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Advanced Entrepreneurship:Customer Development in High Tech
Introduction to the Course
Steve Blanksblank@kandsranch.com
www.steveblank.com
Customer Development in the High-Tech Enterprise Fall 2009
You Are Here
Idea 1st Round
Plan Liquidity
Company Timeline
Customer Development in the High-Tech Enterprise Fall 2009
You Are Here
Idea
Plan Liquidity
1st RoundCompany Timeline
Customer Development in the High-Tech Enterprise Fall 2009
How do You Get Here
Idea
Plan Liquidity
1st RoundCompany Timeline
Customer Development in the High-Tech Enterprise Fall 2009
Entrepreneurship
LogicalProcess
IntuitivePassion
Customer Development in the High-Tech Enterprise Fall 2009
Course Introduction
! Course Objectives
! Intro and Backgrounds
! How the Class Works
! Customer Development
Customer Development in the High-Tech Enterprise Fall 2009
Course Objectives
! Learn how to:" Reduce product/market risk" Organize sales, marketing and business
development when bringing a product to market" Understand its relationship with engineering
! Have Fun! Learn from Each Other
Customer Development in the High-Tech Enterprise Fall 2009
Course Prerequisites
! Officially – none! Realistically:
" Experience in bringing a new product to market" Entrepreneurship 295 or equivalent" Have written a business plan
Customer Development in the High-Tech Enterprise Fall 2009
Introduction and Backgrounds
! Steve Blank
! Guest Speakers
! Class
Customer Development in the High-Tech Enterprise Fall 2009
Introduction: Steve Blank8 startups in 25 years
2 strikeouts Rocket Science, Ardent2 walks ESL, Zilog2 singles Convergent, MIPS1 double SuperMac1 home run E.piphany
Non profits: Audubon, POST, Coastal CommissionBlog: www.steveblank.comTwitter: sgblank
Customer Development in the High-Tech Enterprise Fall 2009
Introduction: ClassWhy are you taking the class?
! How many of you have:" Been in start-ups?" Been in a startup that failed?" Raised or tried to raise money?
! How many are:" Sales, marketing or business development?" Engineers?
Customer Development in the High-Tech Enterprise Fall 2009
How the Class Works! Syllabus! 3 Application Exercises
" Individual projects" Max 2-pages" Use different company than the research project" Syllabus has assignment dates, due the week after" Electronic copy gets graded
! Research Project" Teams of 4 to 6" Using customer development model analyze company
success/failure, propose alternatives" Electronic copy gets graded
! Grading" Research Project (50%)" Application Exercises (25%)" Class Participation (25%)
Customer Development in the High-Tech Enterprise Fall 2009
Class Issues! “Tech-heavy”! “Enterprise-heavy”! For-profit versus non-profit! Startups versus existing companies! Methodology focused on product/customer
risk reduction" Doesn’t work for technology risks (i.e Biotech)
! Doesn’t match your experience or opinion
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 1
In & OutKey Concepts: MktRisk/Tech Risk, VerticalMkts, Types of Startups
Sept 4th
Class 1 & 2
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 1
Think!IMVUWebVan
Customer Development& Discovery - Part 1
Sept 5th
Class 3 & 4
In & OutKey Concepts: MktRisk/Tech Risk, VerticalMkts, Types of Startups
Sept 4th
Class 1 & 2
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 1
TeamSelectionDraft Concept
Market TypeE-InkDiscovery - Parts 2 & 3Sept 24th
Class 5 & 6
Think!IMVUWebVan
Customer Development& Discovery - Part 1
Sept 5th
Class 3 & 4
In & OutKey Concepts: MktRisk/Tech Risk, VerticalMkts, Types of Startups
Sept 4th
Class 1 & 2
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 1
ApprovedConcept
WildfireKittyhawk
Validation– Parts 1 & 2Sept 26th
Class 7 & 8
TeamSelectionDraft Concept
Market TypeE-InkDiscovery - Parts 2 & 3Sept 24th
Class 5 & 6
Think!IMVUWebVan
Customer Development& Discovery - Part 1
Sept 5th
Class 3 & 4
In & OutKey Concepts: MktRisk/Tech Risk, VerticalMkts, Types of Startups
