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Learn the steps involved in going from having a great idea, to building a successful startup around it, from an entrepreneur who has sold two internet companies in the last four years.
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From Idea to Success
A guide for first time entrepreneurs
Gaurav OberoiTwitter: @goberoi
What this talk is about
Have an Idea
Successful exit
?
What you’ll learn
How to:• Evaluate your idea• Build a product that people pay you for• Grow your business
But first, introductions
About Me
• Started and sold 2 companies– BillMonk and PrecisionPolling
• Software background– Amazon engineer, Computer Science from Rice U.
• Startup roles in Product and Eng Mgmt.– SurveyMonkey (current), Xmarks (Mitch Kapor)
• Founded 2200+ entrepreneur group in Seattle– SeattleTechStartups.com
• Advisor to several startups, angel investor
1st company: BillMonk
• Problem: bill splitting sucks• Solution: split bills, track debts• Market: roommates, students• $: fee for settling debts online
• Consumer internet startup• Self-funded, 2 founders• Acquired by Obopay in 16 months
2nd company: Precision Polling
• Problem: automated phone surveys costly and slow to setup
• Idea: self-serve phone polls• Markets: politics, opinion research
(healthcare, govt., call centers)• $: pay per call
• SaaS startup catering to SMB• Self-funded, 2 founders• Acquired by SurveyMonkey in 12 months
My employer: SurveyMonkey
• Biggest web survey provider in the world
• 10 years old, highly profitable• Large investment from PE firm
last year
• Singapore love SurveyMonkey• 15th largest market But• 5th in terms of surveys deployed by all users
Ok, let’s begin
The Problem
Have an Idea
Successful exit
?
Woah, can we break that down?
• Decomposing into chunks = more manageable– E.g. essay writing: thesis, outline, research, write it
• So my plan is:– Break the process into stages– Provide a guide on what to at each stage
A first stab at breaking it down
Have an Idea
ProductMarket Fit
Successful exit
Product/market fit?
Proof that people want your product• Critical mass of users/usage• Who are paying you
Until you have a product people want, focus on growth is pointless
Product/market fit!
• Marc Andreessen: – “I believe that the life of any startup can be divided
into two parts: before and after product/market fit”• Steve Blank: – “set of customers and a market who react positively
to the product: by relieving customers of their money”
• Sean Ellis:– “40% of users disappointed without it”
Ok great: PMF as a milestone
Have an Idea
ProductMarket Fit
Successful exitFocus: product
Focus: growth
But this is too broad
Break it down further
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
3 Stages
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
1. Evaluate your idea
2. Build product people want
3. Figure out marketing
What do I do at each Stage?
• I’ll discuss:– Your goals– What to focus on– Not to focus on– Details by area: product, business, marketing
Great, we have a plan
Let’s dig into details
Progress so far
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
Evaluate your idea
Build product people want
Figure out marketing
Stage 1
Have an Idea
Start Company
Evaluateyour idea
Stage 1: Evaluate Idea
• Goal: reduce uncertainty and risk– “Should I quit my day job for this?”
• Focus on: gathering lots of data
• Do not: write code
Stage 1: What to do (Product)
1. Articulate the problem and solution– List of assumptions to test
2. Test assumptions by talking to customers– 20+ potential customers
3. Refine your assumptions
Repeat!
Stage 1: What to do (Product)
4. Define a super basic v1– 1 page spec
5. Estimate cost for building it
Stage 1: What to do (Research)
7. Market size and segments– Big market is key: you need room to pivot
8. Competitors– Features, pricing, positioning, value prop,
marketing
9. Biz model inputs: order size, rev per user
Stage 1: What to do (Business)
10.Create a basic business model– Calculate fixed costs: salaries, servers, admin– Revenue target = costs IF break even this year– Users needed = rev target / revenue per user– Think about cost per acquisition• ARPU > cost to serve + cost to acquire user
– Keep it simple
Be honest! This is to convince YOU
Stage 1: What to do (Marketing)
11.Test and refine your pitch continuously– What do you do?
12.Test value proposition– Why should I care?
13.Test company names and branding– “Polling Power” was a fail
Stage 1: Summary
• Goal: reduce uncertainty
• Accomplished: validated assumptions– About product– About biz model– And basic how to sell it (what and why)
You have reduced uncertainty and risk. Now: quit job!
