Lean Validation for Social Impact + Design Entrepreneurs

There’s something social impact founders and design entrepreneurs have in common  – a shared allergy/yuck factor when asked to make business models. We try to dispel that myth – business modeling as an iterative act of emergent and divergent discovery, pattern association, and everything fun.

 

Business Models and Entrepreneurial Strategy at Parsons The New School for Design

Excited to teach a revised and redesigned version of Lean at Parsons The New School for Design’s BBA program.

Parsons

Here’s the syllabus:

BUSINESS MODELS AND ENTREPRENEURIAL STRATEGY

Course Code: PUDM4322 CRN: 7370 | Section: A

Instructor: Jen van der Meer

 

Fall / 2016

Monday / 9:00 AM

Location: 6 East 16th Street, Room 1108

Course Description

This course prepares students with a hypothesis-driven approach to company formation. Students will work in teams to generate a business concept, and then validate business model risks in direct collaboration with customers. This course is offered in conjunction with the Senior Project studios and allows the students to compare and analyze different business models and strategies for their Senior Project concepts. Students develop storytelling and financial skills to lead early stage companies from concept through launch.

Open To: Open to: BBA in Strategic Design and Management students; Seniors only; others by permission of BBA in Strategic Design and Management program.

Pre-requisites: Co-requisite(s): PUDM 4120 Senior Project 1. Pre-requisite(s): PUDM 3409 Financial Management

Learning Outcomes

By the successful completion of this course, students will be able, at an introductory level, to:

  1. DEMONSTRATE FAMILIARITY WITH hypothesis-driven innovation methodologies practiced in “real world” startup environments (Lean Startup, Business Model Canvas development, Minimum Viable Product/Proposition).

  2. DEMONSTRATE FAMILIARITY WITH presentation and storytelling skills necessary for early stage startup strategy, team formation, and capital raising.

  3. DEMONSTRATE FAMILIARITY WITH financial literacy, learning the basic building blocks of innovation accounting, generating financial assumptions and forecasts, marketing sizing, term sheets, and capitalization tables.

  4. DEMONSTRATE COMPETENCE IN developing realistic business model evolution scenarios, and ability to create, analyze, combine business model archetypes.

  5. DEMONSTRATE COMPETENCE IN business model validation: the practical strategy of identifying unique customer segment(s) and an early stage value proposition through real world customer discovery interviews and early stage prototype tests.

Course Outline

Business Models and Entrepreneurial Strategy

Week
Date
Class Theme and Activities
Assignment Due
Week 1
Aug 29
Class intro / concept formation
(None)
Week 2
Sep 12
Team formation, intro to the Business Model Canvas (BMC) and customer discovery
Early stage company concepts
Week 3
Sep 19
Customer discovery, customer validation, Market Size Analysis (Total Addressable Market, Served Addressable Market, Target Market or TAM, SAM, TM)
Company BMC analysis results
1 Business model archetype analysis
Week 4
Sep 26
Value, value propositions, and the purpose of business, team forms initial BMC hypothesis v 1.0, team develops customer interview plan
Team BMC 1.0, TAM, SAM,TM
1 Business model archetype analysis
Oct 3
No Classes – Rosh Hashanah
Week 5
Oct 10
Personal value, motivation, vision, and team, team continues to plan customer interviews
Customer discovery interview results, BMC 2.0
2nd Business model archetype analysis
Week 6
Oct 17
Customer relationships, channels, initial value proposition test
Competition, disruptive innovation theory. Innovation accounting
Customer discovery interview results, BMC 3.0 + Lessons learned
3rd Business model archetype analysis
Week 7
Oct 24
How to analyze
Customer discovery interview results, BMC 4.0
4th Business model archetype analysis
Week 8
Oct 31
Midterm: validated “front stage” of the business model, competitive analysis, initial value proposition
Midterm presentations, including BMC 5.0
Week 9
Nov 7
“Back stage” of the business model: Resources, Activities, Partners
Customer discovery interview results, BMC 6.0
5th Business model archetype analysis
Week 10
Nov 14
The money: revenues, costs, how to create financial scenarios 3 years out
Business model scenarios
Unit economics
3 year financial assumptions
7th Business model archetype analysis
Week 11
Nov 21
Investment strategy, cap tables, term sheets
Validated unit economics
8th Business model archetype analysis
Week 12
Nov 28
Turning customer discovery insights into a Minimum Viable Product
Draft cap table, term sheet, investment plan
9th Business model archetype analysis
Week 13
Dec 5
Storytelling and pitch clinic, how to create a “teaser” presentation and a longer form presentation for investors, employees, partners
MVP sketch
Week 14
Dec 12
Pitch practice
Short form presentation
Week 15
Dec 19
Lessons Learned – Final
Long form presentation