Sept 4th
Class 1 & 2
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 1
CustomerDiscovery
MotiveValidation– Part 3Oct 16th
Class 9 & 10
ApprovedConcept
WildfireKittyhawk
Validation– Parts 1 & 2Sept 26th
Class 7 & 8
TeamSelectionDraft Concept
Market TypeE-InkDiscovery - Parts 2 & 3Sept 24th
Class 5 & 6
Think!IMVUWebvan
Customer Development& Discovery - Part 1
Sept 5th
Class 3 & 4
In & OutBurger
Key Concepts: MktRisk/Tech Risk, VerticalMkts, Types of Startups
Sept 4th
Class 1 & 2
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 2
Team MeetingPriceline! Creation – Part 2! Creation Cases
Oct 17th
Class 11 & 12
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 2
Team MeetingPriceline! Creation – Part 2! Creation Cases
Oct 17th
Class 11 & 12
Team DraftCustomerValidation
Peppers &Rogers
! Company Building Part 1
Nov 13th
Class 14
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 2
Team MeetingPriceline! Creation – Part 2! Creation Cases
Oct 17th
Class 11 & 12
Team DraftCustomerValidation
Peppers &Rogers
! Company Building Part 1
Nov 13th
Class 14
! Company Building Part 2
Nov 14th
Class 15
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 2
Team MeetingPriceline! Creation – Part 2! Creation Cases
Oct 17th
Class 11 & 12
Team DraftCustomerValidation
Peppers &Rogers
! Company Building Part 1
Nov 13th
Class 14
! Company Building Part 2
Nov 14th
Class 15
CustomerCreation
SummaryDec 3rd
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
How the Class WorksPart 2
ResearchPaper Due
PescaderoResearchConference
Dec 6th
Team MeetingPriceline! Creation – Part 2! Creation Cases
Oct 17th
Class 11 & 12
Team DraftCustomerValidation
Peppers &Rogers
! Company Building Part 1
Nov 13th
Class 14
! Company Building Part 2
Nov 14th
Class 15
CustomerCreation
SummaryDec 3rd
ResearchProject
ApplicationExercise
CaseClass
Customer Development in the High-Tech Enterprise Fall 2009
Reading
Class Text: Four Steps to the EpiphanyAssigned Reading: In ReaderBlogs: www.steveblank.com
http://startuplessonslearned.blogspot.com/Presentations: www.slideshare.net/Google Group: http://groups.google.com/group/lean-startup-circleTwitter: sgblank
ericries
watch http://www.youtube.com/watch?v=R2lE3fgj7QA for what you could be in store for
Customer Development in the High-Tech Enterprise Fall 2009
Angel/Study.net http://bcangel.gsb.columbia.edu
! All materials are on Angel/Study.net" Syllabus" Reading" Assignments" Presentations (after each class)
Customer Development in the High-Tech Enterprise Fall 2009
Customer Development
! Business Plans
! The Value of “Models” for an Entrepreneur
! Key Concepts" Market versus Technology Risks
" Vertical Markets
" Three Types of Startups
Customer Development in the High-Tech Enterprise Fall 2009
The Top Lies of Venture Capitalists
1. “I liked your company, but my partners didn't.”2. “If you get a lead, we will follow.”3. “Show us some traction, and we'll invest.”4. “We love to co-invest with other venture capitalists.”5. “We're investing in your team.”6. “I have lots of bandwidth to dedicate to your company.”7. “This is a vanilla term sheet.”8. “We can open up doors for you at our client
companies.”9. “We like early-stage investing.”
Source: Guy Kawasaki
Customer Development in the High-Tech Enterprise Fall 2009
The Top Lies of Entrepreneurs
1. “Our projections are conservative.”2. “(Big name research firm) says our market will be $50 billion in 2010.”3. “(Big name company) is going to sign our purchase order next week.”4. “Key employees are set to join us as soon as we get funded.”5. “No one is doing what we're doing.”.6. “No one can do what we're doing.”7. “Hurry because several other venture capital firms are interested.”8. “Oracle is too big/dumb/slow to be a threat.”9. “We have a proven management team.”10. “Patents make our product defensible.”11. “All we have to do is get 1% of the market.”
Source: Guy Kawasaki
Customer Development in the High-Tech Enterprise Fall 2009
Business Plans – Why?
