thestartupownersmanualsxsw-120310163912-phpapp01

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The Startup Owners ManualStanford - School of EngineeringU.C. Berkeley - Haas School Of Businesswww.steveblank.comTwitter: @sgblank

Steve Blank

1See the Animated Version of this Presentation at:http://www.slideshare.net/sblank/the-startup-owners-manual-sxsw-the-movie-2This Talk is Based OnBusiness Model GenerationThe Lean StartupFour Steps to the Epiphany

3This Talk is Based OnBusiness Model GenerationThe Lean StartupThe Startup Owners Manual

4Not all those who wander are lostBilbo BagginsThe Search for a Path1602 - 1908

The Path to Business ExecutionBut Startups are Not Smaller Versions of Larger Companies

From Atoms to Bits

The Startup PathSearch Versus Execution

Whats a Startup?

Whats a Business Model?

Value PropositionWhat Are You Building and For Who?

Customer SegmentsWho Are They?Why Would They Buy?

ChannelsHow does your Product Get to Customers?

Customer RelationshipsHow do you Get, Keep and Grow Customers?

Revenue StreamsHow do you Make Money?

Key ResourcesWhat are your most important Assets?

Key PartnersWho are your Partners and Suppliers?

Key ActivitiesWhats Most Important for the Business?

Cost StructureWhat are the Costs and Expenses

Turning Hypotheses Into Facts

The Four Steps The Startup Path

Customer Development

Customer DevelopmentThere Are No Facts Inside The Building, So Get the Heck Outside

Customer DevelopmentTest the Problem, Then the Solution

Customer DevelopmentThe Entrepreneurial Journey

Startup Owners Manual

Startup Owners Manual

National Science Foundation

Yes theres an E-Book version comingFree autographed copies - SundayStartup America Salon E 1:30 -3pm

Startup Owners ManualExamples from the Book

Examples from the Book

Step-by-Step for both web/mobile and physical channelsCustomer Relationships

Customer Relationships Web/Mobile Products Get Customers

2012 Steve BlankCustomer Relationships Web/Mobile Products Keep Customers

2012 Steve BlankCustomer Relationships Web/Mobile Products Grow Customers

2012 Steve BlankCustomer Relationships Web/Mobile Products Get/Keep/Grow

2012 Steve BlankCustomer Relationships Physical & Web Mobile Are Different

2012 Steve BlankCustomer Relationships Physical & Web Mobile Are Different

2012 Steve BlankHow Does This Really Work?

Lean LaunchPad Class

National Science Foundation

How Does This Really Work?8 Weeks from an Idea to a BusinessTeam DynamoFinal PresentationInterviews: 252Partner: 10Survey: 76Al Hassan HleilehMBA 2

MA in POL ECON SOC HElika MahdaviMS&E MS

BS in Indus.Eng.Megh GautamMS&E MS

BTech in ITHung LeMS&E MS

BS in EE/CS

PICTUREPICTUREPICTUREPICTURETHE TEAM

TABLE OF CONTENTSOverview of our idea evolutionOur journey from week 1 to week 8Current IdeaArchetypeProduct visionPartnerChannel & Demand CreationCompetitive LandscapeMarket SizingLesson learned and what next

Travel booking portal for Middle EasternsSocial travel planningEx-pat travel portal to Middle EastTravel inspiration - Social platform that nudges people to inspire and enrich their life21356Safe travel portal for US travelers to M.E.4

IDEA EVOLUTION THROUGH PIVOT

78Nudge to enrich lifeFocusCustomer InsightsCompetitionMarket sizeCustomer InsightsMarket sizeResearchScalabilityMarket size

Travel booking portal for Middle Easterns1Interviews: 20

Market understandingBest in class productRelationship with partnersHuman CapitalHotelsAirlinesEvents (Festivals)Car rentalsPromotion companiesDeal listingsState TourismTravel agentsConventions (CES)Business Schools (Study groups)Product DevelopmentA/B testingRelationship with hotels; airlines; car rentalsSourcing dealsAcquisition, retain customersWeb and mailAdvertisingSocial MediaWord of MouthReferralsCustomer call centersMagazinesLowest priceBest inventoryConvenientExperiential UISocial ValidationCreate a CommunityMultiple optionsBest Actionable dealsRelevant locationsTrusted relationships Successful partnershipsBrand awareness/ identificationPilotsCross pollinationEvents (Parties!)Young and the affluentHigh disposable incomesWilling to explore

