“So, you want to start a technology company?”
!
!
Nick Barendt
November 4, 2014
Overview
!
Some background
!
Some practical, tactical advice
!
A survey of tools and frameworks
Two Stories
Electronic
Instrumentation
2003-2006
We have a product for
measuring strain in materials
But
We “Sales”
don’t actually
sells this
have
product
this
product…
instead
This is surprisingly common…
engineers hate it.
But we build it.
It is very complicated.
Customer is Happy!
Lesson:
!
Signed Purchase Order
equals
Solid Validation
Sidebar: IEEE 1588
Precision Time Protocol (PTP)
High-accuracy clock synchronization and syntonization on a LAN
(single ns level)
Kendall Correll - CWRU Senior Project
Presented in Zurich, Switzerland
Correll, Kendall, Nick Barendt, and Michael Branicky. "Design
considerations for software only implementations of the IEEE
1588 precision time protocol." Conference on IEEE. Vol. 1588.
2005.
Unfortunately,
developed at a
“breakneck” pace
Need a change...
I know —
Cofound a Software
Startup!
Online, remote data
backup
with Gary Bernhardt
& Dr. Michael Branicky
Amazon EC2
Cloud!
BitBacker
Backup/Restore
Server
Amazon S3
Storage
Customer
Computer
Elegant Mac Client!
Security!
Deduplication!
Scalability!
Roadmap!
But we took too long...
MVP could have been
simpler & faster to build
& we could have
validated earlier
Sigh
Lesson:
!
“Scratching your own itch” can lead
to myopic vision and shadow customer
personas
!
Lesson:
!
Modern product design is a skill
(more on this later)
!
Lesson:
!
Splitting equity is thorny
!
Noam Wasserman
The Founder’s Dilemmas
!
“Rich vs. King”
!
Harvard Business School
Lesson:
!
Cutting-edge technical experience is
rarely a waste
!
Meta Lesson:
!
You often learn more from the
failures than from the successes.
!
Where to next?
On-site coaching
We transform companies and their cultures by
helping them embrace and adopt Agile
development practices. We also offer Agile
training and can even augment your
development teams Design & Delivery
We design and deliver custom software, whether
green-field or legacy systems, for startups to
enterprises. Helping companies improve their culture and their products
Some Recent Portfolio Samples
Innovative Vending Machines
New Top Level Domain
Wellness Informatics
“I have an idea for a great product!”
What is it(Execution
Nothing!
worth?
matters.)
What should I do with my idea?
!
Build a prototype?
!
File for Intellectual Property (IP) protection
!
License it?
!
Found a company?
What should I do with my idea?
!
Build a prototype?
!
File for Intellectual Property (IP) protection?
!
License it?
!
Found a company?
What does founding a company mean?
Business Entities
DISCLAIMER: I AM NOT A LAWYER
Do not take my advice on legal matters.
Founding a company is a legal and
financial action
!
Default - you’re a sole proprietor (aka Schedule C)
!
Generally, though, you create a new legal entity
!
Partnership
!
Limited Liability Company (LLC or Ltd)
!
Corporation (C or S)
Which entity type to choose?
!
Schedule C not sufficient beyond consulting
!
Partnerships only if you are in a professional services biz
!
LLC is simplest and lightest weight - good default
!
Corporation
!
!
legal and accounting quickly become complicated
!
some investors only comfortable with corporations
Not irreversible decision - there are ways to convert
between them, with some time and money
Why bother?
!
Your status changes - you now own some/all of entity
!
The business is separate from you
!
Your business can accept investment in exchange for equity
!
Reduce liability risk
!
Allow easier collaboration (partners, employees, etc.)
!
Lifetime of business is not limited to your lifetime
Where to get help?
!
Find a good lawyer
!
Educate yourself first, though
!
I like nolo.com books
!
!
Most libraries have them
!
Cheap, fast education
Laws are slightly different by state
How will I pay for everything?
Funding
Types of Businesses
!
“Startup” means a particular thing - a company designed
to scale quickly
!
“Lifestyle” business - create income for the owners and
employees, but limited scale (e.g., consulting)
!
sometimes a pejorative in funding circles
!
generally not fundable
!
Business to Business (B2B)
!
Business to Consumer (B2C)
!
Hardware vs. Software
Funding & Investment Options
!
Bootstrapping (savings and consulting)
!
Customers
!
Friends and family round (tricky to do legally)
!
