non dilutive grants

SBIR, STPR grants

Open Innovation prizes (XPRIZE, Kaggle)

Social impact foundations (RWJF)

Project Crowdfunding

KEY RESOURCES: FINANCIAL

FOR PROFIT FUNDING SOURCES

• “A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” – Eric Ries

• “A startup is a company designed to grow fast.” –Paul Graham. Y Combinator.

– For a company to grow big, it has to make something a lot of people want. To reach and serve all of those people.

• “A startup is a temporary organization designed formed to search for a scalable repeatable business model.” – Steve Blank. – Most startups change their business model multiple times. – A scalable startup is a special class of startup – world class team, large

vision, large target market, passionate belief and a reality distortion field.

ARE YOU A STARTUP, OR A SCALABLE STARTUP?

NOT ALL NEW COMPANIES ARE GROWTH STARTUPS

FOR PROFIT HYBRIDS

• Social enterprise social or environmental purpose, may be willing to limit scale opportunities to meet more local goals, or directly serve the need.

• B-corps are a type of social enterprise that also agrees to transparently share financial results.

• Social businesses (Yunnus): for profits that re-invest to meet a social need.

• Social impact growth aiming for scale and for social/environmental outcomes, and high growth returns to investors.

NOT FOR PROFIT FUNDING SOURCES

WHICH WILL YOU CHOOSE

BOTH BENEFIT FROM CUSTOMER DISCOVERY – REDUCE YOUR RISK AND VALIDATE THERE IS A PROBLEM TO SOLVE

Office building/office

Factory/processing

Vehicles

Machines

Hardware

Raw materials/ingredients

Components

KEY RESOURCES: PHYSICAL

KEY RESOURCES

Co-founders

Employees

Contractors

Development firms, contract manufacturing

HUMANS – COMPANY

Mentors – make you smarter about your career

Teachers – provide specific subject matter expertise

Coaches – help you achieve a goal

Advisors – help you make your company succeed

Board members – help the investors succeed

Surround yourself with people that give critical feedback, and help you through a major founder failure point – when you believe your vision is fact.

HUMANS – MENTORS, ADVISORS

Developer/engineer

Designer

Marketer

Scientist

Community manager

When do you need a CEO?

A CFO?

An HR person?

A VP of Sales?

A Chief Revenue officer?

TALENT

https://medium.com/spook-studio/why-happiness-should-be-your-business-model-f866d92cd898

Income statement

Balance sheet

Cash flow

Are these the financials you need to understand?

Yes, because it’s the language investors speak, and it’s good to understand the flows of financial reporting –but this is a system used to compare financial performance for investors.

These do not supply execution metrics to help you make decisions and formulate/test hypotheses.

COSTS

COSTS – EXECUTION METRICS

Viral coefficientCACLTVConversion rateRetention rate

What are vanity metrics?

Registered users, downloads, and raw pageviews. A mobile apps could have millions of downloads but only a few hundred thousand active users, or a freemium website might see exploding traffic growth but barely any conversions to paying users. They are metrics that make you feel good, bad for guiding execution.

What metrics will drive you through MVP?

COSTS – EXECUTION METRICS

UNIT ECONOMICS

32

WHAT CAME BEFORE STEVE AND ERIC

FOR NEXT TIME3/30/15

.

POST BREAK PREP:

We’ve toured the canvas.

But you’re not done.

For March 30: Prepare to run through the canvas:

• What is your clear value proposition, how have you validated.

• What segment(s) are you pursuing, how have you validated.

• What resources will you need to get to MVP, and what are the costs?

• What other key elements of the business model canvas do you need to test.

• What remaining hypotheses do you have?

We are here for you, all of the mentors and advisors. Please reach out even if you don’t think you need help.

NEXT: CANVAS REVIEW AND FEEDBACK