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Flat6 Labs Beirut Bootcamp Day 2

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Dave Parker's 6 Month Startup Program - Bootcamp Edition
Value Propositions, Building MVPs, Startup Road Map and How Startups Make Money

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Flat6 Labs Beirut Bootcamp Day 2

  1. 1. Copyright DKParker, LLC 2017 Flat6 Labs – Beirut – Day 2 Dave Parker @DaveParkerSEA www.dkparker.com/blog Dave@dkparker.com @DaveParkerSEA
  2. 2. Copyright DKParker, LLC 2017 Day 2 Agenda ¤ Value Propositions ¤ Customer Development ¤ Product Market Fit ¤ MVPs/Roadmap ¤ Pricing ¤ How Startups Make Money & Metrics that Matter ¤ Marketing Sales ¤ Business Development Revenue Models ¤ Financial Model Templates
  3. 3. Copyright DKParker, LLC 2017 Value Proposition
  4. 4. Copyright DKParker, LLC 2017 Positioning ¤ Positioning is holding a place in your customer’s mind – not as everything, what’s memorable? ¤ Who is the initial customer ¤ Think about limiting service and customer first – before you expand ¤ You’re not precluded from selling other services or products ¤ What claim or promise will you make?
  5. 5. Copyright DKParker, LLC 2017 Don’t Bury the Lead ¤ Think of this like journalism ¤ What’s the headline? ¤ What’s the Lead? ¤ What’s the Story?
  6. 6. Copyright DKParker, LLC 2017 Exercise ¤ Write out: ¤ What makes you different? ¤ Why should people buy from you? ¤ Write your websites tagline and opening paragraph ¤ What claim/promise will you make ¤ Write your DRAFT Unique Selling Proposition ¤ Compare this to your Pitch
  7. 7. Copyright DKParker, LLC 2017 Customer Development
  8. 8. Copyright DKParker, LLC 2017 Converging Definitions ¤ Design Thinking ¤ Stanford “D-School” IDEO U Crash Course ¤ Lean Startup ¤ Steve Blank ¤ Eric Reis ¤ Agile Development
  9. 9. Copyright DKParker, LLC 2017 Design Thinking For Companies it assumes you have customers (and resources) ¤ Emphasize ¤ Define ¤ Ideate ¤ Prototype ¤ Test
  10. 10. Copyright DKParker, LLC 2017 Lean Startup ¤ Entrepreneurs are everywhere ¤ Validate learning ¤ Build, Measure, Learn
  11. 11. Copyright DKParker, LLC 2017 Customer Development ¤ Parallel process with Product Development ¤ “Get out of the Building” ¤ Develop for a few not Many ¤ Prioritize features based on Needs not Wants ¤ Validate with Revenue/Commitment
  12. 12. Copyright DKParker, LLC 2017 What is Customer Development? ¤ Four Steps of an Epiphany – Steve Blank
  13. 13. Copyright DKParker, LLC 2017 Customer Discovery Goals ¤ Acute focus on problem – not product ¤ Find out if customers care? ¤ What do they want? ¤ Determines the difference your product at launch and at scale ¤ Feature priorities & Product Roadmap
  14. 14. Copyright DKParker, LLC 2017 Customer Dev Mechanics ¤ Google Forms ¤ Structured questions ¤ Progression ¤ Easy to Hard ¤ What do you really want to know? ¤ Will they pay for it? How much ¤ Why will it fail ¤ Neutral, not Guided Questions
  15. 15. Copyright DKParker, LLC 2017 Customer Dev Mechanics, Cont ¤ Build a list of interested parties ¤ Mail Chimp List setup ¤ Ask for permission to email ¤ Two week updates – Format: “What we did, what we’re going to do and where we can use your help” ¤ This setups you up to make progress every two weeks!