Crowdfunding
!
pre-order sales (Kickstarter)
!
equity - still complicated, despite JOBS Act
!
Accelerators (Y Combinator, TechStars, etc.) ~$20-$50k
!
Angel Investors ~$50-$100k
!
Venture Capital >$250k
Brad Feld
Venture Deals
!
TechStars
How much do you need?
I have no idea.
(Maybe less than you think, though.)
Raising investment
is hard
You essentially have to prove
that you don’t need the cash.
What can you do to
stack the deck in your
favor?
Business Models and
Value Propositions
Business Model
!
How you create, deliver, and capture value
!
(Sadly, your product idea is only one tiny part of this)
!
You could create a traditional 50 page business plan, but
that’s likely to contain a bunch of b***s***; you likely have
better things to do
!
You do need to understand your proposed business, though
!
Where to start…
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Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each Customer Segment?
Which customer needs are we satisfying?
For whom are we creating value?
Who are our most important customers?
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What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
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What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
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What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
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This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
http://www.businessmodelgeneration.com/canvas/bmc
Month
No.
Year
The Value Proposition Canvas
Designed for:
On:
Designed by:
Day
Iteration:
Month
Year
No.
Do they…
Which savings would make your customer happy?
Create savings that make your customer happy?
Do something customers are looking for?
(e.g. in terms of time, money and effort, …)
(e.g. good design, guarantees, specific or more features, …)
(e.g. in terms of time, money and effort, …)
Produce outcomes your customer expects or that go
beyond their expectations?
Fulfill something customers are dreaming about?
What outcomes does your customer expect and what
would go beyond his/her expectations?
(e.g. better quality level, more of something, less of something, …)
Copy or outperform current solutions that delight your
customer?
(e.g. regarding specific features, performance, quality, …)
Make your customer’s job or life easier?
(e.g. flatter learning curve, usability, accessibility, more services, lower
cost of ownership, …)
Create positive social consequences that your
customer desires?
(e.g. help big achievements, produce big reliefs, …)
(e.g. quality level, more of something, less of something, …)
Produce positive outcomes matching your customers
success and failure criteria?
How do current solutions delight your customer?
(e.g. better performance, lower cost, …)
(e.g. specific features, performance, quality, …)
Help make adoption easier?
What would make your customer’s job or life easier?
Rank each gain according to its relevance to
your customer.
Is it substantial or is it insignificant?
For each gain indicate how often it occurs.
(e.g. flatter learning curve, more services, lower cost of ownership, …)
(e.g. lower cost, less investments, lower risk, better quality,
performance, design, …)
What positive social consequences does your
customer desire?
Rank each gain your products and services create according to its relevance to your
customer. Is it substantial or insignificant? For each gain indicate how often it occurs.
(e.g. makes them look good, increase in power, status, …)
What are customers looking for?
(e.g. makes them look good, produces an increase in power, status, …)
(e.g. good design, guarantees, specific or more features, …)
Products & Services
List all the products and services your value proposition is built around.
Gain Creators
Gains
Describe how your products and services create customer gains.
How do they create benefits your customer expects, desires or would be surprised
by, including functional utility, social gains, positive emotions, and cost savings?
Describe the benefits your customer expects, desires or would be surprised by.
This includes functional utility, social gains, positive emotions, and cost savings.
What do customers dream about?
(e.g. big achievements, big reliefs, …)
How does your customer measure success and failure?
(e.g. performance, cost, …)
What would increase the likelihood of adopting a solution?
(e.g. lower cost, less investments, lower risk, better quality, performance,
design, …)
Which products and services do you offer that help your customer get either a
functional, social, or emotional job done, or help him/her satisfy basic needs?
Customer Job(s)
Describe what a specific customer segment is trying to get done. It could be the tasks
they are trying to perform and complete, the problems they are trying to solve, or the
needs they are trying to satisfy.
What functional jobs are you helping your customer get done?
Which ancillary products and services help your customer perform the roles of:
(e.g. perform or complete a specific task, solve a specific problem, …)
Buyer
(e.g. products and services that help customers compare offers,
decide, buy, take delivery of a product or service, …)
What social jobs are you helping your customer get done?
Co-creator
What emotional jobs are you helping your customer get done?
(e.g. trying to look good, gain power or status, …)
(e.g. products and services that help customers co-design
solutions, otherwise contribute value to the solution, …)
(e.g. esthetics, feel good, security, …)
What basic needs are you helping your customer satisfy?
