Edmund Pendleton Lead Instructor, NSF I-Corps Assistant Faculty Director, NSF I-Corps Director, DC I-Corps
Before we start
I-Corps Story
$7 Billion
How can we increase the economic impact of the research dollars invested every year?
NSF I-Corps Lean LaunchPad Course
Developed by entrepreneurs
Taught by entrepreneurs
I-Corps Nodes
DC Regional Node
National Regional
National Regional
What will you do?
Jump In
100 Interviews
But why?
Everyone has a plan
until he gets punched in the face.
Search for Product-Market Fit
Build a Business Model
Go No-Go
Startup Story
My startup set out to change an entire industry
1600s Night Caps
1700s Tri-corner Hats
1800s Top Hats
1900s Fedora Hats
1990s Hard Hats
More innovation in hats
We had a much better way
And these guys said so
What Happened?
10 years $20M later
Why are we here?
Our Goal
Improve Odds
Pick Winners
Pick Winners
Startup Statistics
Create More Winners
Shift the Curve
Reduce Risk Fewer Strikeouts
Reduce Risk Fewer Strikeouts More Base Hits and Home Runs!
What we Used to Believe What we Now Know
What we used to believe
Startups are smaller versions of large companies
What we now know
Startups are NOT smaller versions of large companies
Startups search Companies execute
No business plan survives first contact with customers
Tyson s Law
for startups
Planning comes before the plan
Business Models
Business Model Canvas Who are your Key Partners? Who are your key suppliers? 6 What are you getting from them and giving to them? 7 What Key Activities do you require? Manufacturing? Software development? Personal concierge service? Etc. 8 What customer problems are you helping to solve? What customer needs are you satisfying? 1 How will you get, keep, and grow customers? 4 3 Who are your most important customers? What are their archetypes? What job do they want you to get done for them? 2 What Key Resources do you require? Financial? Physical? Intellectual property? Human resources? What are key features of your product/service that match customer problems/needs? Through which channels (sales, distribution, support) do your customers want to be reached? What are most important costs inherent in your business model? What is mix of fixed and variable costs? 9 How will you make money? What is revenue model? What are pricing tactics? 5
Iterate and Pivot Who are your Key Partners? Who are your key suppliers? 6 What are you getting from them and giving to them? 7 What Key Activities do you require? Manufacturing? Software development? Personal concierge service? Etc. 8 What customer problems are you helping to solve? What customer needs are you satisfying? 1 How will you get, keep, and grow customers? 4 3 Who are your most important customers? What are their archetypes? What job do they want you to get done for them? 2 What Key Resources do you require? Financial? Physical? Intellectual property? Human resources? What are key features of your product/service that match customer problems/needs? Through which channels (sales, distribution, support) do your customers want to be reached? What are most important costs inherent in your business model? What is mix of fixed and variable costs? 9 How will you make money? What is revenue model? What are pricing tactics? 5
More startups fail from a lack of customers than from product / tech failure
More startups fail from a lack of customers than from product / tech failure
Founders run a Customer Development Team no sales, marketing or business development
Entrepreneurial education begins with the search for a Business Model
Putting search first is a radical change not just one more methodology or a fad
Get out of the building!
Business Models Customer Development
What s a company?
What s a company? A business organization that sells a product or service in exchange for revenue and profit.
What s a startup?
A temporary organization designed to search for a repeatable and scalable business model
A temporary organization designed to search for a repeatable and scalable business model
A temporary organization designed to search for a repeatable and scalable business model
A temporary organization designed to search for a repeatable and scalable business model
Startup aims to become a company
How are companies organized?
How are companies organized? Companies are organized around Business Models
What s a Business Model?
or how a company makes money!
Customer Segments Who are your most important customers? What are their archetypes? What job do they want you to get done for them?
Customer Segments have Customer Types
Customer Types End User
Customer Types End User Influencer
Customer Types End User Influencer Recommender
Customer Types End User Influencer Recommender Decision Maker
Customer Types End User Influencer Recommender Decision Maker Payer
Customer Types End User Influencer Recommender Decision Maker Payer Saboteur
Value Propositions What customer problems are you helping to solve? What customer needs are you satisfying?
Business Model Canvas Channels Through which channels (sales, distribution, support) do your customers want to be reached?
Business Model Canvas Customer Relationships How will you get, keep, and grow customers?
Business Model Canvas Revenue Streams How will you make money? What is revenue model? What are pricing tactics?
Business Model Canvas Key Partners Who are your Key Partners? Who are your key suppliers? What are you getting from them and giving to them?
Business Model Canvas Key Activities What Key Activities do you require? Manufacturing? Software development? Personal concierge service? Etc.
Business Model Canvas Key Resources What Key Resources do you require? Financial? Physical? Intellectual property? Human resources?
Business Model Canvas Cost Structure What are most important costs inherent in your business model? What is mix of fixed and variable costs?
How do we build a Business Model?
9 Guesses Starting Point Guess Guess Guess Guess Guess Guess Guess Guess Guess
But realize these are Hypotheses
But realize these are Hypotheses Guesses!
How do we turn these into facts?
