Startup Opportunity Discovery & Evaluation (SXSW)

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Startup opportunity discovery and evaluation. In this presentation the authors of The Smarter Startup demonstrate a systematic approach to surfacing and evaluating startup ideas to increase likelihood of success. This is product strategy for startups.

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<ul><li>Startup Opportunity Discovery &amp; Evaluation PREPARED FOR SXSWi 2014 BY NEAL CABAGE &amp; SONYA ZHANG, PhD </li><li>Sonya Zhang Professor INTRODUCTION Introductions Neal Cabage Entrepreneur, Product Manager Digital product architect. Founded ProductCamp.LA and PMA.LA. Built and sold two startups. Authored the book, The Smarter Startup. PhD in Information Systems and Technology, M.S. in Computer Science, and MBA. Researched Internet Entrepreneurship and Digital Product Strategy. </li><li>THE SMARTER STARTUP PRODUCT STRATEGY FOR STARTUPS The Smarter Startup looks at why some startups succeed while others fail. By taking a more strategic approach to entrepreneurship, founders can improve their own outcomes. Written by Neal Cabage and Sonya Zhang, PhD, and published by Pearsons/NewRiders. INTRODUCTION Our Book </li><li>Benjamin Franklin INTRODUCTION Conventional Wisdom Diligence is the mother of good luck. Thomas Edison Genius is one percent inspiration and ninety-nine percent perspiration. </li><li>Benjamin Franklin INTRODUCTION Conventional Wisdom Diligence is the mother of good luck. Thomas Edison Genius is one percent inspiration and ninety-nine percent perspiration. </li><li>Benjamin Franklin INTRODUCTION Conventional Wisdom Diligence is the mother of good luck. Thomas Edison Genius is one percent inspiration and ninety-nine percent perspiration. It is True? </li><li>Diligent Negligent SuccessFailure IS HARD WORK THE ANSWER? Hard work alone is NOT a reliable predictor of success. Hard working people sometimes fail and negligent people sometimes succeed. Theres more to the story! PROBLEM STATEMENT Conventional Wisdom NOT ENTIRELY </li><li>x Working hard is analogous to throwing a ball hard. The velocity is an important part of reaching the target, but you cannot ignore other interactive forces like gravity and drag. Gravity (0ming) Direc0on (customer need) What Is the Whole Story? PROBLEM STATEMENT Drag (compe00on) Velocity (hard work) </li><li>Work Smart, Not Just Hard Timing Customer Product CompetitionStartup Opportunity Finance Team We cannot work simply work hard and expect to have a desirable outcome. There are many dynamics at play that all determine whether were likely to succeed. Some may get lucky but they are the exception not the rule. INTRODUCTION </li><li>A SYSTEMATIC APPROACH THE SOLUTION </li><li>Weve developed a method for systematically discovering startup opportunities by leveraging the Business Model Archetypes model and the Startup Opportunity Scorecard to identify ideas and objectively evaluate them. FRAMEWORK OVERVIEW Startup Opportunity Framework Opportunity Scorecard Finance Timing Competition Team ProductCustomer Idea Idea Idea Business Model Archetypes VerticalMarkets A B+ F A A- Scorecard Criteria BusinessIdeas + = Business Model Archetypes Startup Opportunity Scorecard Ideation Matrix Evalaution Matrix #1 Trade Product Service Marketplace Ecosystem Subscription Brokerage IDEATION PROCESS EVALUATION PROCESS </li><li>Opportunity Scorecard Finance Timing Competition Team ProductCustomer Idea Idea Idea Business Model Archetypes VerticalMarkets A B+ F A A- Scorecard Criteria BusinessIdeas + = Ideation Matrix Evalaution Matrix #1 Trade Product Service Marketplace Ecosystem Subscription Brokerage IDEATION PROCESS EVALUATION PROCESS FRAMEWORK OVERVIEW Startup Opportunity Framework Start by considering the possible business model archetypes (eg personalities) for