Young and singleDivergent origins Social media savvy

Young couples Trendsetting behavior

Young familiesBest education for kidsCultural experience Trendy destinationsHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsPercentage of hotel/package (s)Advertising revenuesEvent of the monthExclusive partnership with eventsWEEK 1 MAKE MY DREAMNewRemainRemoveWeek 1

Middle East focused platform

Offer a booking platform with group discounts and flash-sales

Ramp up strategy through social conversations

Preserve memories of travel through photo sharing and quotesMiddle East focused Travel booking portalPlatformExpedia kind ofSocial Angle to gain customersPost processing

66





Dense canvasToo many things100 week analogy

67





Too broad a platform

Too many value propositionsLack of focus in value propositionsTrying to be Too broad a platformBy having Too many value propositionsKey lesson learned - focus68





The method we used was a top-down approach

We didnt use net numbers (gross)

The lesson here is that if we were to do it again we would use bottom up / net figuresMarket sizing problemKey lesson learned about market sizing69





We were not focused on a specific customer segment too broad.

Our interview base was biased towards our network needed a better sample. Lack of focus in customer segmentsBias was the key lesson learnedVery broadFocus was missing

70





Focus is crucial be it in your value proposition or in your customer segmentation

Market sizing Use bottom up whenever possible

Get out of the building in spirit and in action. Avoid biasKey learning

Travel booking portal for Middle EasternsSocial travel planning1Customer focus2Interviews: 20

Market understandingHuman CapitalRelationship with partners

Best in class productSocial NetworksTravel Publications

HotelsBusiness SchoolsTravel agentsAirlinesEventsDeal listings

Car rentalsPromotion companiesState TourismConventions (CES)Customer Acquisition Customer RetentionProduct DevRelationship with key partnersSourcing dealsWord of MouthSocial Media

Web and mailAdvertisingReferralsCustomer call centersMagazinesEasy and pleasurable trip planningBest inventory

ConvenientExperiential UILowest priceMultiple optionsBest Actionable dealsRelevant locationsCreate a CommunitySocial Validation

Trusted relationships Successful partnershipsEvents (Parties!)

Brand awareness/ identificationPilotsCross pollinationYoung and the affluentHigh disposable incomesWilling to explore

Young and singleDivergent originsSocial media savvy

Young couplesTrendsetting behavior

Young familiesBest education for kidsCultural experience Trendy destinations

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costs

Percentage of hotel/package (s)Advertising revenuesEvent of the monthExclusive partnership with eventsWEEK 2 SOCIAL TRIP PLANNINGNewRemainRemoveWeek 2

Through our mentors, we really dug into our customers insights

They were telling us that they didnt just want to go to the middle east

They wanted a seamless, social and enjoyable travel experience from A-Z

We pivoted to The Middle Easts travel booking portal with a ramp up focused on influential who want easy and pleasurable trip planningPivot to social travel planning for group traveling













Percentage of hotel/package (s)Advertising revenuesEvent of the monthExclusive partnership with eventsNewRemainRemoveWeek 2

WEEK 2 SOCIAL TRIP PLANNING



























When research for potential partners, we learned of several existing competitors with similar product

crowded

hypercompetitiveWhat was the problem?














We should have looked at the competitive landscape earlier

We should have spoken to industry / domain experts earlierKey learning

Social travel planningEx-pat travel portal to Middle East23

Competition

Travel booking portal for Middle Easterns1Interviews: 64

Market understandingHuman CapitalRelationship with partnersSocial NetworksHotelsBusiness SchoolsTravel agents

Travel PublicationsAirlinesEventsDeal listingsCustomer Acquisition Customer RetentionProduct DevRelationship with key partnersSourcing dealsWord of MouthSocial MediaLocal knowhow and content

Easy and pleasurable trip planningBest inventoryTrusted relationships Successful partnerships

Events (Parties!)Young and the affluentHigh disposable incomesWilling to explore


Young couplesTrendsetting behaviorHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 3 EX-PAT TRAVELING NewRemainRemoveWeek 3

Pivot to Ex-pat Community Travel PortalWe pivoted back to the original idea with focus on one customer segment

A travel planner for Ex-Pat students who frequently visit the Middle-East & other major cities.

We want to capture & publish their travel experience.













We interviewed 64 people and found:

The market was too small

There is little homogeneity in customer needs

Too low frequency of travel to justify target marketWhat was the problem?







