REALITY MARKETING FOR THE STARTUP Stanford Technology Venture - PowerPoint PPT Presentation

REALITY MARKETING FOR THE STARTUP Stanford Technology Venture Program | MS&E 273 Technology Venture Formation Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Agenda  Where Startups Go Wrong  What are the 5 things that Really Matter Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

The Balance  You don’t yet know what you don’t know  The clock is ticking… Time-to-market Completeness Risks Risks • Foregone conclusions • Analysis paralysis • Kool-aid reality • Petri-dish reality The Right Balance Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Market Validation – the 5 filters Unmet Need Big Opportunity Sustainable Competitive Positioning Scalable Business Why us? Why now? Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Customer Development - Discovery - Validation CEE 246 Entrepreneurship in Civil & Environmental Engineering 6 Stanford University

Business Model Canvas www.businessmodelgeneration.com CEE 246 Entrepreneurship in Civil & Environmental Engineering 7 Stanford University

CEE 246 Entrepreneurship in Civil & Environmental Engineering 8 Stanford University

Sample BMC: Locate (CHAAT) CEE 246 Entrepreneurship in Civil & Environmental Engineering 9 Stanford University

Webvan Case Study  Founded Dec 1997, raised $10M  Targetted $450B Grocery market with online shopping and delivery model  Strong Founding Team, including CTO, Peter Relan, IITD IT Guru  Raised additional $400M in VC funds in 2 years  Launched Product in Q3, 1999  Raised S400M in IPO in Q4, 1999  Went Bankrupt in 2000 CEE 246 Entrepreneurship in Civil & Environmental Engineering 11 Stanford University

Lessons from Webvan  ASSUMING "I KNOW WHAT THE CUSTOMER WANTS"  ASSUMING "I KNOW WHAT FEATURES TO BUILD"  FOCUS ON LAUNCH DATE  EMPHASIS ON EXECUTION INSTEAD OF HYPOTHESES, TESTING, LEARNING AND ITERATION - TRADITIONAL BUSINESS PLANS PRESUME NO TRIAL AND NO ERRORS  EMPHASIS ON JOB TITLES VERSUS GETTING THE JOB DONE  SALES AND MARKETING EXECUTE TO A PLAN  PRESUMPTION OF SUCCESS LEADS TO PREMATURE SCALING  MANAGEMENT BY CRISIS LEADS TO DEATH SPIRAL  Relan insight: EGO of CEO – REFUSAL TO ACKNOWLEDGE ERROR AND PIVOT, ULTIMATELY LED TO BANKRUPTCY CEE 246 Entrepreneurship in Civil & Environmental Engineering 12 Stanford University

Unmet Need Unmet Need  Who has “hair -on- fire”?  Segment of market that absolutely needs your product Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Find A Big Opportunity  Is there an opportunity?  Will it be big? Big Opportunity Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Size The Market Build a tops down and bottoms-up model Total Market • Analyst data • Proxy modeling Total Addressable Market Your Projected Share • Empirical Your revenue and unit forecast • Qualitative research Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Billion Dollar Market? Stratio Total Address- Semiconductor able substrate material, Market $34.1B Optical Served semiconductor market substrates, $3.75B Initial Optical silicon Target photonics market, $1B Segment + growing at 75% Base-camp Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

What is the Category? Existing New Market Market A better, faster, cheaper A new invention for a alternative for today’s new category category Expanded Re-segment Market Market Niche Market A specialized solution for a niche category Stanford Technology Venture Program | MS&E 273 Technology Venture Formation

Unmet Need  Who has “hair -on- fire”?  Segment of market that Burning Need absolutely needs your product Burning Need CEE 246 Entrepreneurship in Civil & Environmental Engineering 18 Stanford University

Customer Discovery – Overarching Principles  Identify most important items to demonstrate  Common pitfalls to overcome  Important success factors to deliver  “In companies such as this one….”  80/20 vs. 70/5  Develop a plan to prove to yourselves; you’ll then be able to prove to others  Use voice of the customer to answer difficult questions CEE 246 Entrepreneurship in Civil & Environmental Engineering 19 Stanford University