every market actor youre considering serving. Take note of all of the possibilities you uncover in the ideation matrix. STEP 1: IDEATION </li><li>Opportunity Scorecard Finance Timing Competition Team ProductCustomer Idea Idea Idea Business Model Archetypes VerticalMarkets A B+ F A A- Scorecard Criteria BusinessIdeas + = IDEATION PROCESS EVALUATION PROCESS Ideation Matrix Evalaution Matrix #1 Trade Product Service Marketplace Ecosystem Subscription Brokerage FRAMEWORK OVERVIEW Startup Opportunity Framework Objectively evaluate all of the ideas youve developed against a set of entrepreneurial heuristics that will help you to identify weaknesses. Based on this, score each idea to determine the best idea. STEP 2: EVALUATION </li><li>OPPORTUNITY IDEATION STEP ONE </li><li>Describes 7 abstract business model archetypes (fundamental personalities) from which every business model is inherited. Two prototypes (applied examples) are given for each archetype. This represents a holistic view of the possibilities. BUSINESS MODEL ARCHETYPES Business Model Archetypes Trade Product Service Marketplace Ecosystem Subscription Brokerage prototypes: e-commerce lead generation prototypes: software content prototypes: service platform service agency prototypes: ad network dropship program prototypes: content as a service software as service prototypes: products market services market prototypes: technology platform media platform </li><li>BUSINESS MODEL ARCHETYPES Business Models Everywhere! BRICKS &amp; CLICKS COLLECTIVE CUT OUT THE MIDDLE MAN DIRECT SALES DISTRIBUTION MODEL VALUE ADDED RESELLER FREE IN, FREE OUT FREEMIUM AUCTION / ONLINE AUCTION ALL-IN-ONE LOW-COST BARRIER LOYALTY MONOPOLISTIC MULTI-LEVEL MARKETING NETWORK EFFECTS PRO OPEN SOURCE PYRAMID SCHEME RAZOR &amp; BLADES SERVITIZATION OF PRODUCTS SUBSCRIPTION etcetera, etcetera There are many disparate business models that were dened in isola0on but nothing comprehensive that describes the fundamentally unique paCerns in a single and concise framework that suited our needs. </li><li>Carl Jung Psychologist BUSINESS MODEL ARCHETYPES What is an Archetype? A philosophical idea, referring to pure forms which embody the fundamental characteristics of a thing. The concept was based on Carl Jungs Personality Archetypes which describes fundamental personalities and roles that we draw from to develop our own unique personality. </li><li>PRODUCT TANGIBLE SOLUTION SERVICE CUSTOM SOLUTION TRADE CONNECT BUYERS &amp; SELLERS The Business Model Archetypes framework takes a step back from specic business models to say there are 7 abstract archetypes (fundamental personalities) from which every business inherits. Two prototypes (examples) are given for each archetype. This represents a holistic view of the possibilities. BUSINESS MODEL ARCHETYPES Primary Archetypes </li><li>BUSINESS MODEL ARCHETYPES Product Archetype PROTOTYPES WITH EXAMPLES TRADE PRODUCT SERVICE Software: Rovio (mobile apps) AheadWorks (plugins) WooThemes (themes) Content: AdvantageMedia (ebooks) DemandMedia (articles) MakerStudios (videos) Develop a tangible good and sell on a one-time fee basis (purchase or license). Requires high up-front sunk capital but is able to leverage economies of scale. </li><li>BUSINESS MODEL ARCHETYPES Service Archetype Doing work for a client and monetized on a per-use basis. Professionals or technicians with expert knowledge and skills in a specic domain provides intangible solutions to clients. PROTOTYPES WITH EXAMPLES TRADE SERVICE PRODUCT Platform as a Service: SendGrid (email) MaxMind (geo ip) DemandWare (eCom) Service Agency: BlueAcorn (magento) Appirio (salesforce) ReachLocal (adwords) </li><li>PRODUCT TRADE SERVICE BUSINESS MODEL ARCHETYPES Trade Archetype Connecting prospective buyers with a product they seek to buy and making prot on the spread between what a