  16. 16. Copyright DKParker, LLC 2017 What Not To Do ¤ You are not the customer ¤ Don’t tolerate a small sample set – this could delay your success by Years ¤ Avoid “Selection Bias” ¤ “Isn’t our product amazing” ¤ No rhetorical questions ¤ No blind surveys ¤ Can’t outsource
  17. 17. Copyright DKParker, LLC 2017 How Many Customer Interviews ¤ B2B – 25+ ¤ Profile ¤ Job Title ¤ Type of Company ¤ B2C – 50+ ¤ Demographic ¤ ¯_(ツ)_/¯ = bad
  18. 18. Copyright DKParker, LLC 2017 Fundraising Note You have opinions You have Data You get money! Investors have opinions They have money
  19. 19. Copyright DKParker, LLC 2017 Hypothesis vs Fact ¤ If you are convinced you’re right you won’t be open to radical feedback that could change the trajectory of your business & life! ¤ Always testing what you think you know ¤ Permission to give negative feedback ¤ If this idea was to fail, why would it fail? ¤ Why is this idea stupid?
  20. 20. Copyright DKParker, LLC 2017 Dave’s Madlibs Pitch Hi, I’m <your name here>, and my company <your Company name here> the problem I’m solving is <insert problem here>. Our product <insert product info here> is designed for our target customer of <insert target customer here>. We make money by <insert method here> and our team is the right team because <insert why you’re awesome here>. I need help with <insert help needed here>.
  21. 21. Copyright DKParker, LLC 2017 Product Market Fit – PMF
  22. 22. Copyright DKParker, LLC 2017 Product Market Fit Two Epoch’s of every startup ¤ Pre - Product Market Fit ¤ The only thing that matters is getting there ¤ Post – Product Market Fit ¤ A whole new set of questions – Scale, Culture and People
  23. 23. Copyright DKParker, LLC 2017 Pre – PMF ¤ Some Revenue ¤ Some Customers ¤ Some Marketing ¤ A lot Hypothesis
  24. 24. Copyright DKParker, LLC 2017 Post – PMF ¤ Predictable & Scalable Revenue ¤ Customer profiles ¤ Cohort analysis ¤ Churn ¤ Scalable marketing ¤ Hypothesis + Data
  25. 25. Copyright DKParker, LLC 2017 What is “Traction?”
  26. 26. Copyright DKParker, LLC 2017 Predictable/Forecastable Revenue ¤ De-risking your <time> investment ¤ Predictable revenue moves you from valuations based on trailing 12 to future 12 ¤ Target customer ¤ Sales Cycle ¤ Tools trail Strategy and Tactics
  27. 27. Copyright DKParker, LLC 2017 Customer Acquisition Hypothesis ¤ Cost of Customer Acquisition (CAC) ¤ Lifetime value of Customer (LTV) ¤ 36 month calculation in a mature business, 12 months for you ¤ Time to close sale ¤ How does this change with product/market maturity? ¤ Churn/Retention ¤ Average Revenue/measure (User, Account, etc) ¤ Word of mouth vs. Virality
  28. 28. Copyright DKParker, LLC 2017 Product
  29. 29. Copyright DKParker, LLC 2017 Product Vision ¤ Product vision is important ¤ Long term features ¤ Startup with PROBLEM not product – pivot product/ features around the problem ¤ It won’t be what you ship first ¤ What the world looks like before your product ¤ What the world looks like after your product
  30. 30. Copyright DKParker, LLC 2017 Minimum Viable Product (MVP) ¤ Narrow and list features ¤ PowerPoint/Keynote first as your demo ¤ What screens do you need to show (e.g. do you need to really show registration – answer no) ¤ Have them rank the features ¤ Prioritize the build based on the feedback ¤ More Customer Development Interviews!
  31. 31. Copyright DKParker, LLC 2017 Cost to Build
  32. 32. Copyright DKParker, LLC 2017 Estimating Costs ¤ Write specification ¤ Required for launch ¤ Design & Flow ¤ Post project on Fiverr.com ¤ PPT/Keynote first with design ¤ Test design and flow ¤ Revise specification
  33. 33. Copyright DKParker, LLC 2017 MVP Mechanics ¤ MVP Series ¤ Blog 1 – Launching a product ¤ Blog 2 – Writing a spec ¤ Blog 3 – picking a vendor ¤ Blog 4 – Contracts, Monitoring Progress ¤ Cost to market and sell – Next Month!