Transferrer
(e.g. communication, sex, …)
(e.g. products and services that help customers dispose of
a product, transfer it to others, or resell, …)
Products and services may either by tangible (e.g. manufactured goods, face-toface customer service), digital/virtual (e.g. downloads, online recommendations),
intangible (e.g. copyrights, quality assurance), or financial (e.g. investment funds,
financing services).
Rank all products and services according to their importance to your customer.
Are they crucial or trivial to your customer?
Besides trying to get a core job done, your customer performs ancillary jobs in different roles. Describe the jobs your customer is trying to get done as:
Pain Relievers
Pains
What does your customer find too costly?
Describe how your products and services alleviate customer pains. How do they
eliminate or reduce negative emotions, undesired costs and situations, and risks
your customer experiences or could experience before, during, and after getting
the job done?
Describe negative emotions, undesired costs and situations, and risks that your
customer experiences or could experience before, during, and after getting the
job done.
(e.g. frustrations, annoyances, things that give them a headache, …)
(e.g. takes a lot of time, costs too much money, requires substantial efforts, …)
What makes your customer feel bad?
How are current solutions underperforming for
your customer?
Buyer (e.g. trying to look good, gain power or status, …)
Co-creator (e.g. esthetics, feel good, security, …)
Transferrer (e.g. products and services that help customers dispose
of a product, transfer it to others, or resell, …)
Rank each job according to its significance to your customer. Is it
crucial or is it trivial? For each job indicate how often it occurs.
(e.g. lack of features, performance, malfunctioning, …)
Do they…
Produce savings?
Eliminate risks your customers fear?
(e.g. in terms of time, money, or efforts, …)
(e.g. financial, social, technical risks, or what could go awfully wrong, …)
What are the main difficulties and challenges
your customer encounters?
Outline in which specific context a job
is done, because that may impose
constraints or limitations.
(e.g. understanding how things work, difficulties getting things done,
resistance, …)
(e.g. while driving, outside, …)
What negative social consequences does your
customer encounter or fear?
Make your customers feel better?
Help your customers better sleep at night?
(e.g. kills frustrations, annoyances, things that give them a headache, …)
(e.g. by helping with big issues, diminishing concerns, or eliminating worries, …)
Fix underperforming solutions?
Limit or eradicate common mistakes customers make?
(e.g. new features, better performance, better quality, …)
(e.g. usage mistakes, …)
What risks does your customer fear?
Put an end to difficulties and challenges your
customers encounter?
Get rid of barriers that are keeping your customer
from adopting solutions?
(e.g. make things easier, helping them get done, eliminate resistance, …)
(e.g. lower or no upfront investment costs, flatter learning curve, less
resistance to change, …)
(e.g. big issues, concerns, worries, …)
(e.g. loss of face, power, trust, or status, …)
Wipe out negative social consequences your
customers encounter or fear?
(e.g. loss of face, power, trust, or status, …)
(e.g. financial, social, technical risks, or what could go awfully wrong, …)
What’s keeping your customer awake at night?
What common mistakes does your customer make?
(e.g. usage mistakes, …)
Rank each pain your products and services kill according to their intensity
for your customer. Is it very intense or very light?
What barriers are keeping your customer from
adopting solutions?
For each pain indicate how often it occurs. Risks your customer experiences or
could experience before, during, and after getting the job done?
Value Proposition
Rank each pain according to the intensity it
represents for your customer.
Is it very intense or is it very light.?
For each pain indicate how often it occurs.
(e.g. upfront investment costs, learning curve, resistance to change, …)
Customer Segment
Create one for each Customer Segment in your Business Model
www.businessmodelgeneration.com
Use in Conjunction with the Business Model Canvas
http://www.businessmodelgeneration.com/canvas/vpc
Copyright of Business Model Foundry GmbH
Alexander Osterwalder
Operations
Keeping the lights on
First things
!
File with IRS for an Employer Identification Number (EIN)
!
Open a checking account in the business’s name
Accounting
!
If you’re the CEO, you need to learn accounting basics
!
Essentials of Double Entry Accounting
!
Accrual versus Cash Accounting (and why it matters)
!
How to read and interpret
!
Profit and Loss (P&L)
!
Balance Sheet (BS)
!
What EBITDA means
!
Taxes (Payroll, Federal, State, Sales)
!
Payroll
Revenue Cycle
!
Sales Funnel
!
Deliver Product/Service (the one thing you want to do)
!
Invoicing or Payment Processing
!