buyer will pay versus the cost of acquisition. PROTOTYPES WITH EXAMPLES LeadGen: Lending Tree (nancial) Capterra (software) Shopzilla (consumer) Ecommerce: Target.com (retail) Kinerase.com(source) Intellius (data) </li><li>Carl Jung Psychologist The meeting of two personalities (archetypes) is like the contact of two chemical substances; if there is any reaction, both are transformed. BUSINESS MODEL ARCHETYPES Secondary Archetypes </li><li>MARKETPLACE TANGIBLE SOLUTION SUBSCRIPTION CUSTOM SOLUTION BROKERAGE CONNECT BUYERS &amp; SELLERS The Business Model Archetypes framework takes a step back from specic business models to say there are 7 abstract archetypes (fundamental personalities) from which every business inherits. Two prototypes (examples) are given for each archetype. This represents a holistic view of the possibilities. BUSINESS MODEL ARCHETYPES Secondary Archetypes ECOSYSTEM CONNECT BUYERS &amp; SELLERS </li><li>SERVICE TRADE BUSINESS MODEL ARCHETYPES Brokerage Archetype BROKERAGE PROTOTYPES WITH EXAMPLES Ad Network DoubleClick (cpm) Kontera (in-text) Chitika (ppc) Dropship Doba (dropship) Ordoro (dropship) Simplx (dropship) Sourcing on behalf of a client for a retainer or per- transaction fee. The client then prots from any arbitrage spread rather than the sourcing partner. </li><li>TRADE PRODUCT BUSINESS MODEL ARCHETYPES Marketplace Archetype MARKETPLACE PROTOTYPES WITH EXAMPLES Service Marketplace oDesk (outsourcing) Elance (freelancing) Care.com (nannies) Product Marketplace eBay (auction) Etsy (crafts) ThemeForest (themes) Create a platform that facilitates trade, rather than actually trading. This is a network effects business that depends heavily on bringing together sufcient demand and supply. </li><li>SERVICE PRODUCT BUSINESS MODEL ARCHETYPES Subscription Archetype SUBSCRIPTION PROTOTYPES WITH EXAMPLES Content as Service: Ancestry.com (genealogy) Lynda.com (education) Match.com (dating) Software as Service: Mint.com (nance) Wordpress.com (site) HubSpot.com (mktg) Building, maintaining, and supporting an online product in an on-going fashion rather than a one- time sell. Customers pay a monthly subscription service and benet from continued improvements. </li><li>SERVICE TRADE PRODUCT BUSINESS MODEL ARCHETYPES Ecosystem Archetype ECOSYSTEM PROTOTYPES WITH EXAMPLES Media Platform: Facebook (social) Google (search) Yahoo (content) Technology Platform: Apple (hardware/OS) Magento (eCommerce) SalesForce (CRM) A mature market leader begins as another archetype but expands as a result of success. What may begin as a product will also develop a marketplace, services, and even a program for ISV vendors. </li><li>BUSINESS MODEL ARCHETYPES Business Model Archetypes Trade Product Service Marketplace Ecosystem Subscription Brokerage prototypes: e-commerce lead generation prototypes: software content prototypes: service platform service agency prototypes: ad network dropship program prototypes: content as a service software as service prototypes: products market services market prototypes: technology platform media platform Primary archetypes Review: Trade, Product, Service Secondary archetypes Review: Product + Trade = Marketplace Service + Trade = Brokerage Product + Service = Subscription Product + Service + Trade = Ecosystem </li><li>Business Models Archetypes Ideation Matrix Evaluation Matrix Opportunity Discovery Process Trade Product Service Marketplace Ecosystem Subscription Brokerage A B+ F A A- Scorecard Criteria BusinessIdeas STEP BY STEP PROCESS Idea #1 Idea #2 Idea #3 Idea #4 Idea #5 Idea #6 Idea #7 Idea #8 Idea #9 Business Model Archetypes VerticalMarkets Identies the spectrum of fundamental business personalities that you can consider consider when dening your own unique business model. Identify an applied business concept for every archetype personality, across all of the vertical markets you are considering. Grade each of the ideas youve identied in the ideation matrix, based on the six scorecard success criteria and compare to determine the best opportunity. 