Bob Dorf "The four steps 12 step program"

So You Want To Be An Entrepreneur?(a 12-step program from authors of the new Four Steps*)

Bob Dorfallegedly retired serial entrepreneur

www.steveblank.com

*Caution: this 12 step program may require alcohol

A bit about me…

• “Unemployable” since age 22, (gasp) 4 decades ago• 6 startups: 2 homeruns, 2 base hits, 2 tax losses

– 1to1: from 3 people/10k revenue to 400 people/$44mm in 8 years– D&S: from 1 person/12k revenue to 150 people/15mm in 20 years

• >20x startup Investor: 10 personally, 10 via fund

• >12x startup advisor including EPNY, BVSN, DCLK, ICGE

• 3 fleece vests: greatest all-time tuition• 2 years with Steve, teaching, consulting, new book

So What Do I Do?

1. Decide what type of entrepreneur2. Do you have what it takes?3. Find an idea of sufficient size4. Craft company hypotheses5. Build the Website Logistics6. Build a “low-fidelity” web site7. Get customers to the site8. Add the backend code to make the site work9. Test the “problem” with customer data10. Test the “solution” by building the “high-fidelity” website11. Ask for money12.Celebrate success!

12 Steps to a Startup

Step 1: What’s A Startup?

Who’s An Entrepreneur?

Startup

Lifestyle Startups Work to Live their Passion

• Serve known customer with known product

• Work for their passion

Small BusinessStartup

Small Business StartupsWork to Feed the Family

• Serve known customer with known product

• Feed the family

Small BusinessStartup

Exit Criteria- Business Model found- Profitable business- Existing team< $500K in revenue

Small Business StartupsWork to Feed the Family

• known customer known product

• Feed the family

Large Non-Profit

Social Startup

Social Entrepreneurship Startups

• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Strategies

ScalableStartup

Large Company

Scalable Startup

Goal is to solve for: unknown customer and

unknown features

Search Execute

Exit Criteria- Business model found- Total Available Market > $500m- Can grow to $100/year

ScalableStartup

$2 to $50M Acquisition

Buyable StartupBorn to Be Big

Goal is to solve for: Internet, Mobile, Gaming Apps

Search Sell

Sell to larger company

What’s A Startup?

A Startup is a temporary organization used to search for a repeatable and

scalable business model

Startup Large CompanyTransition

BuildSearch Execute

Step 2: Do You Have What It Takes?

• Founder?• Early Employee?• Later Stage?

• Resilient• Relentless• Agile• Curious• Passionate• Driven• “Fire in the Belly”

Step 3: Find an Idea of Sufficient Size

• Idea sources:– New technology– Regulatory/legal changes– Customer tastes changes– Unmet customer needs

• Size the opportunity:– Total Available Market – Served Available Market– Target Market

Step 4: Craft Company Hypotheses

• Any company can be described in 9 hypotheses

CUSTOMER SEGMENTS

which customers and users are you serving? which jobs do they really want to get done?

VALUE PROPOSITIONS

what are you offering them? what is that getting done for them? do they care?

CHANNELS

how does each customer segment want to be reached? through which interaction points?

CUSTOMER RELATIONSHIPS

what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

REVENUE STREAMS

what are customers really willing to pay for? how? are you generating transactional or recurring

revenues?

KEY RESOURCES

which resources underpin your business model? which assets are essential?

23

KEY ACTIVITIES

which activities do you need to perform well in your business model? what is crucial?

KEY PARTNERS

which partners and suppliers leverage your model?

who do you need to rely on?

COST STRUCTURE

what is the resulting cost structure? which key elements drive your costs?

