ENTP MIDTERM
What is a startup according to Eric Reis?
" a human institution designed to create a new product or service under conditions of extreme uncertainty. "
The Lean startup is NOT
1. dreaming small dreams pr pursing low growth 2. a structure that defeats human creativity 3. a perfunctory "theory of the moment" 4. A guarantee of success. In fact, Lean startup will often produce signals that an entrepreneurial idea should be killed quickly and that's a good thing.
business model canvas: how it works
1. select the riskiest assumptions 2. build an experience or MVP to test the assumptions on the market 3. measure customer behaviors during the experience 4. learn if your assumptions are true or false True: move onto the next assumption False: review your hypothesis
What is an entrepreneur?
not just anyone who runs a small business not a subway franchisee-execution risk is not enough (not considered an entrepreneur because they are not operating under extreme uncertainty) operating in conditions of extreme uncertainty another frequent element is high potential growth
True or false a startup will probably fails several times before getting It right T/F
true
In "Ep 3 - Prototyping,"
we should look at the business model as a story on how your idea will create, deliver, and capture value. Once you have reviewed each segment and made your first model, we should continue creating more models because we could develop better ones. way too competitive to not come up with alternatives to ideas because one of those alternatives could be what makes your startup stand out.
storytelling is critical to telling entrepreneurs
what problem you are solving, why this problem matters, why you are the right person or group of people to solve this problem.
"Ep 4 - Navigating Your Environment,"
when navigating our environment we need to be able to identify key trends, industry forces, market forces, and macro-economic forces; you should then use what you gathered to make your business model more responsive. looking at industry forces helps answer the question, "Does your model have a competitive edge today?" Then key trends help answer, "Is your model prepared for emerging trends?" market forces to help answer the question, "Is your model in line with evolving customer needs?" And finally, macro-economic forces help us answer, "How will your model adjust to macroeconomic shifts?" Answering these questions will help your business model better complement the environment, which will help with overall success.
True or False: According to Fred Wilson, you need to work for lots of other companies before you can be your own boss. True False
False
True or False: The Learn Startup process teaches that the "Just Do It" philosophy is key to startup success. True False
False
What piece of advice does Paul Graham give in the Power of the Marginal: Just try hacking something together. If you build it, they will come. Do. Or do not. There is no try. Follow the crowd, that's where the money is. All of the answers are correct
Just try hacking something together.
Entrepreneurs
Operating in conditions of extreme uncertainty with risk that goes beyond execution risk Entrepreneurs have to worry about products working, demand, more than just functioning
The three fundamental activities of The Learn Startup include all of the following except: Build Measure Learn Sale
Sale
experiments
Test your hypothesis. Ensures creation, selection, and scaling up of new technologies and innovations..
What is lean startup
The development of an MVP-Minimum Viable Product which is all about validated learning helping us Pivot or persevere, and build, measure, learn.
brainstorming myth
The myth tells them that a great idea is all they need to produce innovation, and that by generating as many ideas as possible, they will find a single notion that they can bet their new project on.
Idea vs product vs business
Tivo: a great idea The eraser pencil: great product google: all three, but especially a great business.
The Lean Startup originated from which of the following: Toyota's lean manufacturing production system in Japan. Henry Ford's assembly line. Benjamin Franklin's experiments with electricity. Tim Berners-Lee's launch of the World Wide Web.
Toyota's lean manufacturing production system in Japan.
True or False: 90% of startups fail. True False
True
Startup myths associated with lean startup: the lean startup method is only for Web 2.0/internet/consumer software companies.
Truth: The lean startup applies to all customers that face uncertainty about what customers will want. Nothing to do with the size of the company, sector of the economy, or a specific industry.
"Leaness" refers to
capital efficiency
Entrepreneurial realities:
entrepreneurialism is a learned set of skills most entrepreneurialism takes place in teams every job requires entrepreneurialism- now more than ever most entrepreneurs are 35-45 years old ideas are a dime a dozen, its execution! everybody has a boss
true or false according to Coco Meers, the best way to sell your product/services early on is online T/F
false
Entrepreneurship can't be
isolated function, department of position
the telescope and microscope: good presenters
maintain a balance between future vision and present realities high growth is what most investors are seeking but they want to see how you will get there, and that you are attentive to details key to be able to shift between telescope and microscope which is important for developing what makes a good startup.