Progress so far
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
Evaluate your idea
Build product people want
Figure out marketing
Stage 2
StartCompany
ProductMarket Fit
Build product people want
Stage 2: Build a Product People Want
• Goal: get proof that people will pay for product
• Focus: minimum viable product, first customers
• Do not: build stuff nobody asked for
Stage 2: What to do (Product)
1. Create wireframes and show customers– Chopped 40% of features before coding
2. Then start building minimum viable product– Iterate fast, embrace change
3. Don’t focus on dev plumbing/geeking out please– Yes: 1-click deployment, core unit tests– No: scaling, using new tech, rolling custom libraries…
Stage 2: What to do (Business)
4. Sell to first customers– 1-1 demos, write emails, whatever works!
5. Make them pay you– Otherwise it’s not a fair test
6. Keep low burn rate
Stage 2: What to do (Marketing)
7. Create a one-pager– You will email this a lot
8. Create a 1-2 minute video– Because people don’t read
9. And some feature pages– What, and why customers should care
Stage 2: Summary
• Goal: build something people will pay for
• Accomplished: built something people want– Customers are using it– And paying you
OMG, you have discovered a goldmine. Now: grow it!
Stages
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
Evaluate your idea
Build product people want
Figure out marketing
Stage 3
ProductMarket Fit
RepeatableGrowth
Figure outmarketing
Stage 3: Repeatable Growth
• Goal: scalable and profitable Cust. Acquisition– ARPU > Cost to serve + cost to acquire
• Focus: marketing experimentation
• Do not: add features
Stage 3: What to do (Product)
1. Install metrics that you understand
2. Setup an A/B testing framework
3. Maybe: build referral or affiliate programs
Do not add features to attract customers
Stage 3: What to do (Marketing)
4. Define your conversion funnel and optimize– Leads … convert to paying!
Dave McClure’s startup metrics for pirates is an excellent resource.
Dave McClure’s Startup Metrics for Pirates
Website.com
4. REFERRAL
Emails & widgets
Campaigns, Contests
5. Revenue $$$
Biz DevAds, Lead Gen, Subscriptions, etc
2. Activation
Homepage / Landing Page
Product Features
1. ACQUISITION
SEOSEM
Apps & Widgets
Affiliates
PR Biz DevCampaigns,
Contests
Direct, Tel, TV
Social Networks
Blogs
Domains
3. RETENTIONEmails &
Alerts
Blogs, Content
System Events & Time-based Features
Stage 3: What to do (Marketing)
Phone sales should be optimized too.
Tip: Bessemer Ventures blog has great tips for SaaS companies.
Stage 3: What to do (Marketing)
6. So where do I get customers?– Ads on industry email lists (gold!)– Ads on industry blogs (depends on industry)– Referrals (can work great, e.g. DropBox)– Affiliate programs (it’s like a “sales channel lite”)– Partnerships (time consuming, hit or miss)– Viral features (hard)– Social media (risky)– SEO and link bait (good but slow)– Tradeshows (hit or miss, not scalable)– Adwords (often a miss: high CPC, low conversions)
Stage 3: What to do (Marketing)
7. It’s all about experimentation– Budget (time + money)– Metrics– Run– Calculate CPA (total cost / num converted)
Stage 3: What to do (Marketing)
7. And some miscellaneous tips:– Get 1-3 anchor customers ASAP– Get industry awards (silly but valuable)– PR is awesome, but NOT a repeatable and scalable
growth strategy
Stage 3: Summary
• Goal: scalable and profitable Cust. Acquisition
• Accomplished: marketing that works– Channels to acquire leads– And a process to convert them– Profitably: ARPU > Cost to serve + Cost to acquire
Congratulations, you are a badass! Now: $$$?
Progress so far
Have an Idea
Start Company
ProductMarket Fit
RepeatableGrowth
Successful exit
Evaluate your idea
Build product people want
Figure out marketing
Successful Exit?
• You are in a great position for the big kaching!• But lots can still go wrong:– Competition, operational failures, hitting market
saturation, inability to hire fast enough… blah blah• Btw, there other options too:– “Lifestyle” biz: do what you love, decent money
• And successful exits without this too:– Talent, IP, customer base, biz-deals
Conclusion
• It’s not magic, there is a process– Evaluate, Build, Grow
• The process depends on data– Validate assumptions, MVP, Run marketing experiments
• Be honest to yourself
• Get cracking! Validate your idea and quit your job– Disclaimer: your mileage may vary
Resources
• Book: 4 Steps to the Epiphany (Steve Blank)
• Blog: http://startuplessonslearned.com (Eric Reis)
• Latest info: http://news.ycombinator.com
• A great pitch deck template:http://www.slideshare.net/BryanStarbuck/alliance-of-angels-pitch-deck-template
• Look up: minimum viable product
Follow me on Twitter: @goberoi
Q & A