 

Assessable Tasks

 

The students will work in self-formed teams to simulate the experience of developing a startup from scratch.

Key tasks, all as group work:

 

  • Presentations: weekly presentation of lessons learned, updated Business Model Canvas versions based on customer interview findings, formulation of new hypotheses to test (over 10 weeks).
  • Field research: customer discovery interviews (at least 30 interviews per team or until key business model hypotheses are sufficiently validated).
  • Financial analysis and industry analysis: market sizing (total addressable market, served addressable market, target market estimations.
  • Value proposition test and test results for midterm
  • Financial scenario development, calculating and validating unit economics, investment strategy, cap table, term sheet
  • Pitch development and delivery.
  • Final lessons learned presentation.

Final Grade Calculation

10% participation in class, giving constructive feedback to your peers

30% progress in customer validation, customer interviews

20% midterm validation test and presentation

20% financial analysis, scenarios, and projections

20% final pitch and lessons learned

Extra Credit Policy

No extra credit

Required Reading

Textbooks may be purchased (new or used), rented, or downloaded through standard sources such as Amazon, Barnes & Noble, or Chegg. Be sure to use the ISBN number in order to ensure that you are ordering the correct edition.

Book available on directly from the publisher:

Lean Analytics, Alistair Croll and Ben Yoskovitz, 2013

Articles, Papers:

The End of Competitive Advantage, by Rita Gunther McGrath, HBR, 8, 2013.

What is Disruptive Innovation? By Clayton Christensen, Michael E. Raynor, and Rory McDonald, HBR, December 2015

A Friedman Doctrine–; The Social Responsibility of Business is to Increase Its Profits, by Milton Friedman, The New York Times, 9, 1970. (paywall)

The Founder’s Dilemma by Noam Wasserman, HBR, 2008

The Role of the Business Model in Capturing Value from Innovation: Evidence from Xerox Corporation’s Technology Spinoff Companies Henry Chesbrough and Richard S. Rosenbloom, Oxford University Press, 2002

Why the Lean-Startup Changes Everything, by Steve Blank, HBR, 2013

Recommended Reading

The following two books are recommended for your reference and for help in writing and conducting research:

Business Model Generation, Alexander Osterwalder and Yves Pigneur

Talking to Humans, Giff Constsable and Frank Rimalovski (fre download)

Interviewing Users: How to Uncover Compelling Insights, Steve Portigal, 2013

Traction: How Any Startup Can Achieve Explosive Customer Growth, Gabriel Weinberg, 2015

The Founder’s Dilemma, Noam Wasserman, 2013

Value Proposition Design, by Alexander Osterwalder

Resources

Lean LaunchPad videos on Udacity by Steve Blank

Lean Startup video by Eric Reis

 

6 Signs the Future Will Not Be Advertised

Photo Credit: Dragan

Steven Spielberg’s 2002 movie Minority Report was for many dark and dystopian. Tom Cruise’s character walks through an invasive screen-lined lobby bombarded by ads. When a camera identifies him with a retinal scan, a dancing 3-D video calls out to him, “John Anderton! You could use a Guinness right about now.”

Some would say that future is already here, but will advertising keep encroaching on our lives like that?

Here are six signals that show a potential future without advertising and one giant reason we should celebrate.