Market sizing is crucialKey learningEx-pat travel portal to Middle East3Safe travel portal for US travelers to M.E.4

Market size

Social travel planning2

Travel booking portal for Middle Easterns1Interviews: 33Survey: 46

Market understandingHuman CapitalRelationship with partnersSocial NetworksAlumni AssociationsHotelsBusiness SchoolsTravel agents

Travel PublicationsAirlinesEventsDeal listings

Customer Acquisition Customer RetentionProduct DevelopmentRelationship with key partnersSourcing dealsWord of MouthSocial MediaSafety propositionLocal knowhow and contentCommunity/Group Travel

Easy and pleasurable trip planningBest inventoryTrusted relationships Successful partnershipsYoung and the affluentHigh disposable incomesWilling to explore

-MBA Students

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4

Pivot to US Traveler Portal to Middle EastWe expanded our market to entire US travel market

Platform to facilitate Americans to travel to the Middle-East




Easy and pleasurable trip planningBest inventoryTrusted relationships Successful partnershipsMBA Students

Young and the affluentHigh disposable incomesWilling to exploreHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4We surveyed 46 people and interview 33 more

Young & Affluent Americans traveling to the Middle East need local insight.

Well be the trusted source!Young affluent market




Easy and pleasurable trip planningBest inventoryTrusted relationships Successful partnershipsYoung and the affluentHigh disposable incomesWilling to explore

-MBA Students

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4





Young and the affluentHigh disposable incomesWilling to exploreHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4Launched website with full basic booking functionalitiesEbtism.com went live

Full basic functionalities (login, browse deals and book trips)

4 sourced deals from agencies

42 GSB students booked

Exclusive login

Deals selection (real sourcing)

Value proposition

Ability to book trips





Young and the affluentHigh disposable incomesWilling to exploreHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4

We spoke to Christos Stergiou, founder of truegreece.com (Greece Analogue)

10 years of development

$5M ideaWhat was the problem?





Young and the affluentHigh disposable incomesWilling to exploreHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsRefundsPercentage of booking costsWEEK 4 US TRAVEL TO Middle EastNewRemainRemoveWeek 4

Market size need to be VENTURE SCALE

We want to DISRUPT the Travel Space.

Lets Re-think the Entire Idea! Key learningEx-pat travel portal to Middle East3Safe travel portal for US travelers to M.E.4


Travel booking portal for Middle Easterns1Social platform that nudges people to travel5

Market sizeInterviews: 17Survey: 10

User dataHuman CapitalRelationship with partnersSocial NetworksTravel Websites

Alumni AssociationsTravel agentsBusiness SchoolsHotelsCustomer Acquisition Customer RetentionProduct DevelopmentRelationship with key partners

Sourcing deals

Word of MouthSocial MediaEnrichment (Travel)Leads

Safety propositionLocal knowhow and contentCommunity/Group TravelTrusted relationshipsSuccessful partnershipsOnline travelersTravel Websites

MBA Students

Young and the affluentHigh disposable incomesWilling to exploreHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationships

RefundsLeadsAdvertising

Percentage of booking costsWEEK 5 TRAVEL NUDGEPaying partner sideEnd-user sideRemoveWeek 5

Pivot to travel inspirationWe pivot to a brand new market

Inspire people to travel more through recommendation

Relevant based on social graph and travel history



Sourcing deals



MBA Students



Percentage of booking costsWEEK 5 TRAVEL NUDGEPaying partner sideEnd-user sideRemoveWeek 5

Inception of Nudge by looking at the competitive landscape

Revisedlater



Sourcing deals



MBA Students



Percentage of booking costsPaying partner sideEnd-user sideRemoveWeek 5

WEEK 5 TRAVEL NUDGE



Sourcing deals



MBA Students




Bottom-up estimation

Market = population x nudge frequency x CTR x CPC

With leads revenue sharing model, TAM is based on assumptions of nudges frequency and conversion

Target market is justifiable with an annual revenue of $267 million with 31% market penetration

Sizeable potential marketSOM = $267MSAM = $373MTAM = $900MWEEK 5 TRAVEL NUDGE



Sourcing deals



MBA Students




Mock up of the product for customer interview

WEEK 5 TRAVEL NUDGEEx-pat travel portal to Middle East3Safe travel portal for US travelers to M.E.4