26images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

sketch out your business model

Step 5: Website Logistics

• Get a domain name• Set up Google Apps• For Coders: set up a web host

– Use virtual private servers (VPS)– “Platform As A Service like Heroku, Dotcloud or

Amazon Web Services

Step 6: Build a “Low-Fidelity” Web Site

• Splash Page – value proposition, benefits summary, and a call-to-action to learn

more, answer a short survey, or pre-order

• For Non-coders– Make a quick prototype in PowerPoint or use Unbouce,

Wordpress– For surveys and pre-order forms use Wufoo or Google Forms

• For Coders– Build the User Interface with a wireframe prototyping tool– Create a fake sign up/order form

Step 7: Get Customers to the Site

• Start showing the site to potential customers, testing customer segment and value proposition

• Use Ads, textlinks or Google AdWords, Facebook ads and natural search

• Usse your network to find target customers • For B2B products, use Twitter, Quora, and industry

mailing lists are a good place to find target customers. • Use Mailchimp, Postmark or Google Groups to send out

emails and create groups• Create online surveys with Wufoo or ZoomerangGet

feedback on your Minimum Viable Product (MVP) features and User Interface

Step 8: Build a Complete Solution

• Build a more complete solution (Connect the User Interface to code)

• Connect the UI to a web application framework (– Node.js, Rubyon Rails, Django, SproutCore, jQuery, Symfony,

Sencha, etc.)

Step 9: Test the Customer Problem

Customer Development

The Search for the repeatable and scalable Business Model

Customer Development

There are no facts inside your building

So get the hell out

More startups fail from a lack of customers than from a failure of product development

Customer DevelopmentThe Search For the Business Model

CompanyBuilding

Customer

Discovery

Customer

Validation

Customer Creation

Pivot

• Stop selling, start listening

• Test your hypotheses – problem and solution

• Continuous Discovery

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

Pivot

Customer Discovery

Customer Validation

Customer

Discovery

CustomerValidatio

n

Customer Creation

CompanyBuilding

• Repeatable and scalable business model?

• Passionate earlyvangelists?

• Pivot back to Discovery if no customers

Pivot

The Pivot

• The heart of Customer Development

• Iteration without crisis

• Fast, agile and opportunistic

Pivot Cycle Time Matters

• Speed of cycle minimizes cash needs

• Minimum feature set speeds up cycle time

• Near instantaneous customer feedback drives feature set

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most …

- orders, learning, feedback, failure…

Pivot ExampleRobotic Weeding

Talked 75 Customers in 8 Weeks

Our initial plan

Confidential

20 interviews, 6 site visits…We got OUR Boots dirty

WeedingVisited two farms in Salinas Valley to better understand problem

Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator

MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and

lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)

Business Plan Autonomous Vehicles for Mowing & Weeding

We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)

Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider

Weeding- Farmers with manual weeding operations

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Mowing Dealers- Ag Dealers

- Innovation- Customer Education- Dealer training

Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Autonomous vehicles, GPS, path-planning

Found weeding in organic crops is HUGE problem; 50 - 75% of costs

Crews of 100s-1000

Back-breaking task

(Ilegal) labor harder to get

1-5 weedings per year/field

$250-3,500 per acre and increasing

Food contamination risk

Decision to make – mowing vs weeding

Application If ROI is < 1 yr they will

buy

Labor costs significant?

Autonomous would solve

problem?

TAM

Mowing of large fields

Yes.Professionally

run organizations

Yes Yes Adjusted up toxxx

Weeding in Agriculture

Agri Industry: YES!

Large Growers: Yes

Small Growers: No

YES! for organic crops

They are spending $500/ac!

Not necessarily

Key need is weed vs. crop differentiation

TAM increased to $2.6 B (Total

organic)

Target Market (organic

specialty) 162 M/yr

18%/yr growth

Autonomous vehicles WEEDING

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Ag Dealers- Ag Service providers

- Innovation- Customer Education- Dealer training

Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Dealers- Ag Service providers

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Machine VisionTwo problems:- Identification- Elimination

1 Week – 1 CarrotBot

Confidential

CARROTBOT

Machine Vision data collection platform Monochrome & Color

Cameras Laser-line sweep

(depth measurement)

Encoders (position/velocity)

Onboard data acquisition & power

CarrotBot 1.0

The Business Plan Canvas Updated

• Research Labs

• Equipment Manufacturers

• Distribution Network

• Service Providers

• Technology Design

• Marketing• Demo and

customer feedback

• Cost Reduction

• Remove labor force pains

• Eliminate bio-waste hazards

• IP – Patents• Video

Classifier Files

• Robust Technology

• Farming conventions.

• Demo, demo, and demo!!