Professors definition of lean startup
model that helps you identify the scientific method as a way to help identify failure rate so you can develop hypothesis and then identify the quickest and simplest way to work through some of the challenges to become a successful startup
why the lean startup changes everything
75% of all start-ups fail, according to research by Harvard Business School. The "lean start-up" methodology emphasizes experimentation over planning, customer feedback over intuition, and iterative design over traditional development. The methodology's concepts, including "minimum viable product" and "pivoting," have quickly taken root in the start-up world, and business schools are adapting their curricula to teach them. The lean start-up has yet to go fully mainstream and is still a buzzword whose implications companies are beginning to understand. Start-ups attempt to improve their chances of success by following the lean start-up's principles of failing fast and continually learning. A business model canvas is used to look at all nine building blocks of a business on one page. Each component of the business model contains a series of hypotheses that need testing. The lean method has three key principles: summarizing hypotheses in a business model canvas, conducting customer development to search for a business model that works, and iterative development to execute and build a formal organization.
Uncertainty
A major problem with uncertainty is that you simply cannot know what to expect. face risks that can't be foreseen or measured
Entrepreneurship is
A management approach
What is lean startup?
A method to systematically address uncertainty through rapid iteration and market learning (basically should we continue or pivot)
hypotehsis
An assumption that your value proposition, business model, or strategy builds on. All the things that would have to be true for you business idea to work.
assumptions
Assumptions are ideas that we presume to be true before taking decisions.
Clayton Christensen from Harvard said:
At the time innovation is most needed it doesn't seem necessary
Failure in organizational culture is
Bad
How can we improve success rates?
Build-Measure-Learn turns ideas into products, measure customer response, pivot or persevere Note: focus on the boring stuff-how to measure progress, how to set up milestones, how to prioritize work, etc.
Before launching crowdfunding read this
Crowdfunding has become an attractive alternative to traditional funding for businesses to start and grow. The crowdfunding economy has more than tripled in the last three years. Just 2% of $30 trillion of the U.S. long-term investment capital placed into startups could be 10 times greater than the amount angels and VCs invest annually. 67% of small businesses are looking at alternative sources of funding, and crowdfunding platforms like Kickstarter, IndieGoGo, Kiva, Peerbackers, and Fundable are making it possible for SMBs to leverage the power of the crowd in their growth. The SEC is in the process of approving the last part of the 2011 JOBS Act, which would allow smaller investors to purchase shares of a company instead of just receiving gifts for their investment. To create a successful crowdfunding campaign, one must perfect their message by starting with the problem their product or service solves, getting clear on how much money is needed, and finally, creating a compelling pitch with a call-to-action. Getting investors is about giving them something to believe in, so they will be more likely to invest. Focus crowdfunding requests on specific parts of your business or certain phases of development.
What is lean startup
Definition: fundamental frameworks for bringing scientific method to the business of entrepreneurship development of hypothesis test those hypothesis continuous innovation, testing and humility
Why Entrepreneurship is different
Entrepreneurship calls ALL of your business related skills: 1. management 2. sales, marketing and fundraising 3. finance 4. accounting 5. operations
Once employees see how fun business can be when it's centered on entrepreneurship how do you retain them?
Equity ownership, bonus, and promotion
Entrepreneurship is difficult to succeed without
Executive buy in
How to value a startup reading
Facts 📈 The market determines the value of a startup, and it is vital to accept the market valuation to raise money from investors. Entrepreneurs can influence the market by developing a process for valuing the company based on comparables and financial projections. 🏭 Comparables help determine the market rate for similar companies in the industry and geography. Lawyers and accountants are among the best advisors to help determine the value. 📊 Financial projections can be challenging for a startup, but they are necessary to determine value and defend the valuation. 💰 Profitability is crucial in determining the value of a startup. Businesses that are not profitable do not have much liquidity and are difficult to sell. ⏰ The time it will take a startup to become profitable affects its value. A business with a long road to profitability will be worth less than one with a quick path to profitability. 🎨 Entrepreneurs need to use creativity to value their startup businesses. Traditional valuation approaches are akin to painting by numbers.