Types of Discovery Revenue/Orders Execution- LOI / MOU Users/Stats Referenceable Customers Proxies Quotations Industry reports Credibility Surveys Public research Anecdotes Traditional Public sources quantitative “We believe” research methods Statistical Significance CEE 246 Entrepreneurship in Civil & Environmental Engineering 20 Stanford University

“70 - 5” – Better Than “80 - 20” Assumption Important Risk to Common Belief Driver of Overcome Success √ √ TAM √ Target segment(s) √ Burning need? √ Customer behavior √ Willingness to pay / value prop √ Customer acquisition model √ Business model √ Partnerships Environment (dependencies) CEE 246 Entrepreneurship in Civil & Environmental Engineering 21 Stanford University

Make a Plan For Addressing Each Important Item Example: Customer behavior:  What behavioral pattern are you trying to change?  How will you determine whether you have demonstrated the possibility of change (metrics)?  What sources will you tap into (discuss)? Who will do what, when – Gantt chart with clear deliverables?  How well will you be able to answer the tough investor question? CEE 246 Entrepreneurship in Civil & Environmental Engineering 22 Stanford University

Execution Beats Hypotheses How will I respond to those difficult questions…  Google AdWords  Landing page  Analytics regarding customer behavior - users  Actual $ changing hands  MOU/LOI  Build your product or service and get reactions and statistics  Screen-shots, (fake) demos, make-a- little…. CEE 246 Entrepreneurship in Civil & Environmental Engineering 23 Stanford University

Hierarchy of Product Execution Product release User validation Beta Alpha Prototype Mock-up Screen shots CEE 246 Entrepreneurship in Civil & Environmental Engineering 24 Stanford University

Hierarchy of Sales Execution $ Users LOI / MOU for Beta customers Potential customers who can be contacted as references Written references from potential customers Names of customers CEE 246 Entrepreneurship in Civil & Environmental Engineering 25 Stanford University

How do I Get to Talk With Folks?  LinkedIn  Social networks  Alumni networks  Relentless pursuit – “name names”  Salesperson’s approach  Associations – Directory of Associations  Email lists CEE 246 Entrepreneurship in Civil & Environmental Engineering 26 Stanford University

Example Source of Information: Interviews – Overcome the Fear  Prepare  Target interviewees  Land meetings / phone calls  Develop interview guide  Execute  2-on-1 for important face-to-face meetings?  Good experience for interviewee  Achieve goals of interview – different for different stages  Follow Up  Thank you  Future meetings  Other targets CEE 246 Entrepreneurship in Civil & Environmental Engineering 27 Stanford University

Interviews – Pacing 1 st Stage: 2 nd Stage: 3 rd Stage: Open-ended React to product LOI / MOU Broad Validate specific need Intent to purchase Wide net Determine target market and value proposition Purchase order Listen to their motivations / needs Modify specs CEE 246 Entrepreneurship in Civil & Environmental Engineering 28 Stanford University

Interview Process Considerations  Target interviewees  Interview notes  How to “learn” and iterate  Combine insights with other data  Set stage for future discussions / business meetings / Board of Advisors CEE 246 Entrepreneurship in Civil & Environmental Engineering 29 Stanford University

Survey Considerations  Survey development process  Sample considerations (size, bias)  Method of surveying  Level of detail  Quantitative vs. qualitiative  Sources of survey information  How to present / report CEE 246 Entrepreneurship in Civil & Environmental Engineering 30 Stanford University

Other Sources of Information  Competitors’ websites  Census data  10Ks, S-1s  Conferences – rich for intelligence and interviews  Industry reports  Trade publications  Stanford network  Input from instructor team and guests: all 50 of us – sort it out CEE 246 Entrepreneurship in Civil & Environmental Engineering 31 Stanford University

Customer Discovery - Why Speak Validate Answer in with your the voice credibility target and of the and business customer authority model CEE 246 Entrepreneurship in Civil & Environmental Engineering 32 Stanford University

Customer Discovery - How Tailored Analytical Scrappy to YOUR – be AND business intuitive creative “70/5” CEE 246 Entrepreneurship in Civil & Environmental Engineering 33 Stanford University