1/ Ad Blockers on the Rise

In her her 2016 Internet Trends report, KPCB Partner Mary Meeker reported that ad spending is at all time highs, but ad blocker use is growing, faster. Ad blocker users grew to 420 million, up 94% from last year. Growth is global, and the leading ad blocking countries are China, India, and Indonesia.

From: KPCB Mary Meeker Internet Trends Report

2/ Subscription Streaming Accelerates

Music, TV, and movie subscription streaming services continue to grow. 46% of all US households have access to a streaming video on demand service,according to Nielsen.IFPIfound that there were 68 million streaming music subscribers in 2015, up 45% from 2014. The most popular streaming services, Netflix and Amazon Prime, both offer completely ad-free experiences.

3/ Fraud is Big Business in Digital Ads

Have you bought digital ads for your latest campaign, and wondered why performance was so low? One culprit could be fraud in digital ads. In the most recent Bot Baseline Report predicts that advertisers will lose $7.2 billion globally to fraud bots in 2016. The study deployed detection tags to measure “bot fraud,” or non-human traffic. While direct media buys had lower fraud, ad formats such as programmatic video ads had 73% more non-human traffic than the study average.

4/ Media Companies Hunt for Models Old and New

The decline in print advertising has decimated the newspaper and magazine industry. The companies that survive are shifting their focus to the future, or back to the subscription model of the past.

The New York Times’s new Public Editor, Liz Spayd described the company’s shift to focus building an audience of paying subscribers, who already generate more than half of the company’s revenue.

The NYC Media Lab is on the hunt for new business models made possible by new technology. Justin Hendrix, the Lab’s Executive Director, says, “The rise of defensive user behaviors like installing ad blockers has created a context for experiments with business models for media that look beyond advertising.”

5/ Advertising Forces a Tradeoff

If you live inside of a company dependent on advertising for revenues, then you know the perils of a business model with inherent trade-offs and frictions. You are constantly having to balance the needs of your audience with the needs of your advertisers, and if you make one side too happy, the other side is not happy. This is true for any advertising-driven company, from Google to The New York Times to a YouTube vlogger.

The best public example is Facebook, who is always adjusting the pendulum to favor advertisers vs. users and then back again. In June, Facebook limited news and other advertising updates to “focus on friends and family.” Just yesterday, Facebookannounced they would disguise ads to fight ad blockers — essentially forcing advertising on ad-blocking users. You can track these shifts backwards and forwards on a quarterly basis — they are always searching for the right tradeoff between giving their users what they want and monetizing those users with advertising.

6/ Advertising is No Longer Cool

The young and hungry entrepreneurs of tomorrow are favoring other business models over advertising. In the early days of the internet, the idea was to build an audience first, monetize later. Monetize later typically meant earn money through advertising.

From: TheMacro.com

At Y Combinator, one of the leading startup incubators, applications for ad-supported business ideas are at a historic low. New companies are seeking revenue through more popular business models such as Software-as-a-Service.

Why We Should Celebrate a Future Without Advertising

If the company founders of Silicon Valley can’t see advertising in their future, maybe this is the strongest signal of all. We’ll live in a science fiction future fantasy of a calm, focused life, free from the distractions of advertising.

Better yet, perhaps this hunt for the better business model will direct more innovation to better alignment between customer needs and value created. 100% focus on pure customer engagement, with no advertiser trade-off, may be the strongest position in the long run.

So what do you do if you’re dependent on advertising in your business model? Start thinking of business modeling as a verb, not a noun. Don’t fret, or bury your head in the sand. Begin the path towards business model innovation. Try to envision new models, experiment new ways to create and capture value, and co-create with your current and future customers. You may just find out that other models out there are better for your business.

Jen van der Meer is the Founder of Reason Street. Jen is on a mission to decode business jargon and distracting panic that keep us trapped in old ways of thinking, and explain business potential in human terms. You can explore the Business Model Library, read If You Have Innovation in Your Job Title, The Non-Linear Growth Competency Gap, The Day the Business Model was Born, and Models that We Live By.

Can You Define Your Strategy on One Page?

Here’s a roundup of one page strategy tools our opinion of which tools work best.