  34. 34. Copyright DKParker, LLC 2017 Roadmap
  35. 35. Copyright DKParker, LLC 2017 Roadmap ¤ Quarterly Targets ¤ Product ¤ Milestones ¤ People ¤ Hires ¤ # and who ¤ Customers ¤ Onboarded ¤ Revenue ¤ Cash out date
  36. 36. Copyright DKParker, LLC 2017 Roadmap Cont. ¤ Roadmap is NOT dependent on fundraising ¤ If you raise capital, you move things forward in the roadmap ¤ E.G. items from Q4 move to Q2 next year ¤ Where will you be in 18 and 36 months ¤ Does it map to your financial model ¤ Maps to use of proceeds
  37. 37. Copyright DKParker, LLC 2017 Quarterly Roadmap Q1 People Product Revenue Month to Cash out Q2People Product Revenue Month to Cash out Q3 People Product Revenue Month to Cash out Q4 People Product Revenue Month to Cash out
  38. 38. Copyright DKParker, LLC 2017 Dave’s Madlibs Pitch Hi, I’m <your name here>, and my company <your Company name here> the problem I’m solving is <insert problem here>. Our product <insert product info here> is designed for our target customer of <insert target customer here>. We make money by <insert method here> and our team is the right team because <insert why you’re awesome here>. I need help with <insert help needed here>.
  39. 39. Copyright DKParker, LLC 2017 BREAK
  40. 40. Copyright DKParker, LLC 2017 Metrics that Matter
  41. 41. Copyright DKParker, LLC 2017 What to track – best practices ¤ Marketing Metrics – “Marketing Motion” ¤ Ad Spend ¤ Traffic ¤ Marketing Qualified Leads (MQLs) ¤ Sales Metrics “Sales Motion” ¤ Outbound/Inbound ¤ MQL to SQL Conversion ¤ Business Development – Partnerships ¤ What’s in it for them? ¤ Pricing
  42. 42. Copyright DKParker, LLC 2017 Monthly Updates ¤ Using MailChimp Free Account ¤ Investors – Tagged ¤ Customers ¤ 30 day intervals ¤ What we thought ¤ What we learned ¤ What we’re doing about it ¤ Where we need help ¤ Regularly
  43. 43. Copyright DKParker, LLC 2017 How Startups Make Money
  44. 44. Copyright DKParker, LLC 2017 Do you know? ¤ Cost to Build Known Unknown ¤ Cost to Sell Known Unknown ¤ Price Known Unknown ¤ Profit Known Unknown
  45. 45. Copyright DKParker, LLC 2017 Business Model: Should You Build It? ¤ Creating Value ¤ You’ve identified a problem ¤ Can you build a solution? ¤ Delivering Value ¤ Ship it! ¤ Capturing Value for what you created ¤ Cost to build – last month (and next month) ¤ Cost to Sell ¤ Make a Profit
  46. 46. Copyright DKParker, LLC 2017 How not to make money? ¤ Small transaction values are bad ¤ Small percentages are bad ¤ Not being able to capture value is bad ¤ Lumpy sales cycles are bad ¤ Long sales cycles are bad ¤ Pricing too low could kill your idea before you start
  47. 47. Copyright DKParker, LLC 2017 Marketing – Finding the right customers
  48. 48. Copyright DKParker, LLC 2017 Marketing – Finding Customers ¤ Messaging/Value Proposition ¤ Does it resonate with the target customer segment ¤ They are the hero of the story ¤ Is it repeatable? ¤ Strategy ¤ Outbound first ¤ Inbound second
  49. 49. Copyright DKParker, LLC 2017 Key Metric Terms ¤ State your hypothesis ¤ CAC ¤ LTV ¤ ARPU ¤ Churn ¤ Time to Close ¤ Customer engagement ¤ Time on Site
  50. 50. Copyright DKParker, LLC 2017 OrganicSearch PaidSearch WordofMouth SalesCalls PR Miracles! TimetoClose Month1 Month2 Month3 Month4 $ Spen d # Conv # Conv # MRR Time
  51. 51. Copyright DKParker, LLC 2017 Marketing Channels ¤ Paid Search ¤ Organic Search ¤ Word of mouth ¤ Sales calls ¤ Public Relations ¤ Affiliate ¤ Email marketing ¤ Social
  52. 52. Copyright DKParker, LLC 2017 Marketing Qualified Leads ¤ Define qualified vs list ¤ Suspects ¤ Prospects ¤ Qualified Prospects