6 6 Market Dynamics The 6 market dynamics are a set of known impact that need to be considered for success that can be used to evaluate an ideas potential. </li><li>Take a systematic approach to identifying all the possible opportunities. You will identify a startup idea for every business model archetype, for each business vertical you are considering. Once you have done this, you can begin to evaluate these ideas. Ideation Matrix Idea #1 Idea #2 Idea #3 Idea #4 Idea #5 Idea #6 Idea #7 Idea #8 Idea #9 Business Model ArchetypesVerticalMarkets STEP BY STEP PROCESS </li><li>IDEATION MATRIX Create a matrix with the business model archetypes across the x-axis, and vertical market segments youre interested in exploring on the y-axis. Cancel out any business model archetypes you already know arent a good t for your team. Identifying Opportunity Product Service Trade Subscrip3on Marketplace Brokerage Ecosystem Real Estate Agents Real Estate Brokers Property Managers Cant Start Here! Dont Possess Trade Func0onal skills </li><li>IDEATION MATRIX Develop a business idea for each market actor that youre considering, for each of the business model archetypes. Fill them into the grid. Identifying Opportunity Product Service Subscrip3on Marketplace Brokerage Real Estate Agents Real Estate Brokers Property Managers IDX Wordpress Theme Marke0ng CRM Property Search Site Virtual Assistant Lead Genera0on </li><li>OPPORTUNITY EVALUATION STEP TWO </li><li>Business Models Archetypes Ideation Matrix Startup Heuristics Evaluation Matrix Opportunity Discovery Process Trade Product Service Marketplace Ecosystem Subscription Brokerage Idea Idea Idea Business Model Archetypes VerticalMarkets A B+ F A A- Scorecard Criteria BusinessIdeas STEP BY STEP PROCESS Identies the spectrum of fundamental business personalities that you can consider consider when dening your own unique business model. Identify an applied business concept for every archetype personality, across all of the vertical markets you are considering. Grade each of the ideas youve identied in the ideation matrix, based on the six scorecard success criteria and compare to determine the best opportunity. The 6 market dynamics are a set of known impact that need to be considered for success that can be used to evaluate an ideas potential. 6 </li><li>STARTUP STRATEGY The 6 Market Dynamics THE FUNDAMENTAL CRITERIA START HERE There are 6 fundamental market dynamics to consider when developing a startup concept. Weve developed 18 startup heuristcis (3 per market dynamics). customer product compe00on 0ming nancial team The 6 Market Dynamics </li><li>STARTUP HEURISTICS The 18 Rules of Startup Strategy Startup Heuristics Finance 13. Low Sunk Costs 14. Working Capital Float 15. Economies of Scale Timing 7. Recent Innovation Enabler 8. Demand Already Established 9. No Signs of Commoditization Competition 10. Clear Market Inefficiency 11. Low Barriers to Entry 12. Differentiable Position Team 16. Subject Matter Expertise 17. Functional Competence 18. Supplier Partnerships Product 4. Customer Focused Solution 5. Low Barriers to Adoption 6. Clear Value Proposition Customer 1. Unmet Need or Desire 2. Right Size Market or Segment 3. Reliable Access to Customers 2014 Cabage &amp; Zhang </li><li>WHATS A GOOD CUSTOMER? The ideal customer wants something the market hasnt yet delivered. The size of this market should match your ability to compete and ability to deliver justify solving the problem. Validate you can control means of customer acquisition along the way. STARTUP SCORECARD Customer Criteria UNMET NEED OR DESIRE Unsatised Customer Desire RIGHT-SIZE MARKET OR SEGMENT Need t...</li></ul>