How does The lean startup methodology help?
Lean Startup avoids building a product/service no one wants Lean startup brings a framework to the most uncertain process you can imagine preserves capital and time avoids "circling the truth"
Money game and how to fund a startup
Many companies look to many outlets to obtain money: savings, credit cards, banks, friends and family, and venture capitalist. Credit cards- largest sources of capital for the company when savings are no longer a resource Banks- can be a difficult outlets because they are picky who they decided to provide money to . If you have no asset to provide banks won't help Friends and family- and option when you don't have savings left and have tapped out credit cards Venture capitalist- see the potential in young business and can offer them money so that they can obtain growth capital Angel investors- individual wealthy investors can provide money and advice to companies
We have two videos on entrepreneurial sales concepts. One from Craig Portman and one from coco meers, you don't need to remember the details of of which person said what, but the fundamental point of these assignments was to point out that
Mastering sales is incredibly important for an entrepreneurial company, and sales often requires entrepreneurs to get out from behind the computer
To overcome conventional thinking
Show colleagues what entrepreneurs are doing to disrupt business Engage in innovation ecosystem Imagine how your business model could be. Disrupted Discuss benefits of failure Incentivize entrepreneurship
Compensation, bonuses, promotions are all oriented towards the
Status quo
Leadership commitment to innovation is necessary, not sufficient T/F
True
Risk aversion generally rules in organizational culture T/F
True
True or False: Great new things often come from the margins, and yet the people who discover them are looked down on by everyone, including themselves. True False
True
True or False: The Lean Startup is about developing hypotheses and testing those hypotheses. True False
True
True or False: The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself. True False
True
Startup myths associated with lean startup: Lean Startups are small bootstrapped startups
Truth: Lean Startups are ambitious and are able to to deploy large amounts of capital.
Startup myths associated with lean startup:Lean startups replace vision with data or customer feedback
Truth: Lean Startups are driven by a compelling vision and are rigorous about testing each element of this vision.
Startup myths associated with lean startup: Startup success is about achieving goals
Truth: if we build something nobody wants... what does it matter if we accomplish it on time, on budget, with high quality, and build a beautiful design.
Startup myths associated with lean startup: lean means cheap. lean startups try to spend as little money as possible
Truth: the lean startup method is not about cost, it is about speed, if we can reduce time between pivots, we can increase our odds of success before we run out of money
Startup myths associated with lean startup: Startups are created in basements.
Truth: there are no facts inside the building. Ge out of the building. want you to start testing, thinking, experimenting, and talking to real customers
entrepreneurs solve problems
What kind of problems are entrepreneurs actually solving examples from lecture slides: Beauty Butler Nova Vi Fro Pro Upointz MH waste collection Sole Server WithU
According to Paul Graham, what is a technique for determining when your'e on the right track?
When people complain that you're unqualified, or that you've done something inappropriate. If people are complaining, that means you're doing something rather than sitting around, which is the first step. And if they're driven to such empty forms of complaint, that means you've probably done something good.
Imagine you are the founder and CEO of an early stage startup. In addition to you there are two software developers on the team and an intern from the local university. that's it. Who will most likely be doing most of the sales? the intern an outside sales organization you will hire the internet you the CEO
You the CEO
Minimum viable product
a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle. In industries such as software, the MVP can help the product team receive user feedback as quickly as possible to repeat and improve the product.