BMC

The idea of the one page strategy tool has been around since the 1880s when French managers sought to see the world beyond mere financial and accounting metrics. The rise of Business Model Canvas and other tools like it take visual strategy out of the wonky heads of MBAs and into the hands and sketches of teams with diverse skills and perspectives. The tools are most popular in organizations faced with uncertainty and complexity. If you need to tap the diverse skills and expertise in a team-based approach to define the future, try a strategy canvas tool on for size.

We start with the Business Model Canvas and conduct a roundup of other tools we’ve seen in startup, non profit, and corporate innovation settings. We’ve eliminated any tools with paywalls under the assumption that a paywall is a bad business model for strategic thought leadership!

The Business Model Canvas 

Osterwalder, 2009 available at Strategyzer.com

Business model innovation is a fairly recent concept in strategy circles, going back 20+ years ago in sync with the Netscape IPO. Suddenly, seeing the future potential of a fast growing company became more complex, with more options, combinations, and possibilities.

Back then, it didn’t make sense to invest the time and effort to develop a full business plan for every possible combination. We tended to choose one directional path, write a long form plan, and march forward. Often, founders would end up marching to their quick demise following the illusion that a plan was a roadmap, or playbook.

Fast forward to the present day. Business model innovation is popular in startup circles, but also in corporate innovation, nonprofits, and social impact entrepreneurship. The magical tool: The Business Model Canvas, by Alexander Osterwalder and Yves Pigneur.

BMC for UberThe Business Model Canvas Canvas includes all 9 building blocks and is based on Osterwalder’s PhD thesis – Business Model Ontologies (don’t click on the PhD thesis link unless you are an extreme business model geek with hours to spare).

The Canvas enables you to see your business model potential as something sketchable, involving sticky notes, and Sharpie pens. Design thinking meets a whole company view. Osterwalder encourages a sketch and prototype approach, and to use the Canvas in group meetings to create a shared language and understanding about business model options.

The Business Model Canvas is best used as an iterative tool, to create shared understanding and document team learning. Osterwalder’s strategy firm, named Strategyzer, and Steve Blank’s Lean LaunchPad curriculum both use the Canvas to test and validate assumptions over time.

Continue reading

Why Your HealthTech Market Analysis is Probably Wrong

Broken Eyeglasses on White Background

Have you had an eye exam at Warby Parker? If you’re in health tech, or just healthcare, and you wear glasses, I recommend you make your way to a Warby Retail location soon just for the experience. Go to the website – you can make an appointment Apple-Genius-bar-style. (Sorry Bay Area folks – their first eye exam locations are East Coast and Midwest).

Why? Because how we look at trying to predict the future, current market dynamics, and competitive threats is wrong if we’re only looking at incumbent competition.

The optician was brisk, thorough, and sophisticated about my questions. When I asked about her experience working at Warby Parker, she took extra time to tell me the best part. She was able to spend time to help people, without having to worry about insurance codes and billing and revenue lifecycle management.

She told me a story about a man who walked around with masking tape on his 20 year old glasses – not just on the bridge – but holding together the lenses and obstructing his vision. He was finally able to afford the exam ($75 flat fee), and the replacement glasses ($95), verses his previous pair from 20 years ago that cost him $400. Thanks to Warby Parker.

If you’re an incumbent in the healthcare field, or a startup aiming to disrupt, there are lessons in this story for both sides.

1/ Look beyond competitors

Are you conducting a competitive analysis for your hospital, pharmaceutical product launch, or medical device? Is Warby Parker’s $75 flat fee eye exam on your map?

“The strategy playbook today needs to be based on the idea of transient competitive advantage- that is, where you compete, how you compete, and how you win is very different when competitive advantage is no longer sustainable” – Rita McGrath, The End of Competitive Advantage.

McGrath recommends a new level of analysis at a granular level – connecting the market segment, offer and geographic location. She calls this looking at an Arena – not focused on “near substitutes” seen in competitive analysis – but down to the level of customer needs, and connections with customer solutions.