Customer Development
Search for Product-Market Fit Discover whom your customers are
Search for Business Model Validate customers with early sales
Sales, Sales, Sales Scale sales by creating demand
Startup to Company Build out organization and processes
I-Corps Focus
I-Corps Focus Customer Discovery
I-Corps Focus Search for Product-Market Fit
Customer Discovery in Four Steps
Step 1: State your Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess
Step 2: Test the Problem
Step 2: Test the Problem Identify customer problems and needs
Step 2: Test the Problem Identify customer problems and needs Test hypotheses about CS and VPs
Step 2: Test the Problem Identify customer problems and needs Test hypotheses about CS and VPs iterate and pivot
In addition to Value Propositions
Also talk to Customers about these Boxes Where do you buy products today?
Also talk to Customers about these Boxes How do you find out about new products?
Also talk to Customers about these Boxes What would this be worth to you?
Also talk to Customers about these Boxes
Step 3: Test the Solution MVP
Step 3: Test the Solution MVP Test minimum viable product features
Step 3: Test the Solution MVP Test minimum viable product features Do they satisfy problems or needs?
Insights Drive Changes Audio Middleware Companies Problem Solving Refine and improve 3D audio algorithms Better Performance 3D immersive sound Higher gaming scores Personal Assistance and Self-service Small support staff, emphasize web support PC Gamers More realism PC Game Developers Reduced ear fatigue Intellectual Property Proprietary knowledge, brand, patents, trade secrets, Audio experts, software developers Pinpoint sounds Game Engine Companies Audio Middleware Companies Note changes from last iteration Audio & Software Engineers IP License Fee to UMD Software development tools SW License, Per Title, Per Seat for Plug-in
Step 4: Pivot or Proceed New Gues s New Gues s
Step 4: Pivot or Proceed Fact Fact
Step 4: Pivot or Proceed Product-Market Fit
Step 4: Pivot or Proceed Holy Grail!
Step 4: Pivot or Proceed
9 Guesses End Goal Fact Fact Fact Fact Fact Fact Fact Fact Fact
What Good about Ideas Steve?
What Good about Ideas Steve? He didn t talk to customers!
REMEMBER You are talking to customers to identify problems and needs
REMEMBER You are talking to customers to identify problems and needs you are not asking them to define your product!
Quick Summary
Start with the Business Model
Business Model Canvas
Step 1: State your Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess
Step 2: Test the Problem Identify customer problems and needs
Iterate and Pivot What customer problems are you helping to solve? What customer needs are you satisfying? 1 How will you get, keep, and grow customers? 4 3 Who are your most important customers? What are their archetypes? What job do they want you to get done for them? 2 What are key features of your product/service that match customer problems/needs? Through which channels (sales, distribution, support) do your customers want to be reached?
Step 3: Test the Solution MVP Test minimum viable product features Do they satisfy problems or needs?
Iterate and Pivot What customer problems are you helping to solve? What customer needs are you satisfying? 1 How will you get, keep, and grow customers? 4 3 Who are your most important customers? What are their archetypes? What job do they want you to get done for them? 2 What are key features of your product/service that match customer problems/needs? Through which channels (sales, distribution, support) do your customers want to be reached?
Key Activities, Resources, Partners
Revenue & Costs
9 Guesses End Goal Fact Fact Fact Fact Fact Fact Fact Fact Fact
Initial Directions
Pick one Customer Segment
Dive Deep
Different Customer Segments often have Different Business Models
Customer Segment #1 Customer Segment #2 Customer Segment #3
Pick one Customer Segment Identify End User, Decision, Payer
Business to Business
End User = Steel Laborer
Decision Maker = Project Manager
Payer = Purchasing Director
Saboteur = Construction Surveyor
Business to Business typically have distinct End Users, Decision Makers, Payers, and others.
Business to Consumer may as well!
Business to Consumer
Business to Consumer
Business to Consumer
Pick one Customer Segment Identify End User, Decision, Payer List only Value Propositions you plan to test
Original Canvas
Revised Canvas
Customer Segments
Customer Segments Customer Sub-Segments
Customer Segments Customer Sub-Segments Customer Types
Customer Segments
Hospitals Primary Care Clinics
Hospitals Primary Care Clinics
Customer Sub-Segments
Hospitals
Hospitals Customer Sub-Segments University Teaching Hospitals Major (Non-University) Teaching Hospitals
Not Done
Customer Types
Find the people! University Teaching Hospitals End User
Find the people! University Teaching Hospitals End User Decision Maker
Find the people! University Teaching Hospitals End User Decision Maker Payer
Find the people! University Teaching Hospitals End User Decision Maker Payer Influencer
Find the people! University Teaching Hospitals End User Decision Maker Payer Influencer Recommender
Find the people! University Teaching Hospitals End User Decision Maker Payer Influencer Recommender Saboteur
University Teaching Hospitals Customer Types End User Decision Maker Payer Influencer Recommender Saboteur
Identify Archetypes to understand purchase decision
User Archetype Reads Attends Watches
Identify Archetypes for each Customer Segment
Customer Segment #1 Customer Segment #2 Customer Segment #3
Customer Segment #1 Customer Segment #2 Customer Segment #3
Customer Segment #1 Customer Segment #2 Customer Segment #3
Customer Segment #1 Customer Segment #2 Customer Segment #3
Why do we group into Customer Segments?
Different Customer Segments often have
Different Customer Segments often have Different Business Models
Customer Segment #1 Customer Segment #2 Customer Segment #3
Customer Segments #1, #2, #3
But Remember
Different Customer Types also often have
Different Customer Types also often have Different Value Propositions