! Why write a plan?" VC’s require it" Planning (Strategic/Financial/Ops)" Articulate Bus Model/Assumptions
! What’s wrong with a plan?" Static" Execution Oriented
Customer Development in the High-Tech Enterprise Fall 2009
The Value of “Models”
! Model = shorthand for complicated idea
" Check to see if the results are static or dynamic
! For example, …
Customer Development in the High-Tech Enterprise Fall 2009
Timmons Model of Entrepreneurship(The Business Plan)
Resources Opportunity
TeamCreativity Leadership
Communication
BusinessPlan
Customer Development in the High-Tech Enterprise Fall 2009
Moore Model of Entrepreneurship(Chasm + Life Cycle)
Customer Development in the High-Tech Enterprise Fall 2009
New Product IntroductionsWhat’s the Model?
! New Product introduction models" Checklist of what to and when to do it" Market size and business case" Models try to ensure that product matches market" Technology and development “gates”
Customer Development in the High-Tech Enterprise Fall 2009
StageGate™ Model(New Product Introduction)
Customer Development in the High-Tech Enterprise Fall 2009
Venture Capital Model of a Startup(Execution)
Concept/Bus. Plan
ProductDevelopment
Alpha Test/Beta Test
Launch/1st Ship
Customer Development in the High-Tech Enterprise Fall 2009
New Product IntroductionIt Doesn’t Always Work
! New Product Development Process" Works great for some new products, fails
miserably for others" Products usually are late, over cost" Typically fails to understand and satisfy
customer needs! Why?
Customer Development in the High-Tech Enterprise Fall 2009
Issues in New Product Intros
! Current models:" Confuse product development process with
customer needs" Treat all startups as the same
! We need a New Product Intro Process" Reduces Market Risk\Simple, understood by all" Founders commitment" Cross function organization" Solid homework
Customer Development in the High-Tech Enterprise Fall 2009
Problem: known Solution: known
Waterfall
Product Development - MicrosoftUnit of progress: Advance to Next Stage
Customer Development in the High-Tech Enterprise Fall 2009
Problem: known Solution: unknown
Agile (XP)!
“Product Owner” or in-house customer
Product Development - StartupAssumes Customers and Markets are Understood
Customer Development in the High-Tech Enterprise Fall 2009
Problem: unknown Solution: unknown
Customer Development Engineering
ScaleCompany
CustomerDiscovery
CustomerValidation
CustomerCreation
Hypotheses, experiments, insights
Data, feedback, insights
Product Development - Lean StartupAssumes Customers and Markets are Unknown
Customer Development in the High-Tech Enterprise Fall 2009
Agile Product
Development
The Lean Startup ModelAgile Product Development
! Continuous cycle ofProduct Development" Product release cycle in
hours not years" Tightly coupled with
customer development" Minimum feature sets,
maximum customercoverage
Customer Development in the High-Tech Enterprise Fall 2009
CustomerDevelopment
The Lean Startup ModelCustomer Development
! Continuous cycle ofcustomer interaction" Rapid hypothesis
testing about market,pricing, customers, …
" Extreme low cost, lowburn, tight focus
" Measurable gates forinvestors
Customer Development in the High-Tech Enterprise Fall 2009
CustomerDevelopment
Agile Product
Development
Lean Startup PrinciplesExtraordinary Value at Low cost in Little Time
! Leverages:" Commodity Technology" Agile management" Customer Development
! Designed to test hypothesisand answer the unknowns
Customer Development in the High-Tech Enterprise Fall 2009
The Lean Startup ModelCustomer Development Parallels Agile Development
Customer Development
CompanyBuilding
CustomerDiscovery
CustomerValidation
CustomerCreation
Agile Development
Concept /Concept /Business PlanBusiness Plan
AgileAgileDevelopmentDevelopment
ContinuousContinuousTestTest
ContinuousContinuousShipShip
Customer Development in the High-Tech Enterprise Fall 2009
Customer DevelopmentTurns Market Risk/Product Fit Hypothesis into Facts
! Discovery: Test hypotheses i.e. problem and product
! Validation: Build a repeatable and scalable sales process
! Creation: Create end-user demand and fill the sales pipeline
! Building: Scale via relentless execution
CompanyBuilding
CustomerDiscovery
CustomerValidation
CustomerCreation
Customer Development in the High-Tech Enterprise Fall 2009
Lean Startup Advantages
! Builds low-burn companies by design" Low cost market risk testing
! Organized around learning anddiscovery
! Right model for current conditions
CustomerDevelopment
Agile Product
Development
The next wave of capital efficient startups
Customer Development in the High-Tech Enterprise Fall 2009
The Value of “Models”
! Model = shorthand for complicated idea
! This class teaches a “model” for productintroduction
! How to reduce risk for customer/market fit
! Side effect is rethinking timing in Sales,Marketing & Business Development
Customer Development in the High-Tech Enterprise Fall 2009
Customer Development
Concept/Bus. Plan
ProductDev.