• Proximity is paramount

• Organic Farmers

• Weeding Service Providers

• Conventional Farmers

• Dealers• Direct Service• Indirect

Service• … then

Dealers• Asset Sale• Direct Service

with equipment rental

• … then Asset Sale

Value-Driven

Visit Highlights

Carrot vs. WeedsDue to small root systems, carrots have no chance against weeds

Visit Highlights

Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked

Visit Highlights

State of the Art in Weeding Technology for Organic Crops

Customer Hypothesis

Us Dealer

Large Growers

Industrial Growers

Us Dealer

Industrial Growers

Large Growers

Service Providers

Equipment Rental

Hypothesis Confirmed• Growers interested in own

equipment • Industrial (10,000s of acres) • Large (1,000s of acres)• Willing to pay $100k for one unit

• Smaller growers (100s of acres) usually subcontract the labor services or rent equipment

• All purchases through local dealers• Customer service is essential

Pre-Test

Post-Test

Customer Map #1 – Industrial Growers

End User

Influencer

Recommender

Decision Maker

Approver

Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr

• Equipment Operator

• Director, Ag Technology

• Justin Grove, interviewed

• VP, Growing Operations

• CFO, CEO (Jeff Dunn)

• Local Farm Mgr• Cliff Kirkpatrick, visited

Equipment Operator

Cliff, Farm Mgr

Customer Map #2 – Service Providers

End User

Influencer

Recommender

Decision Maker & Approver

Example: Ag Services – Service Provider, Salinas Valley

• Equipment Operator

• Service Mgr

• ?? (service mgr’s boss)

Me (left), Marty (middle, Service Mgr), Doug (right, Grower)

• Grower

The Business Plan Canvas Updated

• Research Labs

• Equipment Manufacturers

• Distribution Network

• Service Providers

• Technology Design

• Marketing• Demo and

customer feedback

• Cost Reduction

• Remove labor force pains

• Eliminate bio-waste hazards

• IP – Patents• Video

Classifier Files

• Robust Technology

• Farming conventions.

• Demo, demo, and demo!!

• Proximity is paramount

• Mid/Large Organic Farmers

• Agricultural corporations

• Weeding Service Providers

• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• ($1,500/d; 120d/yr )• Low density:

$1,500/d• High density:

$6,000/d

Value-Driven

World Ag Expo interviews:the need is real and wide spread

• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude

competitor sells for $171 K

• Revenue Stream– Mid to small growers prefer a

service– Large growers prefer to buy, but

OK with service until technology is proven

– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)

Confidential

The Business Plan Canvas Updated

• Research Labs

• Equipment Manufacturer

• Distribution Network

• Service Providers

• 2 or 3 Key Farms

• Technology Design

• Marketing• Demo and

customer feedback

• Cost Reduction

• Remove labor force pains

• Eliminate bio-waste hazards

• IP – Patents• Video

Classifier Files

• Robust Technology

• Farming conventions.

• Demo, demo, and demo!!

• Proximity is paramount

• Mid/Large Organic Farmers

• Agricultural corporations

• Weeding Service Providers

• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• Low density: $1,500/d

• High density: $6,000/d

Value-Driven• R&D• Bill of Materials• Training &

Service• Sales

Autonomous weeding - Final

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Direct- Provide high quality service at competitive price

Direct - Alliance with service providers- Eventually sell through dealers

- Innovation- Customer Education- Dealer training

Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Service providers

- Research Institutes (eg UC Davis, Laser Zentrum Hannover)

- 3-4 key farms

Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale

Engineers on Machine VisionTwo problems:- Identification- Elimination

Step 11: Ask for Money

HINT: YOUR VC PITCH WAS HIDING IN THE LAST 12 SLIDES…DISCOVERY

Step 12: Scale and Celebrate!

Step 13: Repeat

Thanks

now go PIVOT!

www.steveblank.comTONS of free tools, help, ideas

bob@kandsranch.com

Want more info on upcoming events?

Henrik BerglundChalmers University of Technology

Center for Business Innovationhenber@chalmers.se

www.henrikberglund.com@khberglund

Marcus.Thorin@chalmersinnovation.comTimo.Lehes@chalmersinnovation.com

www.chalmersinnovation.com

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