I’d recommend also creating space in your analysis for emerging successful business models versus cool tech. Sure we can all imagine drone-based emergency services and virtual reality doctor visits. What insights can you extract from Airbnb’s marketplace model, Netflix’s subscription model, or Amazon Web Services’ pay-per-use model?

2/ Practice radical customer centricity

In the healthcare field, customer centricity is NOT a given. In fact in many conferences and panel discussions in health tech, leading luminaries predict that we will not have a consumer-focused healthcare system for many more years to come.

What’s in the way? Healthcare is a massive $3 Trillion that is 17.5% of our GDP, and is based fundamentally on delivering services, paid through third parties, and doctors and healthcare administrators who are more resistant to change.

While the Centers for Medicare and Medicaid Services (CMS), private insurers and self-insured employers aim to shift a bulk of those payments to value based care, a type of pay for performance measured in health care outcomes, everyone expects a hybrid system for the foreseeable future. Value-based programs (payment deals tied to health outcomes) will exist on top of a dominant logic business model that is still based on services (payment tied to the quantity of hospital stays, MRIs, or hip replacement surgeries).

Sure, you can aim to disrupt with your consumer tech solution or wearable by working outside the system – but even the $3.2 Billion Fitbit market cap (down from a high of $10.7 Billion) is but a rounding error on in that $3 Trillion. You’re not going to move the mountain.

Yet the fact that something like Warby Parker absolutely disrupted my customer experience of eyecare is a sign that maybe it could be possible to be radically customer centric, now. The lower cost, brisk efficient service was 10x better than the hassle of visiting an eye doctor, dealing with the billing codes, and paying for my last pair of $800 glasses from the Luxottica Corporation. Let’s compare that experience to the not-yet-awesome retail clinics and you can begin to see how a new front line health services offering could emerge.

3/ Compete to win on business model, not product or experience

To be sure, charging for eye exams in a retail location is not radical nor breakthrough innovation. Luxottica, which owns LensCrafters and Pearle Vision, have been offering this service from the start, competing with local optometrist offices. Luxottica is the world leader in frames, lenses, and eyewear, with over 80% of the market.

What is radical? Warby Parker recognized the weaknesses in Luxottica’s business model – high margins for frames and lenses – and built their own vertically integrated system to reduce costs, reduce prices, and still afford a buy-one give-one model.

The social impact story is no mere marketing gimmick; the company is a certified benefit corporation and strongly advocates a stakeholder management model, emphasizing its treatment of workers, the environment, and helping provide eyeglasses to the developing world. Social impact is built into their business model and powers Warby Parker to take on a true giant in their field.

What does this mean for an emerging or incumbent health tech player? It’s worth looking at the current incumbent models in health and thinking through the shifting business models. But make sure you’re tracking companies and sectors outside of health for ideas and experiences – what may be an inspiration today may be a competitor tomorrow. Finally while incumbents dance slowly towards a pay for performance business model, imagine how your organization can leapfrog ahead and actually deliver superior quality and experience, demonstrated in actual end customer value.

So You Want to Control Your Own Destiny, Do You?

Founder motivations and control for impact entrepreneurs

Lean Startup  is great for finding scale opportunities, quickly, You make assumptions, discover your customer needs, run some tests, and you can quickly get feedback that you’re either on the right track, or need to start again.

Yet one thing that tends to stop founders from even asking the right questions in the first place is the reason why they are starting a business.

Why are you doing what you are doing? What’s your motivation?

I like to ask this question of very new founders. I got to ask this question twice last week:  at NYC Media Lab’s kickoff of their intensive customer discovery program, The Combine, and at in my two week Lean class at NYU ITP.

There are two basic patterns in the answers – and often the two answers coming from the same founders:

1] I want autonomy. I don’t want anyone looking over my shoulder. I want to control my own destiny.

2]  I want to see my technology/product/service reach as many people as possible (only a few publicly admit to seeking wealth but will acknowledge this in private).

Yet these two motivations set up a dilemma, The Founder’s Dilemma, to be precise, as researched by Noam Wasserman. A Harvard Business School professor, Wasserman studied tens of thousands of companies to understand founder motivations and the high rates of entrepreneurial failure.