  53. 53. Copyright DKParker, LLC 2017 Sales Qualified Leads ¤ Hand off to Sales ¤ Identify steps to close ¤ Number of calls
  54. 54. Copyright DKParker, LLC 2017 Time to Close ¤ Lead attribution ¤ Source time ¤ Compressing or Expanding ¤ Trend by source
  55. 55. Copyright DKParker, LLC 2017 Tracking ¤ Data allows you to know where to double down and where to hold back ¤ Conversion ratios
  56. 56. Copyright DKParker, LLC 2017 Sales – capturing value creation
  57. 57. Copyright DKParker, LLC 2017 How will they buy? ¤ Web Direct – place the order to buy on the web ¤ Direct – outbound sales, inside/outside ¤ Indirect/Channel – fulfills demand, doesn’t generate ¤ Retail – BestBuy, etc
  58. 58. Copyright DKParker, LLC 2017 Sales Model Hypothesis Known Market Unknown Market Low Price Point High Price Point Known Search Words Unknown Search words Web Direct Direct Indirect Retail
  59. 59. Copyright DKParker, LLC 2017 Sales ¤ Model – Pick one, why? ¤ Strategy ¤ Who ¤ Tactics ¤ How ¤ Tools ¤ Sales tools
  60. 60. Copyright DKParker, LLC 2017 Business Development
  61. 61. Copyright DKParker, LLC 2017 Business Development ¤ Strategic relationships ¤ Who has the list you want ¤ How do you get the partnership
  62. 62. Copyright DKParker, LLC 2017 Business Development ¤ Strategy ¤ Who should you get as a partner ¤ How will you build the relationship? ¤ What channels ¤ Tactics ¤ Messaging/Value proposition ¤ Tools ¤ CRM
  63. 63. Copyright DKParker, LLC 2017 Revenue Models: Services = 1 Products =15
  64. 64. Copyright DKParker, LLC 2017 Business and Revenue Models ¤ Business Models – abstract framework of Creating, Delivering and Capturing Value ¤ Revenue Models (part of business model) is the framework of revenue, pricing, who pay ¤ Models Lean toward Tech and Product
  65. 65. Copyright DKParker, LLC 2017 1. Fee for Service ¤ Example: Consulting Services company ¤ Use: B2B & B2C ¤ Key Metrics ¤ Project Revenue ¤ Cost of delivering (usually time) ¤ Gross Margin ¤ Services are hard to scale because they require people to deliver including Restaurant, Contractors, etc. ¤ Services include markup on cost of goods sold
  66. 66. Copyright DKParker, LLC 2017 2. Commerce ¤ Example: Amazon, AmazonSupply ¤ Use: B2C & B2B ¤ Key Metrics: ¤ Wholesale or cost of goods sold ¤ Average Margin % ¤ Average Basket ¤ Commerce – Physical Goods- Wholesale, cost of goods, retail, average margin, physical good ¤ Notes: Can mature into marketplace
  67. 67. Copyright DKParker, LLC 2017 3. Subscription ¤ Example: Salesforce , Box, Spotify ¤ Use: B2C & B2B ¤ Key Metrics ¤ Average Revenue Per User (ARPU) ¤ Conversion ratio – e.g. trial to purchase ¤ Churn ¤ Challenges: MVP won’t be enough to be Kick Ass Product ¤ Notes: Highest multiple, forecastable revenue
  68. 68. Copyright DKParker, LLC 2017 4. Productize a Service ¤ Your offerings is generally complex and requires services to deploy ¤ Gross margin on Services >35% ¤ Product development comes with services ¤ Use: B2C & B2B ¤ Examples: Moz, service company convert to tools. ¤ Challenges – difficult to make the transition away from services
  69. 69. Copyright DKParker, LLC 2017 5. Transaction Fees/Rental ¤ Example: 99Designs, KickStarter, Elance, Chugg ¤ Use: B2C & B2B ¤ Key Metrics ¤ Average transaction revenue ¤ Fee % per transaction ¤ Number of transactions ¤ Challenges: Margins are small (15%), need efficiency ¤ Notes: Don’t start too low
  70. 70. Copyright DKParker, LLC 2017 6. Lead Generation ¤ Example: Mint.com, AllStarDirectories, NetQuote ¤ Use: B2C & B2B ¤ Key Metrics ¤ Cost to generate traffic ¤ % conversion of form data ¤ Price per lead ¤ Challenges: Highly competitive, barrier of entry is low ¤ Notes: Conversion rates average 0.06%