Alpha/BetaTest
Launch/1st Ship
Product Development
ScaleCompany
Customer Development
CustomerDiscovery
CustomerValidation
CustomerCreation
Customer Development in the High-Tech Enterprise Fall 2009
Customer Development
ScaleCompany
CustomerDiscovery
CustomerValidation
CustomerCreation
This is what our class is about
Customer Developmentin the High Tech Enterprise
Key Concepts
Steve Blanksblank@kandsranch.com
www.steveblank.com
Customer Development in the High-Tech Enterprise Fall 2009
Class 2: Agenda
! Vertical Markets! Market Risk vs. Invention Risk! Case: In N Out! Three Types of Startups! Customer Development
" Definitions" Market Type effects
Customer Development in the High-Tech Enterprise Fall 2009
New Product Conundrum
! New Product Introduction methodologiessometimes work, yet sometimes fail" Why?" Is it the people that are different?" Is it the product that are different?
! Perhaps there are different “types” of startups?
Customer Development in the High-Tech Enterprise Fall 2009
Startup Checklist – 1What Vertical Market am I In?
! Web 2.0! Enterprise Software! Enterprise Hardware! Communication Hdw! Communication Sftw! Consumer Electronics! Game Software
! Semiconductors! Electronic Design
Automation! Cleantech! Med Dev / Health Care! Life Science / Biotech! Personalized Medicine
Customer Development in the High-Tech Enterprise Fall 2009
Startup Checklist - 2
! Market Risk?! Technical Risk?! Both?
Customer Development in the High-Tech Enterprise Fall 2009
Startup Checklist - 3
! Opportunity Where does the idea come from?! Innovation Where is the innovation?! Customer Who is the User/Payer?! Competition Who is the competitor/complementor?! Sales What is the Channel to reach the customer?! Marketing: How do you create end user demand?! What does Biz Dev do? Deals? Partnerships? Sales?! Business/Revenue Model(s) How do we organize to make money?! IP/PatentsRegulatory Issues? How and how long?! Time to Market How long does it take to get to market?! Product Development Model How to you engineer it?! Manufacturing What does it take to build it?! Seed Financing How much? When?! Follow-on Financing How much? When?! Liquidity How much? When?
Customer Development in the High-Tech Enterprise Fall 2009
In-N-Out Secret Menu
! X by Y" X meat patties and Y slices of cheese
(for example, a 3 by 3 or a 2 by 4)! Double Meat
" Two meat patties without cheese.! Triple Meat
" Three meat patties without cheese.! Animal Style
" A mustard cooked beef patty served on abun with pickles, lettuce, tomatoes, extraspread and grilled onions. Any burger(including veggie and grilled cheeses) maybe made this way.
! Flying Dutchman" Two meat patties, two slices of melted
cheese and nothing else.! Protein Style
" Instead of a bun, the burger is wrapped inlettuce. Any burger (including veggie andgrilled cheeses) may be made this way.
! Veggie Burger (Wish Burger)" A burger without the meat and cheese.
! Grilled Cheese" Two slices of melted cheese, tomato,
lettuce and spread on a bun, with no meat.! Extra Everything
" Adds extra spread, tomato, lettuce, andonions (regular or grilled).
! Fries "Light"" Almost raw fries that are cooked for less
time.! Fries "Well" (aka "Wellies")
" Fries that are cooked longer to be extracrisp.
! Cheese Fries" Fries with two slices of melted cheese
placed on top.! Animal Style Fries
" Fries with cheese, spread, and grilledonions.
! Neapolitan Shake" All three shake flavors (strawberry, vanilla
and chocolate) combined in one shake.