He found that entrepreneurs often make choices that do not maximize their wealth.Founders are often torn between wanting to control their company, and wanting to grow their company.

“The need to negotiate a trade-off between wealth and control, between building financial value and maintaining a grip on the steering wheel… founders’ early choices can have delayed and unexpected but significant effects, sometimes because natural inclinations such as passion, optimism and conflict avoidance lead to shortsighted decisions.”   – Noam Wasserman

In Wasserman’s analysis, you can aim to be “King” – seeking complete control over your company, self-funding and maximizing your ownership stake. Or you can aim to be “Rich”  – seeking external investment, and sharing equity to attract and motivate cofounders and employees. Control-oriented companies tend to achieve well below their potential because they fail to attract capital, and also fail to attract strong co-founders and world-class employees.

Meanwhile, founders seeking to build for financial value have a higher hit rate for reaching their potential.

I’ve loved Wasserman’s work ever since I read the findings of his early research. I’m a recovering control freak and have learned how my own desire for control has limited my upside.

But I’ve been struggling with Wasserman’s Rich Verses King concept when working with a the new crop of impact entrepreneurs. These are founders who want to grow and scale their businesses, but they have defined a core purpose beyond financial outcomes. They want to help people. They want to restore the planet.

Rich v. King

 

When we talk about the Rich vs. King dilemma, they want to consciously choose King. The path of Rich means making decisions oriented towards maximizing wealth. Yet these founders find this goal tantamount to greed, which they define as the root cause of much of the capital industrial system they aim to disrupt and unwind.

More critically, they fear the motives of investors who may not share their same values, or who may want them to simply maximize shareholder value, and not seek a social impact goal. They are researching B-Corp status, LC3, and even considering not-for-profit structures in order to protect their mission, and vision from the likes of misaligned investors.

When we break it down further, these impact entrepreneurs do not follow the classic control pattern. They are open and willing to attract strong equity-sharing co-founders, and want to give decision rights and control to employees. Specifically it’s the fear of investors who want a different outcome that limits their growth. They tend to self-fund and bootstrap, and aim for a corner of their market, rather than go for the biggest possible impact.

The double dilemma of the impact entrepreneur

The desire to control the destiny of the company leads to avoiding external funding, which limits the company’s potential. Impact entrepreneurs settle for a smaller corner of a market, a known problem, and may even compete with non profits in the space. More critically, they fail to make the big, disruptive shifts that would manifest the world they want to see.

“The best problems to work on are often the ones nobody else tries to solve.” – Peter Thiel, Zero to One.

What’s the way out of this? My cynical, Wall Street self says, “That’s the way business works. The spoils go to those who seize the power, and maximize for their personal wealth. The markets are geared to find the most efficient financial returns.” But my meditation-and-yoga-practice-self sees a new possibility.

We are witnessing a grassroots movement of entrepreneurs, globally, seeking to contribute to a  better world, by creating a business. They are motivated by the act of creation, they want to be connected to their community, and to the world.

There will always be enough money to chase wealth maximizing business ideas. But my bet is that we’ll see a new form of capital, with more evolved expectations.

We we can hope for: We can encourage impact entrepreneurs to aim big. To go after those problems we can’t figure out how to solve. To back these high potential, high impact companies to private investors with aligned values. We can see a future where high impact companies get the backing and support they need to grow and attract the best talent. To trust that giving up control will lead to the greatest outcome. We may then become clear about what it truly means to flourish and prosper.

The Rules of the Game are Changing

 

Exploring how our changing expectations for capital, met with near zero marginal cost technology, is completely changing the rules of the game, over at Reason Street:

Innovation

3 Questions to Predict Who Will Survive in 2026

The faulty dominant logic mindsets that keep the big companies from actually finding exponential models for growth. Innovation and the Non-Linear Growth Competency Gap. Looking at the recent Ford and GM’s move into the Uber/Lyft space.

Can We Change the Rules of the Game?

Are the rules always set for a winner-take-all outcome? In an era of connected, complex, and connected webs of business and relationships, can we imagine different rules of the game?