Target market
a set of buyers sharing common needs or characteristics that the company decides to serve
according to the lean startup, _____ eliminates wasted time and resources by developing the product iteratively and incrementally agile development hypothesis testing all the above waterfall development trial and error
agile development
the brainstorming reality
all ideas must be allowed to "breathe" spontaneity in the brainstorming meeting is key be unconstrained in sharing ideas be constrained in offering feedback or critiques
We use the business model canvas
as a great way to model our lean startup business model (document plan)-> business model canvas (identify the riskiest parts of your plan)-> systematically test your plan
When sharing an entrepreneurial vision
avoid reading slides, maintain eye contact, use natural gestures, avoid um and uhhh
The telescope and microscope
balance vision and hypothesis testing vision: motivation, investors hypothesis testing: day-to-day discipline of building something new the analogy of the telescope and microscope the best entrepreneurs get good at switching between the two
Pivots
changing some aspect of its core products or services. Businesses might pivot to better meet customer demand, to shift their target audience to boost sales or some combination of both.
one of the critical differences between startups and existing ventures is that while ______ execute a business model, _____ look for one
existing companies, startups
true or false entrepreneurs need to hire professional sales people early on to ensure success T/F
false
true or false: the first thing every founder must do is create a business plan T/F
false
Startup success is a consequence of: Good genes Being in the right place at the right time Following the right process The right marketing campaign
following the right process
Build-Measure-Learn
helps us turn an idea into something that can actually turn into a successful startup
Kenneth Denman, Importance of a Scalable Business Model and Architecture
how important architecture is when you are looking at solving a problem because "architecture will allow you to live or die at the end of the day." both the front and back ends of a startup must work well together, and if one fails to be successful, your thoughts involving the business are not possible. what made companies like eBay and Amazon successful was that they had a core platform thought, and even though there were still issues to be worked out and problems that needed to be solved, their "model and architecture scaled." big companies can't take on something considered small because they "don't have a vision for the size of it." He argues that there wouldn't be enough return on investment and a lack of opportunity to take on small ideas. this allows small businesses and new entrepreneurs to create businesses and markets that larger companies "don't have the time, the focus, or the vision" for.
What kind of innovation?
innovation, for purposes of our study, is not just incremental improvement not just a version 2.0 vs 2.1. We are looking for really big jumps in innovation that exist under key steps of uncertainty. not feature creep real key is bringing a fundamentally new product or service to the market or solving a problem that hasn't been solved.
what is innovation
its about disruptions ex: Netflix vs blockbuster Craigslist vs classified ads uber vs yellow cab smart phones-> address book, compass, music, camera, alarm clock, calendar, books, calculator, map, paper tickets, camcorder, newspapers
Lean startup is everywhere
large organizations: - new opportunities for innovation and productivity -seeking continuous sources of organic growth Startups: -disrupt existing markets Not-For-Proft Organizations: looking for ways to create value
pitch deck
needs to tell a story in a simple, accessible way typically 10-20 slides appropriate mix of images and text should include: problem, solution, market, business model, team, financial projections, and finish of with an ask (ex:what is the purpose, or motivation?)
startups
new business ventures created "from scratch"
"Ep 2 - Visualizing Your Business Model,"
nine essential business blocks comprise the business model. when you get all nine blocks working together, you have answered the fundamental questions that any business model must solve. customer segments- all the people or organizations that are creating value. within each segment, a specific value proposition is assigned, which helps create value for your customers. channels - allow customer interaction and delivering value. customer relationships- the relationships you are trying to create with your customers and how you retain them. revenue streams- the pricing mechanism that your business model captures value is categorized under. key resources -show which assets are essential so you can describe the infrastructure needed to capture value. Key activities- show what needs to be able to perform well. key parties- show who can help you strengthen your business model. once you have been able to understand the business model, you will be able to identify the cost structure.
An effective elevator pitch is
one or two sentences that describe your business enough for everyone to understand it Needs to be honed and worked on over time ex: Facebook: "an online platform that allows friends to share comments photos and videos about their lives, and respond to those posts."
Customer Development
portion of the Lean Startup methodology aimed at understanding the problem. requires vetting the opportunity and validating that the proposed solution will indeed meet customer needs and demand.