Customer Development in the High-Tech Enterprise Fall 2009
So Why Are We Talking About This?
New MarketResegmentedMarket
Existing Market
Customer Development in the High-Tech Enterprise Fall 2009
Three Types of Markets
New MarketResegmentedMarket
Existing Market
Customer Development in the High-Tech Enterprise Fall 2009
Three Types of Markets
! Who Cares?! Type of Market changes EVERYTHING! Sales, marketing and business development
differ radically by market type
New MarketResegmentedMarket
Existing Market
Customer Development in the High-Tech Enterprise Fall 2009
Definitions: Three Types of Markets
! Existing Market" Faster/Better = High end
! Resegmented Market" Niche = marketing/branding driven" Cheaper = low end
! New Market" Cheaper/good enough can create a new class of
product/customer" Innovative/never existed before
New MarketResegmentedMarket
Existing Market
Customer Development in the High-Tech Enterprise Fall 2009
Existing Market Definition
! Are there current customers who would:" Need the most performance possible?
! Is there a scalable business model at this point?! Is there a defensible business model
" Are there sufficient barriers to competition fromincumbents?
Customer Development in the High-Tech Enterprise Fall 2009
Existing Market
Perfo
rman
ce
ExistingCompanies
Our Company
Customer Development in the High-Tech Enterprise Fall 2009
Oops, forgot about Time
Perfo
rman
ceOur Company
Existing Company Performance Growth
Time
ExistingCompanies
Today
Customer Development in the High-Tech Enterprise Fall 2009
Existing Market Risks
! “Better/Faster” is an engineering driven axiom! Incumbents defend high-end, high-margin
businesses! Factor in:
" Network effect of incumbent" Sustaining innovation of incumbent" Industry (or you own) “standards”
! “They’ll never catch up” is not a business strategy! Established companies almost always win
Customer Development in the High-Tech Enterprise Fall 2009
Resegmented Market Definition (1)Low End
! Are there customers at the low end of the marketwho would:" buy less (but good enough) performance" if they could get it at a lower price?
! Is there a business profitable at this low-end?! Are there sufficient barriers to competition from
incumbents?
Customer Development in the High-Tech Enterprise Fall 2009
Low-end Resegmentation“Good Enough” Performance
Perfo
rman
ce
Our CompanyAt the Low-end
Time
ExistingCompanies
Today
Existing Company Performance Growth
Customer Development in the High-Tech Enterprise Fall 2009
Resegmented Market Definition (2)Niche
! Are there customers in the current market whowould:" buy if it addressed their specific needs" if it was the same price?" If it cost more?
! Is there a defensible business model at this point?! Are there barriers to competition from incumbents?
Customer Development in the High-Tech Enterprise Fall 2009
Niche Resegmentation“Branding” has its place
Perfo
rman
ce
Time
Existing CompanyNiche for a New CompanyNiche for a New Company
Existing Customers New Niches
Customer Development in the High-Tech Enterprise Fall 2009
Resegmented Market Risks
! “Cheaper” is a sales-driven axiom! Incumbents abandon low-end, low-margin
businesses" For sometimes the right reasons
! Low-end must be coupled with a profitablebusiness model" Up migration
Customer Development in the High-Tech Enterprise Fall 2009
New Market Definition
! Is there a large customer base who couldn’t dothis before?" Because of cost, availability, skill…?
! Did they have to go to an inconvenient, centralizedlocation?
! Are there barriers to competition fromincumbents?
Customer Development in the High-Tech Enterprise Fall 2009
New MarketCustomers That Don’t Yet Exist
Perfo
rman
ce
Time
Existing Company
Existing Customers New Niches
New Market
New CustomersNew Markets
Customer Development in the High-Tech Enterprise Fall 2009
New Market Risks
! “New” is a marketing-driven axiom! New has to be unique enough that:
" There is a large customer base who couldn’t dothis before
" They want/need/can be convinced" Adoption occurs in your lifetime
! Company manages adoption burn rate" Investors are patient and have deep pockets
Customer Development in the High-Tech Enterprise Fall 2009
Hybrid Markets
! Some products fall into Hybrid Markets! Combine characteristics of both a new market
and low-end resegmentation" SouthWest Airlines" Dell Computers" Cell Phones" Apple iPhone?
