Session 5 - Ignitor Bootcamp - 3 July 2015

After Bootcamp

Getting customers

Startup assumptions and risks

1. CAN YOU… find early adoptors?

2. CAN YOU… sell early adoptors?

3. CAN YOU… build a product they love?

4. CAN YOU… get lots of customers?

?

Getting lots of customers

You have found a predictable and cost-effective way to acquire new

customers

When you start…

If you succeed (cltv > 3x cac and is recovered in 12 months)

Example 1: dropbox $200 to a little over free

Warning!!! groupspaces could never attract

customers at a low enough cost to scale

Series1

0 500 1000 1500 2000 2500 3000

365 days

2500 days

Do you want to waste 6 years?

What to test?

1. Paid acquisition (Google, YouTube, Facebook, traditional ads)

2. Virality (Word of mouth, viral tools, raving fans)

3. SEO (Website, content marketing)

4. Sales (Inbound, outbound)

5. Retail (Own stores, partner stores)

6. Distribution partners (Franchise, agents, wholesalers)

Startup Science

? ? ?

The first sale

What predicts success?

1 Planning doesn’t predict

Source: Lange, Mollov, Pearlmutter, Singh and Bygrave (2007)

“new ventures launched with formal written business plans do not outperform ones

launched without them.”

Business Plan?

Source: Bhide (2000)

21%

79%

Yes!No!

No!

No!

No!No!

No!

Doh!?!

2 Opportunity predicts

Source: Shane (2009)

Industry Number of Inc 500 firms

Firm starts Percent of Starts

Pulp mills 6 33 18.182Computer and office equipment 99 2359 4.197Guided missiles, space vehicles, parts 2 60 3.333Nonferrous rolling and drawing 14 581 2.410Railroad car rental 3 136 2.206Measuring and controlling devices 49 2482 1.974Paper mills 3 125 2.400Search and navigation devices 6 310 1.935General industrial machinery 26 2173 1.197Photographic equipment and supplies 7 646 1.084Manifold business forms 3 281 1.068Household appliances 4 390 1.026Electrical industrial apparatus 11 1080 1.019Legal services 10 129207 0.008Eating and drinking places 34 494731 0.007Carpentry and floor work contractors 4 66383 0.006Real estate operators 5 90042 0.006Hotels and motels 2 39177 0.005Painting and paper contractors 2 43987 0.005Retail bakeries 1 22165 0.005Grocery stores 5 112473 0.004Used merchandise stores 1 24442 0.004Automotive repair shops 5 124725 0.004Beauty shops 3 79081 0.004Residential care 1 27710 0.004Videotape rental 1 27793 0.004

Industry choice vs. inc 500

Computer and Office Equipment (1/25)

Eating and Drinking Places (1/14,550)


Computer and officeequipment

582 succeed

Eating and drinking places

1 succeeds


Correlation between number of startups in an industry and failure rate

0.77


3 Team predicts

Series1 13.1%

54.2.%

Source: Bruderl, et al. (1992)

+

>

5-year failure rate?

90%

10%

1 founder

2 or more founders

Source: FinScope (2010)

Team size south africa

4 Advice seeking predicts

Series1 45%

80%

No advice

Source: Watson (2007)

Advice from accountants 3+/yr

3-year survival rate

Source: Pretorius & Le Roux (2011)

Successive entrepreneurship and no learning

Source: Pretorius & Le Roux (2011)

5 Industry experience

75%

25%

Source: Fresser and Willard (1990)

Inc 100 entrepreneurs with industry experience

Source: Bruderl, et al. (1992)

Series1 25.5 %Industry Experience

No Industry Experience 54.5 %

5-year survival and industry experience

Strong Team

(1) 3 + members

(2) 50% joint experience

(3) 3 year industry experience

(19%)

(73%)

Source: Eisenhardt & Schoovenhoven (1990)

6 Traction

“I'd just go sell it. I don't believe in market research. Somebody once told

me the only thing you need is a customer."

Source: Sarasvathy (2007)

Source: Reynolds (1987)

Source: Bhide (2000)

82%

8% 10%Somewhat Involved

Main Salesperson

Heavily Involved

Founders involvement in selling


1. Find early adopters

2. Sell early adoptors

3. Build something customers love

4. Get lots of customers

?