Crowdfunding
raising money for a project or venture by obtaining many small amounts of money from many people
myths: entrepreneurialism really only happens in startups
reality: every job requires entrepreneurialism- now more than ever
myths: the most important thing is a great idea!
reality: ideas are a dime a dozen- it's execution, making sure you are solving a real problem for real people
myths: entrepreneurs are lone wolves
reality: most entrepreneurialism takes place in teams
myths: entrepreneurs are young
reality: most entrepreneurs are 35-45 years old
myths: entrepreneurs are born
reality: entrepreneurialism is a learned set of skills
myths: entrepreneurs are their own boss
reality: everybody has a boss
bootstrapped
refers to the process of launching and growing a business without external help or capital. It involves starting from the ground up, using personal savings and/or existing resources instead of relying on investors or loans.
The lean startup helps us answer
should we build this new product or service? how can we increase our odds of success?
Why lean startup?
succeeding at an entrepreneurial endeavor is REALLY hard! 90 percent of startups fail The failure rate for entrepreneurial endeavors within companies is probably similar extreme uncertainty they are facing technology risk, founder risk, execution risk
Ep 1- Getting From Business Idea to Business Model,"
success is far from assured, even if you have a great idea. for every great idea, thousands of great ideas could have been better. So to not be one of the thousands of ideas to flop, you must have a great business model. Once your idea is live, it will interact with consumers. And if the problem you are trying to solve does not intrigue those consumers, your idea will be added to the list of other failures. there is still the chance that even if your customers like your value proposition, you can still have a chance at failing if it is not scalable or financially stable. it is important to have reliable channels to reach your target audience; you need to have a strong business plan and structure so that as you continue to grow your business so you can avoid failure as much as possible. If any of these things do not run accordingly, then that can mean your idea is a bust. When using the business model you can map out the challenges you could face so that you can develop a way to control them and stay organized throughout your process. You can then explore, plan, and manage those potential challenges. if you want to see success in your business model, you need to show up being creative, willing to work and have a passion for the idea you are trying to make a reality.
What are the kinds of uncertainties according to Reis?
technical/product risk - can we build this? customer/market risk - if we build this, will people use /buy it business model risk -can we find a way to make money from it?
Why entrepreneurship is different
you're creating something new and you are constantly "telling and selling" your story critical to tell your story via effective presentations through an elevator pitch or a pitch deck
do things that done scale
💡 Startups don't just take off by themselves; founders have to make them take off. 💼 Recruiting users manually is the most common unscalable thing founders have to do. 💳 Stripe, a successful startup, used the "Collison installation" technique of setting users up on the spot. 💹 Founders often underestimate the power of compound growth and resist recruiting users individually. 🏡 Airbnb was able to succeed because of the heroic measures they took early on, like going door-to-door to recruit users. 🚼 Most startups are fragile initially, and inexperienced founders often judge them by the standards of established ones. 🚀 It's important for founders to see the full potential of what they're building, as dismissing their startup could be the biggest danger.
How to Forecast Revenue and Growth
💰 Start with expenses, not revenues. It's easier to forecast expenses than revenues. Start with estimates for the most common categories of expenses: Fixed Costs/Overhead, Rent, Utility bills, Phone bills/communication costs, Accounting/bookkeeping, Legal/insurance/licensing fees, Postage, Technology, Advertising & marketing, Salaries, Cost of Goods Sold, Materials and supplies, Packaging, Direct Labor Costs, Customer service, Direct sales, Direct marketing. 💰 Forecast revenues using both a conservative case and an aggressive case. Create one set of projections with conservative assumptions and one with aggressive assumptions to make conservative assumptions and then relax some of these assumptions for your aggressive case. 💰 Check key ratios to ensure your projections are sound. Beware of assumptions that make your gross margin increase from 10 to 50 percent. You should expect positive movement with your operating profit margin. Divide the number of employees by the total number of clients you have to check total headcount per client. 💰 Double your estimates for advertising and marketing costs since they always escalate beyond expectations. 💰 Triple your estimates for legal, insurance, and licensing fees since they're challenging to predict without experience and almost always exceed expectations. 💰 Keep track of direct sales and customer service time as a direct labor expense even if you're doing these activities yourself during the startup stage because you'll want to forecast this expense when you have more clients. 💰 Building an accurate set of growth projections for your startup will take time, but it is worth it to avoid unexpected expenses later on.