Customer Development in the High-Tech Enterprise Fall 2009
Business Model
1. A diagram that shows all the flows between yourcompany and its customers
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech MarketsTransportSmart
PowerRenewablesGreen
BuildingEnergy
EfficiencyAir, Water& Waste
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech Markets - RiskTransportSmart
PowerRenewablesGreen
BuildingEnergy
EfficiencyAir, Water& Waste
! Which markets have technology risk?! Which markets have customer risk?! Which have both?
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech Markets - RiskDefinitions
TransportSmartPower
RenewablesGreenBuilding
EnergyEfficiency
Air, Water& Waste
! Technology Risk" risk is in development of the product (i.e. fuel cells, thin-film
arrays, etc.) then customers automatically adopt! Customer risk
" risk is in customer and market adoption! Which have both?! You spend your time differently depending on risk
Customer Development in the High-Tech Enterprise Fall 2009
Size of Opportunity
LiquidityFollow-onSeed FinancingTeamManufacturingProd Dev ModelTime to MarketRegulatoryIP/PatentsBus/Rev ModelCustomer DevBiz DevMarketingSalesCompetitionCustomer
Clean Tech Markets - Hypotheses
! Your business plan is a set of untestedhypothesis
! What are they?! How do you test them?! How do you execute them?
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech Markets -Hypotheses
! Size of Opportunity" TAM, SAM
! Customer" Who’s the end user? Economic buyer?
Reimburser?! Sales
" What’s the distribution channel?! Marketing
" How do you create end-user demand! Customer Development
" How do you test your hypothesis! Business Model
" How do all the parts work to create profits?! Financing
" What is the path to cash flow positive
Size of Opportunity
LiquidityFollow-onSeed FinancingTeamManufacturingProd Dev ModelTime to MarketRegulatoryIP/PatentsBus/Rev ModelCustomer DevBiz DevMarketingSalesCompetitionCustomer
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech MarketsTransportSmart
PowerRenewablesGreen
BuildingEnergy
EfficiencyAir, Water
WasteSize of Opportunity
LiquidityFollow-onSeed FinancingTeamManufacturingProd Dev ModelTime to MarketRegulatoryIP/PatentsBus/Rev ModelCustomer DevBiz DevMarketingSalesCompetitionCustomer
Customer Development in the High-Tech Enterprise Fall 2009
Clean Tech MarketsTransportSmart
PowerRenewablesGreen
BuildingEnergy
EfficiencyAir, Water
Waste
Size of Opportunity
ImportantIsThis
Liquidity
Follow-on
Seed Financing
Team
Manufacturing
Prod Dev Model
Time to Market
Regulatory
IP/Patents
Bus/Rev Model
CustomerDevelopment
Biz Dev
Marketing
Sales
Competition
Customer
Customer Development in the High-Tech Enterprise Fall 2009
Business Plan - Sum of Hypotheses
! Business plan collects your hypothesis! Adds facts as you know them today! Contains a plan of how to turn hypothesis into
facts! Extrapolates results if hypothesis turn into facts! Has a business model which is clearly articulated
Customer Development in the High-Tech Enterprise Fall 2009
Business Model
! Goal is to get to a single diagram of yourbusiness
! Start by drawing pieces of your business" Problem/Opportunity" Market Size" Distribution Channel" Demand Creation" Financial assumptions
! Then put it all together
Customer Development in the High-Tech Enterprise Fall 2009
Market Type?
! Existing Market! Resegment a Niche! Resegment on Low Cost! New Market
Customer Development in the High-Tech Enterprise Fall 2009
Definitions: Types of Markets
! Existing Market" Faster/Better = High end
! Resegmented Market" Niche = marketing/branding driven" Cheaper = low end
! New Market" Cheaper/good enough can create a new class of
product/customer" Innovative/never existed before
New MarketResegmentedMarket
Existing Market
Customer Development in the High-Tech Enterprise Fall 2009
Type of Market Changes Everything
! Market" Market Size" Cost of Entry" Launch Type" Competitive
Barriers" Positioning
! Sales" Sales Model" Margins" Sales Cycle" Chasm Width
New MarketResegmentedMarket
Existing Market
• Finance- Ongoing Capital- Time to Profitability
• Customers- Needs- Adoption
Customer Development in the High-Tech Enterprise Fall 2009
TotalAvailableMarket
Total Available Market, ServedAvailable Market, Target Market
109
ServedAvailableMarket
Target MarketSAM = how many can I reach
with my sales channel
TAM = how big is the universe
Target Market (for a startup) = who will be the most likely buyers
sizing up the market
SF
$123 billion tourismindustry inside the U.S.