7 Pre-mature scaling

Avoid Pre-mature Scaling

AMAR BHIDE

Idea BuildNo

Facts

Don’t skip the assumption testing

paulshawsmithscientific business strategy

paulshawsmithscientific business strategy

74%of high growth internet start ups

fail due to premature scaling.

Source: Start Up Genome Report(2011)

20times faster than startups that

scale prematurely

Startups that scale properly grow about

Source: Start Up Genome Report(2011)


1. Find early adopters

2. Sell early adoptors

3. Build something customers love

4. Get lots of customers

?

Do this last!

8 Community

Observational learning

Mayans

Hutu

Greeks

Romans

Egyptians

Vikings

Khoisan

Persians

tribes

YPO

MBAs

Gamers

Sports centers

The Sharks

KIPPRhodes Rowing

Music Scools

tribes

7000 inc 500 companies assessed

9 best performers chosen for a study

4 belonged to YPO

The breakthrough company

“their willingness to support, mentor and fund each other to success. In my humble opinion, this is what is really valuable about YC”

- Dave McClure, 500startups founder

9 Values

What are values?

How importance or precious something is to a person

Values Definition

Time:

How does a person spend their time?

Show

Energy:

What activities gets the person excited?

Show

Money:

How do they spend their money?

Show

Determining Values

Time:


Business

Energy:


Business

Money:


Business

Elon Musk Values

8:00: Heads to SpaceX’s office in his Model S.

How does Elon Musk spend his time?

8:00: Morning phone calls. Marketing VP, journalists, job candidates or conference calls

10:45: Week status review on the Falcon 9


12:30: Propulsion schedule meeting

12:30: Building operations meeting


16:30 Visits the rocket factory


19:00 Interviewed by Sarah Lacy from Pando Daily

Attends premier of a film he has produced


How does Elon Musk spend his money?

Time:


Business

Energy:


Business

Money:


Business

Richard Branson Values

“A business has to be involving, it has to be fun”

“My general attitude to life is to enjoy every minute of every day. I never do anything without a feeling of, ‘Oh God,

I’ve got to do this today”

What gives Richard Branson energy?

What does Richard Branson spend his money on?

Time:


Business

Energy:


Business

Money:


Business

Richard Branson Values

AMAR BHIDE

Values predict your future!

AMAR BHIDE

Becoming a great investor

Business and investing

Family and friends

BaseballSeries1

AMAR BHIDE

Eating

Movies

Partying?

Outcome 1

Outcome 2

Outcome 3

AMAR BHIDE

Business

Career

Investing?

Outcome 1

Outcome 2

Outcome 3

10 Vision

Source: Barringer et al. (2005)

54%

80%

FASTGROWTH

SLOWGROWTH

Growth commitment?

“We will create products that become pervasive around the world… We will be

the first Japanese company to go into the US market and distribute directly.. Fifty

years from now, our brand will be as well know as any in the world.”

“I will build a motor car for the great multitude… It will be so low in price that no man making a good salary

will be unable to own one. The horse will have disappeared from our

highways, the automobile will be taken for granted.”

Action list1 Validate you have a real opportunity

2 Build a team

3 Seek advice

4 Develop your industry knowledge

5 Don’t scale until P/M fit

6 Get traction

7 Join a community

8 Value your business

9 Have a vision

Pitching Your Business

2-minute pitch

1 What does your company do?

2 How big is your market?

3 How much traction do you have?

4 How many customers did you talk to?

5 What did you learn this weekend?

2-minute pitch

1 What does your company do? Ignitor helps entrepreneurs succeed using coaching and mentoring. 2 How big is your market? We are targeting the R10B that is spent on business support in SA 3 How much traction do you have? We have landed 4 major sponsors and helped 400 entrepreneurs 4 How many customers did you talk to?


Last customer interview & Prepare pitch

• Last customer interviews (B-to-B: 15; B-to-C 30)

• Prepare a 2-minute pitch

• Test your pitch on 5 people in the room (and phone your mum)

• Pitching begins at 16:00

1 What does your company do?

2 How big is your market?

3 How much traction do you have?

4 How many customers did you talk to?


Session 5 - Ignitor Bootcamp - 3 July 2015

Business

advice source

founders source

office equipment

industry number

new customers

drinking places

industry choice

industry experience