The Fed Rates Rose: Let’s Panic!

The 1 reason why smart business leaders don’t have to worry:

If you have a solid plan to get to profitability and growth, or you’re already there (how quaint) then you will likely attract the funding you need. Business fundamentals and smart thinking about how you will actually make money, or grow without losing tons of money, will soon become valuable again. There is no need panic about the rise in rates – money is always attracted to strong business fundamentals. So sleep well tonight, you deserve it.

 

 

Finding Your Customer Pain Points: How Far Do You Go

faces

One of the first jobs in unlocking a business model is to define a customer segment, and figure out customer “pain points.” You know you’ve struck gold when you uncover a “hair on fire” problem that is so tremendously painful the customer will work with your earliest version of the product just to douse the flames.

The belief about pain points is reinforced by investors, incubators, accelerators, and entrepreneurship curricula like Lean LaunchPad. I teach a version of Lean at NYU ITP, and like all good entrepreneur coaches, I too encourage founders to get out of the building, discover customers, and find the pain points that need to be solved.

The easiest shortcut is to “scratch your own itch” – solve a problem that you, the founder have. You’re an “n of one,” or sample size of one, and your job then is simply to make sure that you’re not the only one with that problem – that you’ve found a pain point that if solved would form into a nice exponential growth curve for your company.

The challenge with the scratch / itch formula is that founders who skew younger, and male, tend to go for the superficial itch and not the deeper underlying pain points. Entrepreneurs seem to be stuck in a logic error that never satisfies our need for time, love, food, or money. For our own lives, and the lives of the people we are trying to serve.

There’s been a call recently to encourage for profit, growth seeking startups to tackle the “real problems” that face our culture – but we seem trapped in a circular logic that keeps us stuck in superficial, temporary needs.

How do we get to big ideas when so many founders are encouraged to simply solve for the known, obvious pain points. And how do you find any competitive advantage when solving for the known knowns?

Defining customer needs, it turns out, is an art, and a science. Pursuing hypotheses through customer interviews is a great way to validate early thinking and save precious time ensuring that there is an actual market need a solution. But how you go about conducting interviews, what do you ask? How and when do you talk about your solution? When do you stop searching for the pain, and how do you prioritize that first list of features to launch your idea?

We’ll be conducting a series of online courses at Reason Street to explore the art and science of customer fit. If you’re interested in learning how to get underneath the obvious truths, and find out how to position your business to solve deeper human needs, sign up for our upcoming class, with an A/B tested title that seems to fit your real pain points about business models:

Screen Shot 2015-11-04 at 3.35.49 PM

 

 

Why Growth? Pitchfest Workshops at New Inc.

What’s more fun than working with a bunch of world changing tech founders who see themselves as future unicorns?

Working with artist entrepreneurs at New Inc.

In module 1 of a Pitchfest Workshop series, we covered why you might want to grow big, and have huge scale, as an exercise in imagining your impact.

We are here:  Module 1: Why Growth

Module 2: Storyline (and business model help)

Module 3: Pitch Practice, Feedback, Development

Pitchfest will help you create a growth narrative for your company. The goal of the workshop: construct your company narrative to get useful and constructive feedback from growth investors. We’re focused on the shortest story, the “short deck.” You’ll need a longer deck if you are actually pursuing investors.

You may decide to pursue a fast growth model, or you may decide to pursue more of a steady state plan for generating revenue – but at least you will have invested time to understand the potential for your business.

Prework: Make sure you have recently spoken to at least 10 potential customers before coming to the Pitchfest to present your idea.

Pitch Practice: 2 minutes each, no visual aids.

Why Growth?

Impact. Scale. Envisioning Big Outcomes. If it is clear enough and compelling enough AND BIG ENOUGH it will attract the SCALE AND IMPACT-SEEKING people and resources (VCs, angels, future partners and team members)

What does it mean to seek a 10x return?

My current revenues of _______ would have to grow to ____________ in 5 years to be considered worthy of a venture capital investment.

Trick question – why?