$1 billion English travelguides sold annually
$210 million 20-35 yearold travelers
(Initial test market)
Customer Development in the High-Tech Enterprise Fall 2009
OLED’s - Billion DollarOpportunity
!"#$%&'())(*+,-./0&1+234&5*+67'43&4)4583*+(56&'93:48
;./0&;(<4&*=&->&'93:48
-93?48&/:80&"@AA'())(*+B
!"A%%&'())(*+B,
OLED TV market will grow to $15.29billion by 2015
Target products: Camcorders, DVDplayers and recorder, digital cameras,computer monitors, LCD and Plasma TV
YEAR 1 PROJECTIONS
Our target market is the FlatPanel display market.
Units sold : 1,000,000Price per unit : $700 - $1,000
Revenue from Royalties (assuming .5-1.0% of shelf price):Worst case = $3,500,000 Best Case = $10,000,000
Apex: ! 3.5M
Sales Ecosystem
Superintendant
IT Director
Dept. Head
TeacherTeacher
District
School
Discussion channelMandate channel
Sale
Engagement(Early Stages) Another
schoolin thedistrict
Anotherdistrict
!"#$%"&'$()#* IP +),'()-$./# 01'")2.C1D
2 patents owned by Apex!• Technology patent - SOLED• Long-Brite and inkjet printing process
Licensed Partners:• Sony• Samsung(Other possibilities - LG, Toshiba, Panasonic,DuPont)
Partners’ distribution channels• Sony• Samsung(Other possibilities - LG, Toshiba, Panasonic,DuPont)
Consumer electronics• Flat Screen TVs through
Fry’s, Best Buy, Magnolia,etc
Dollar flows:
License feesRoyalties
.C1D
Wages: founders &ConsultantsIP Costs: Lawyer& Patent costs.
Premises: Dev’t labs.
Patents
C.E-F1E;
Distribution Channel
Demand Creation
! State-by-state rollout: educational standards! Continuous iteration of feedback
! Hypotheses: Willthey adopt, use,and pay?
! 10 schools f2f:
! Sales: $1,066
! Travel: $1,000
CA Pilot
! Hypothesis: Howwell does it sellitself?
! All telemarket
! $533/dist
GrowAdoption
! Hypotheses: Willthey buy hands-off? Can it scale?
! CA telemarket
! F2f elsewhere
BroadAdoption
distribution and demand creation! Unique Idea: website and iPhone app form
symbiotic relationship
traffic
traffic
AdWords
Blogs (ex.Travelblog.org)Magazines
TravelApp
Listing
TravelSpy.com iPhone App
Customer Development in the High-Tech Enterprise Fall 2009
Financial Assumptions
! Ten Numbers that matter depends on your business" Average selling price" Life time value" Material cost" Distribution channel cost" Customer Acquisition cost" Time to market" Time to cash flow positive" Etc.
! Do this before 45 pages of financials
Bird’s Eye View of our BusinessModel
Hardware($155)
Software (in-house)($1.00)
MyNote($156.00)
Online Distribution• Own website ($208+.3x)• Amazon.com ($40+32x)• eBay ($300+25x)
Offline Distribution• College bookstores($0.02)
Viral
Marketing
Target Market
$399.99
CustomerAcquisition
Cost:($41)
Demand Creation• SEO/SEM
• Blogs• Forums
• Bookstorepromotion
• Sales force• Viral marketing
• Website
END-USERS END-USERS
CITYBEATS.COMREVENUEREVENUE
SERVICE SERVI
CETwo Revenue StreamsTotal Revenue (year 1) = $ 90 KTotal Revenue (year 2) = $ 2.2 M
BUSINESS MODELiPhone Application Subscription Based Service
Nightlifevenues
Thirdparty
affiliates
$ 5/monthYear 1: $ 50KYear 2: $1.2 M
$ 2.99 (x.7)Year 1: $ 40KYear 2: $1M
March | 2011Critical Mass: 500,000 users
!"#$%&'(#&&%)*%+
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