Travel booking portal for Middle Easterns1Travel inspiration - Social platform that nudges people to inspire and enrich their life56

Interviews: 52 + 3 partners

User dataHuman CapitalRelationship with partnersSocial NetworksTravel WebsitesCustomer Acquisition Customer RetentionProduct DevelopmentRelationship with key partnersWord of MouthSocial MediaEnrichment (Travel)Customer Acquisition

LeadsTrusted relationshipsSuccessful partnershipsOnline travelersTravel WebsitesHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisition

LeadsAdvertisingWEEK 6 TRAVEL NUDGEPaying partner sideEnd-user sideRemoveWeek 6



LeadsAdvertisingPaying partner sideEnd-user sideRemoveWeek 6

PartnerReach out to Travelocity (Jim Hornthal)

Customer insights differed

Technological challenges (e.g. cookies)

Revenue share instead of lead generating

Reach out to Expedia and Bookingmarkets

Confirm revenue share model (5% - 10%) and we even got a standard termWEEK 6 TRAVEL NUDGE



LeadsAdvertisingPaying partner sideEnd-user sideRemoveWeek 6

Then we went out of the building to interview 50 people at Stanford Mall

What prevents people from traveling is time, not imagination or laziness (seasonal)

People dont want to be nudged too often (1 per month)

Referrals from close friends more valuable than referrals from strangersThe customers value relevance of nudgesWEEK 6 TRAVEL NUDGE

Ex-pat travel portal to Middle East3Safe travel portal for US travelers to M.E.4



7Nudge to enrich lifeMarket sizeInterviews: 16

User dataHuman CapitalRelationship with partnersSocial NetworksTravel WebsitesEvent WebsitesUniversity EventsMerchantsCustomer Acquisition Customer RetentionProduct DevelopmentRelationship with key partnersWord of MouthSocial MediaEnrichment (Activities + Travel)Customer Acquisition

Enrichment (Travel)Trusted relationshipsSuccessful partnershipsStudentsGraduatesYoung Families

Travel Websites

Online travelers

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisitionWEEK 7 - NUDGEWeek 7Expand from travel to include activity nudgesWe expanded our nudges to include activities, events, social reminders than just travels

Keep user more engaged with relevant frequent nudges



Travel Websites

Online travelers

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisitionWEEK 7 - NUDGEWeek 7



Travel Websites

Online travelers

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisitionWEEK 7 - NUDGEWeek 7We went out of the building to interview 20 people

People also want to be nudged in other things than just travel

Mobile is the most effective medium to increase engagementThe customers want diverse nudges



Travel Websites

Online travelers

Human CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisitionWEEK 7 - NUDGEWeek 7

Ex-pat travel portal to Middle East3Safe travel portal for US travelers to M.E.4



78Nudge to enrich lifeInterviews: 15Partners: 7Pilot nudges: 20



Sourcing deals



MBA Students



Percentage of booking costsNUDGEPaying partner sideEnd-user sideRemoveWeek 5

nudge /nj/

verb:to push slightly or gently, especially with the elbow, to get someone's attention, prod someone into action, etc.

noun:a slight or gentle push or jog, especially with the elbow. Creating NUDGE

User dataHuman CapitalRelationship with partnersSocial NetworksTravel WebsitesEvent WebsitesUniversity EventsMerchantsCustomer Acquisition Customer RetentionProduct DevelopmentRelationship with key partnersWord of MouthSocial MediaEnrichment (Activities + Travel)Customer AcquisitionTrusted relationshipsSuccessful partnershipsStudentsGraduatesYoung Families

Travel WebsitesHuman CapitalProduct DevelopmentAdvertising costsMaintaining relationshipsCost per acquisitionWEEK 8 (FINAL)Paying partner sideEnd-user sideRemove

Week 8

CUSTOMER ARCHETYPES

AshleyClairAlexAge: 26Stanford StudentWorked in HollywoodLoves AdventuresWants to be nudged relevantly, and inspired!Age: 28Works at mobile start-up in San Francisco, originally from MontanaSingle & datingPlays soccer, runs marathonsLikes to cook/host dinner with friends when possibleAge: 38Married, 1 child (4 y.o. Clay)Investment professional in New YorkVolunteer coach for sons hockey teamCommutes for work to Manhattan every dayGoes out of town to the country for break once/month with his family 108

