I just sat in the front row of an intimate Steve Blank talk. It was great! I got to be in the “hot seat” on the stage where I put my venture out in front of the audience and took questions. Then, Steve Blank came up and did a great presentation on the Startup Owner’s Manual and answered all kinds of great questions we had for him.
Here are my notes (I banged some out on twitter during the session).
Business plans were the old way. When they didn’t work, you fired the VP of Sales. Then you hired another VP of Sales. If it still didn’t work, then you fired the VP of Marketing. If the business was still failing, then you replaced the CEO. Now, you replace the business model first. Pretty cool. He hammered the waterfall product development model: Waterfall has 2 specific errors… it assumes I know the customer problem and I know the features. Most startups fail from a lack of customers and not product development.
He talked of the big difference between startups and companies. A startup wants to become a company. The definition of a startup is a temporary organization designed to search for a repeatable and scalable business model. That whole startup mode is the “search” for a model. Then, after the model is found, the company exists and is now in “execution”. Then, marketing and sales and development can execute. Executing before the search is complete leads to disaster. Search! Don’t sell. Don’t code. Get out of the building and question your customers.
He talked of the Lean Canvas and Customer Development. The lean canvas is filled with hypotheses or “f-ing guesses”. The word hypotheses is used because people in school are paying big bucks for tuition, but they are really “f-ing guesses”. I love that. Customer Development turns the “f-ing guesses” on the canvas into facts.
Startups go from failure to failure. The initial idea is almost always wrong. This is really hard for smart people. How quickly can you learn what is wrong is the key. You can’t get it all right on day 1. If you think that’s true, the odds are you are hallucinating. It’s about how quickly are you learning that you are wrong.
When asked about protecting ideas in the early stage, Steve said if you are doing a web startup…it’s an eng problem. Your idea is not a company. You need rapid customer feedback. You need to talk to customers about their problems and really nail that. Then, you need to see what solutions will work for those problems. Don’t sit in some room and fret over someone taking your idea. Get out and talk to customers. However, if it’s BIO tech, get a patent immediately. Don’t mess around with billion dollar biotech ideas.
We talked about smaller niche markets vs. bigger mass markets. He stated the Business Model Canvas doesn’t show the biz oppty. He said it’s really the difference between doing a small business and a big startup that VC’s want to invest in. If you have a 5m a year business, then it is a small business (which is fine if you want that). If you don’t know the biz model of Angels and VC’s, you will be frustrated. If your biz isn’t large enough, you aren’t getting VC money.
When asked about straddling markets and deciding which to invest in, he said if you are GM with a lot of resources then you can straddle. But as a startup, you need to really know your market. You need to understand your market to know when and where to put all your chips in. That’s a startup. When you push a chip in at a time, you are a small business.