NET Terms (15, 30, 60, 90 Days)
!
Accounts Receivable, Aging, and Collections :-(
!
!
(Note Credit Cards: use payment processor and avoid PCI)
!
(“Eyeballs” are harder to get an maintain than you think)
Legal
!
Find an attorney that has technology startup experience
!
Learn how to read contracts - it takes practice
!
Non-Disclosure Agreement (NDA) - use them, but don’t be paranoid
!
IP protection
!
Patents
!
Copyright
!
!
W-2 Employees versus 1099 Contractors
Lean Startup
Hypothesis driven business
Lean
!
Reduce Waste
!
Continuous Improvement
!
!
Lean Manufacturing - Toyota Production System (TPS), Demming
!
Waterfall Software Development Model (Royce, 1970)
!
Lean / Agile Software - Agile Manifesto (2001)
!
Lean Startup (2011)
!
Lean User Experience (2013)
Steve Blank
&
Eric Ries
Early stages of new
business should focus on
reducing risk and
learning.
Build -> Measure -> Learn
!
Articulate Hypotheses, then test
!
Increase frequency of contact
with target customers
!
Iterate as rapidly as possible
!
!
Prototype
!
Learn
!
Understand your customer
MVP
! Minimum
Viable Product (Eric Ries)
! Minimum Valuable Product
A minimum viable product has the exact
(not least) amount of features to make it
desirable and sellable, thus giving value.
-Martin Christensen
Identifying your MVP
User Story Cards
TITLE
!
user]
As a [type of
me task]
o
s
m
r
o
f
r
e
p
[
I want to
some goal]
h
c
a
e
r
[
n
a
c
I
so that
ok Title
Search by Bo
!
stomer
u
C
n
o
z
a
m
A
n
As a
ooks by title
b
r
o
f
h
c
r
a
e
s
I want to
book to
a
d
in
f
n
a
c
I
so that
purchase
Product Backlog
Priority
Prioritized Backlog Drives Team Activities
Stories as Experiments
!
Lean Startup - Build, Measure, Learn
!
Don’t build software too early
!
Prototype quickly
!
How can we prove/disprove this hypothesis
quickly?
!
Can we do something even simpler/faster to
prove X?
!
Think of experiments for
hypotheses
!
How to prioritize stories/
experiments?
!
Optimize for rapid learning
!
David Bland - Experiment Mapping
!
Process alone is often illuminating
Learning Value
Tool - Experiment Mapping
Days
Weeks
Time
Months
Tools to Track Progress
!
Try to stay objective
!
Lean Canvas
!
Javelin Experiment Board
Tool - User Story Mapping
!
Jeff Patton
!
http://www.agileproductdesign.com/
!
Organize and Prioritize Features
User Story Mapping
Login
Synch
Search
User Story Mapping - Generating
User Story Mapping - Prioritizing
Customer Development
“Get out of the Building!” - Steve Blank
!
Identify Potential Users and Customers
!
Talk to them; early and often, before you have the final product
!
Personas and Segments
!
How do you find them? (if you can’t find them now, how will you ever
find them when you want to sell them something?)
!
Don’t build for everyone - solve a problem for a niche
!
Observe them
!
Ask them questions (but stay “out of the ‘Woulds’”)
!
Build empathy
!
Understand their buying process and price / value calculus
!
Clarify Users versus Economic Customer
This is often uncomfortable for
stereotypical, introverted
engineers and developers.
Just get started. It gets easier.
Ash Maurya
Team
Founding versus Co-Founding
!
Rich vs. King dilemma
!
Odds are, you don’t have the time and skills to do it all
!
Find people that are compatible and complementary
!
Founding team defines the culture - hard to change later
!
Starting business can be exhausting and lonely - share the
journey
Roles to consider
!
Visionary (Nerd?)
!
Big Picture, Systems Thinker
!
Hustler (sales and marketing)
!
Operator (detail oriented; get i’s dotted, t’s crossed)
!
!
Find mentors (business, not just technical)
Where to find?
!
On Campus
!
Startup Networking Events
!
Accelerators
!
Meetups
Motivation
Why do you think you want to do this?
!
Motivation?
!
Goals?
!
If only for money, probably easier options
Good Answer:
to try to change the world
Questions?
Thank you for your attention.
!
nick.barendt@leandog.com
!
Some potentially useful resources:
!
http://www.leandog.com/dogtreats/
!
http://www.leandog.com/what-we-do/studio/
!