Angel Targeted Returns 5 to 10 times $ in 4 to 8 years

Multiple
 

 

Years to Exit

5x 6x 7x 8x 9x 10x
4 50% 57% 64 68 73% 78%
5 38% 43 48 55 55 58%
6 31% 35 38 44 66 47%
7 26% 29 32 37 37 39%
8 25% 25 28 30 32 33%

For some early angels in Facebook, returns = 62,000%

What % of startups fail? ___________

Why Not Growth?
Control. Creative Control. Ownership Stake. Lifestyle.

Smaller market size – but compelling.

Rich vs. King.

Trade-Off by Noam Wasserman at HBR.org

The Founder’s Dilemma at HBR.org.

 

Prep for Next Time:

Purpose. Know why you are driven to do this.

Motivation. Know what drives you? Are you trying to control your own destiny? Or dominate the world? Create a dent in the universe?

Further orientation:

Spend time going over VC classic recommendations for how to build a pitch deck:

Sequoia Cooley Co Polaris New York Angels Criteria

For lots of examples PitchEnvy The exact Pitch Strategy I’ve used to Raise $125 MM since 2011.

1. Choose a story line arc.
Module 2 is storyline for the pitch – covering the personal motivation/inspiration to start the company, the current market need, the vision for growth, the potential financial outcome.
If you haven’t seen Kurt Vonnegut’s failed master’s thesis – he outlines the different storylines perfectly. For a startup pitch – the Creation/Cinderella arc works well, but also consider the “Man in Hole” storyline – more room to be compelling if you had a story of struggle. No Kafka!
Vonnegut on Open Culture.
2. Assemble any unknown data for your pitch.
Here are examples of VC recommendations for pitches – you don’t have to follow these but they are showing you what investors tend to look for. Not all investors are the same – and in a first meeting you are better off intriguing them than you are having every question answered.
What you’ll need in your story –
_You, your origin/background story, your motivation. (Spear in the chest moment).
_The huge, pressing problem that people are suffering from today.
_The size of that first market – your customer segment / target / nice.
_How big the market could be eventually.
_Your extraordinary solution.
_Your secret sauce.
(And have as backup competitive difference, financial projections, and business model hypotheses for how this idea will make an investor a 10x+ return in 5 years).
3. Create your storyline for a verbal 1-2 minute pitch.
We’re practicing for demo day – but this is the pitch you would make before you start showing the demo, or along side the demo. But I recommend developing a pitch that would work with just your words, so that you’ll be able to make a compelling intro to your business anywhere, in any circumstance.
You don’t seem like a shy crowd so just jump in, it will be fun and we an workshop any questions next week.

Designing for Climate Action

Join me and my students from SVA’s Products of Design Program at Design for Climate Action @svaPoD for an evening of open innovation. Inspire a group of students who have the skills we need to start pushing the right levers of change (systems thinking, design, programming, communications, everything that I should have learned in grad school). Wednesday, September 30th, in NYC.

DCA_LOGO

 

Get Tickets Here ($10)

Event Description: Designing Climate Action is an open-innovation forum for entrepreneurs, designers, scientists, and activists to collaborate to accelerate climate action. Through an iterative and participatory workshop hosted by the Products of Design community, the event will bring together industry leaders with activists to foster inter-disciplinary partnerships and seed endeavors. Select ideas generated during the event will be developed by Products of Design masters students throughout the fall semester, and publicly presented in December 2015 to align with with COP21 proceedings. Products of Design is a Masters degree program at the School of Visual Arts.

Who should attend: Designing Climate Action calls for participation from entrepreneurs and business leaders building new more sustainable economies, designers and communicators creating movements to mobilize consumer action on climate and social justice, scientists working to foster urgency on climate change, and community activists whose stories should be front and center in the climate conversion.

A call to action: For the workshop please bring your challenges, ideas, and opportunities which can only be achieved through collective action. By pulling together this network of experts and activists, the Products of Design community hopes to create a forum to collaborate with you and/or your organizations to realize projects with high potential to galvanize action on climate change, by incubating them throughout the fall before releasing them to the public.