NUDGE TYPES

social pushserendipityNudges from friends as a social pushOCCURING EVENTS(REALITY)EVENTS YOU ARE AWARE OF(CONSCIOUS)DESIRE(SUBCONSCIOUS)Discovering nudgesHighest conversion rate nudgesnudge

SIMULATED NUDGE As long as there is transparency between advertisers, the suggestion database and its users, this is an innovative idea. Otherwise, it is a rather subversive tool for consumer and social trends. An interesting concept either way! Love the product idea! This is awesome! I love it!! Just told me to walk the dish today! phenomenal and stunning all in one shot!!We did a pilot to test how many people sign up for nudge

103 people try the product

42 people left email (41% signup for service rate)

NUDGE: "it's 4 months till you graduate, take your best friend out for a coffee at Coupa, and share some of the good times you have had at GSB"

SIMULATED NUDGEWe carefully selected people we know to send them tailored nudges

We sent tailored nudge to 25 people with 40% conversion rate

10 people actually like the nudge and go

4 people may take the trip in the future

11 people didnt respond

NUDGE: "Visit the Rodin Sculpture Garden this week and get inspired. Located next to the Cantor Arts Center but accessible at all hours, the Rodin Sculpture Garden houses one of the largest collection of Rodin sculptures111

RECOMMENDING PLATFORMComputationalMatrix factorizationCollaborative filteringCrowd-sourcedSocial nudgingCuratedData miningSocial networksGeographyContext-basedCustomized user preferenceTimePast behaviorsInputModel112

Revenue sharing (CPA)

PARTNERS

PartnerGiftsEvent + ActivitiesTravelUniversity EventsRestaurants

Facebook AdFacebook Fan PageYouTube VideoViews273,380Unique120,17382Clicks0.030%CTR$0.38CPC83LikeFreeCPCEngage46WebsiteUnique43062%Bounce rate2:22minAvg time

DEMAND CREATION

Week 7370Days900898603730

COMPETITIVE LANDSCAPEInspirationPlanningSharingQ&AFlash DealCommunity

Reminder

INCOME STATEMENTQ2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013User growth projection2,00020,00050,000500,0001,000,0002,000,0004,000,000Q2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013Revenues AdvertisingN/AN/AN/AN/AN/AN/AN/A Rev. Share * $10,000$100,000$250,000$2,500,000$5,000,000$10,000,000$20,000,000 Total Revenue$10,000$100,000$250,000$2,500,000$5,000,000$10,000,000$20,000,000Cost of Sales Customer Acquisition$60$600$1,500$15,000$30,000$60,000$120,000 Advertising & Promotions$1,000$1,000$1,000$3,000$3,000$3,000$3,000 Total Cost of Sales$1,060$1,600$2,500$18,000$33,000$63,000$123,000 Gross Profit$8,940$98,400$247,500$2,482,000$4,967,000$9,937,000$19,877,000Expenses Development **$645,000$645,000$645,000$940,000$1,115,000$1,290,000$1,465,000 Hosting$1,250$1,250$1,250$1,250$1,250$1,250$1,250 Other Wages ***$100,000$100,000$100,000$100,000$100,000$100,000$100,000 Travel$5,000$5,000$5,000$10,000$10,000$15,000$15,000 Office + Utilities$12,000$12,000$12,000$12,000$12,000$12,000$12,000 Total Expenses$763,250$763,250$763,250$1,063,250$1,238,250$1,418,250$1,593,250Net Income($754,310)($664,850)($515,750)$1,418,750 $3,728,750 $8,518,750 $18,283,750 California UniversitiesLocal beta at StanfordGo global !Focus is key segmentation is important Market sizing is crucial!!!!There is nothing more important than good team environment and cultureMentorship is hugely important, we couldnt have got where we are without our Mentors help We should be open to pivot even at an earlier stage and trade off: The need to be loyal to our old ideas vs. new innovations that could solve problems based on our customer insightsDistilling insights and listening to experiments Looking past ourselves We have a heightened awareness of confirmation bias and try and assuage that in our different experimentsLESSON LEARNEDWHATS NEXT

Incubators

CRITICAL SUCCESS MILESTONESNEXT 6 MONTHSInitiate Cohort AnalysisExpand Beta testing to entire Stanford Campus Test Gamification iteration and Badges Develop machine learning and curation technology and resources to enable scalability Hire key resources (software developer, data scientist, marketing, business development, social animal) and spaceWhy Do We Do This?

Make Your Lives Extraordinary

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