Lean Startup presentation for Maples Investments by Steve Blank and Eric Ries

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<ul><li> 1. The Lean Startup Low Burn by Design not CrisisSteve Blank and Eric Ries </li></ul> <p> 2. The EconomyBefore Cash was readily available Follow on nancing was readily available After Debt markets are tight IPO &amp; M&amp;A window closed VC!s deep pessimism Venture fund returns have been on decline for a decade- no end in sight 3. State of Startups High burn rate Swing for the fences Full management teams Assume customer is known Assume features are known Assumes growth is by executionTraditional startups are ghting yesterdays war 4. Top Gun dogfight scene 5. Warfare Changes Forever 6. Boyd: Winning is about Agility The OODA Loop Observe Orient Decide Act 7. Boyd Redefines the Rules to Win Agility requires a continuouscycle of interactions with theenvironment But you cant do it from a desk 8. Winners are Those Who Can MoveFaster Than Their Competitors Winning requires constant assessment of change and ways to mitigate risk Iterating faster than competitors yields substantial advantage 9. Facing Reality at Todays Startup There is no 2nd Place Uncertain environment Rapid, unanticipated changesthat lead to disorientation Constant threats to any initiative Burn rate (time, fuel, bullets,dollars) limits window ofopportunity 10. Using OODA to Create Lean StartupsAnd Changing the Startup Rules CustomerDevelopment AgileProductDevelopment 11. Lean Startups Building a New Wave of Companies in Silicon Valley Continuous customerCustomer Development interaction Revenue goals from day one No scaling until revenue Assumes customer and features are unknownsAgile Product Low Burn by Design - Not Development Crisis 12. IMVU 13. Founding IMVU History:- Company founded in April 2004- Founders audit Steve Blank's B-school class Fall of 2004 Tactics:- Shipped in 6 months- Charged from Day 1- No press releases- Ship 20 times a day Results:- Continuous iteration with customers- 2007 revenues of $10MM Here's what it looked like to their first venture investors 14. IMVU: Q4 2004 Product9,000 $8,000- 3D Instant Messenger (IM) add-onhanging out online with friends 8,000 $7,000 - Piggy-back on existing buddy lists7,000$6,000and IM programs6,000 Customer reaction$5,000 - Avatar customization is key appeal5,000$4,000- Add-on concept is confusing. They 4,000actually want a separate buddy list $3,0003,000 So we... $2,000- Ditched the IM add-on idea2,000 1,000 $1,000 0$0 Feb-05 Dec-04Mar-05Jan-05Nov-04May-05 Aug-05 Apr-05Jul-05 Jun-05 15. IMVU: Q1 and Q2 2005 Product- 3D IM service for hanging out with 9,000 $8,000 friends and meeting people 8,000 $7,000- Introduced Chat Now feature (instant 7,000matching)$6,000 Customer reaction 6,000 $5,000- Meeting new friends is as important5,000as talking with existing friends (50/50) $4,000 - Not enough people on IMVU 4,000 $3,000- Retention is a problem 3,000 So we...2,000 $2,000 - Scaled up advertising budget (to 1,000 $1,000$40/day)- Learned about retention from market 0$0leaders (Cyworld, Myspace)Feb-05Dec-04 Mar-05 Jan-05 Nov-04 May-05Aug-05Apr-05 Jul-05Jun-05 16. IMVU: Q3 2005 Product 9,000 $8,000 - 3D IM service plus avatar home 8,000 $7,000pages- Also introduced messages, gifts, 7,000 $6,000picture galleries and blogs 6,000 Customer reaction $5,000 - Avatar home pages are highly 5,000 $4,000addictive4,000- 2D and 3D complement one 3,000 $3,000another- Messages in home pages and real2,000 $2,000 time interaction complement oneanother1,000 $1,0000$0Feb-05Dec-04 Mar-05 Jan-05 Nov-04 May-05Aug-05Apr-05 Jul-05Jun-05 17. Lean Startup Principles Extraordinary Value at Low cost in Little Time Leverages:Customer- Technology commoditization Development- Agile management practices- Customer Development Designed to test hypothesis and answer the unknownsAgileProductDevelopment 18. The Lean StartupAgile Product Development Continuous cycle of Product Development- Product release cycle inhours not years- Tightly coupled with customerdevelopment- Minimum feature sets,Agile maximum customer coverage Product Development 19. What has changed? Technology Lean Startups Leverage Commoditized Technology Licensed Software/Open Source/Proprietary HardwareCommodity Technology 20. Product Development a la Microsoft Unit of progress: Advance to Next StageWaterfall Problem: knownSolution: known 21. Product Development at Typical Venture Startup Assumes Customers and Markets are Understood Agile (XP)! Product Owner orin-house customer Problem: knownSolution: unknown 22. Product Development at Lean StartupAssumes Customers and Markets are UnknownCustomer Development EngineeringCustomerCustomer CustomerScale Discovery Validation CreationCompany Data, feedback, insights Problem: unknown Solution: unknown Hypotheses, experiments, insights 23. The Lean StartupCustomer Development Continuous cycle of customer interactionCustomer Development- Rapid hypothesis testing aboutmarket, pricing, customers, - Extreme low cost, low burn,tight focus- Measurable gates for investors 24. The Lean Startup Customer Development Parallels Agile Development Agile DevelopmentConcept /AgileContinuous Continuous Business PlanDevelopment TestShipCustomer DevelopmentCustomerCustomer Customer Company Discovery Validation Creation Building 25. Customer Development Turns Market Risk/Product Fit Hypothesis into Facts CustomerCustomerCustomer Company Discovery ValidationCreation Building Discovery- Test hypotheses I.e. problem and product concept Validation- Build a repeatable and scalable sales process Creation- Create end-user demand and fill the sales pipeline Building- Scale via relentless execution 26. Lean Startup Advantages CustomerDevelopment Builds low-burn companies by design- Low cost market risk testing Agile Organized around learning andProductDevelopment discovery Right model for current conditionsThe next wave of capital efcient startups </p>