  71. 71. Copyright DKParker, LLC 2017 7. Gaming ¤ Example: King.com/Candy Crush ¤ Use: B2C Only ¤ Key Metrics: ¤ Downloads ¤ % play ¤ Average in app purchase ¤ Challenges – tends to be “hit driven business” ¤ Notes: use in first 21 days is a predictor of success
  72. 72. Copyright DKParker, LLC 2017 8. Marketplaces ¤ Example: eBay, Alibaba ¤ Use: B2C & B2B ¤ Key Metrics ¤ Average Transaction Amount ¤ Number of Monthly Transactions ¤ Commission % ¤ Challenges: two sided market places require you start with one side, value to seller & Product market fit (x2) ¤ Notes: critical mass or marketplace required
  73. 73. Copyright DKParker, LLC 2017 9. Advertising/Search ¤ Example: Google, Facebook ¤ Use: B2B – advertisers pay, users are free ¤ Key Metrics ¤ Traffic ¤ Click ¤ Avg. revenue/click ¤ Challenges – Scale, need >1M uniques/month to consider the option
  74. 74. Copyright DKParker, LLC 2017 10. New Media ¤ Example: SnapChat, WhatsApp ¤ Use: B2C only ¤ Key Metrics: ¤ K-Factor (Viral Co-efficient) ¤ Network effect of inviting others to join ¤ Challenges – K-Factor is hard. Little revenue until scale ¤ Notes: Everyone wants to! Not happening in B2B
  75. 75. Copyright DKParker, LLC 2017 11. Combinations ¤ Combinations business models happen for two reasons ¤ You don’t know which model is right ¤ At scale you can expand revenue sources ¤ Examples: Hardware sensors + software services to create data analytics ¤ Challenges – most require scale or at least traction
  76. 76. Copyright DKParker, LLC 2017 12. Coin/Tokens ¤ Bitcoin and Blockchain have burst onto the scene over the last couple of years ¤ Blockchain is a technology ¤ Bitcoin is a token, ICOs have been very succesful but aren’t a security.
  77. 77. Copyright DKParker, LLC 2017 Three that could cost you everything!
  78. 78. Copyright DKParker, LLC 2017 Three at Scale – Not Launch 13. Multi-sided Marketplaces – Etsy – create products and customers 14. Big Data – PatientsLikeMe is emerging, but requires massive data in advance = massive cash 15. Panels – Toluna, precise groups of customer service research Dead Model 1. Licensing – the old Microsoft model <pre-subscription>
  79. 79. Copyright DKParker, LLC 2017 Summary – Pick Two (Primary & Secondary) 1. Fee for Servicer 2. Commerce 3. Subscription 4. Productize a Service 5. Transaction Fee/Rental 6. Lead Generation 7. Gaming 8. Marketplace 9. Advertising/Search 10. New Media 11. Combinations 12. Coins Tokens 13. Multi-sided Marketplaces 14. Big Data 15. Panels 16. Licensing
  80. 80. Copyright DKParker, LLC 2017 Pricing
  81. 81. Copyright DKParker, LLC 2017 Your price will be wrong! Increase it every year and grandfather early customers for a period of time
  82. 82. Copyright DKParker, LLC 2017 Art or Science? ¤ Benchmarks ¤ Comparable products ¤ Don’t start too low ¤ Cost base vs Value based ¤ What is the alternate for the “Job to be Done”? ¤ Remember Freemium is a marketing mechanic, not a price
  83. 83. Copyright DKParker, LLC 2017 Product Pricing ¤ First Product ¤ Staged pricing – up or down over time ¤ Second Product ¤ Staged pricing – up or down over time ¤ Launch timeline based on product road map ¤ Services? ¤ Could it improve you sales cycle
  84. 84. Copyright DKParker, LLC 2017 Financial Modeling
  85. 85. Copyright DKParker, LLC 2017 Templates ¤ Do this after you get in the program – not highest and best use today ¤ Four Templates ¤ Marketplace ¤ Subscription ¤ Transaction Fee (works for commerce) ¤ Productize a service ¤ www.venturereadymodels.com Promo “Cairo2019”
  86. 86. Copyright DKParker, LLC 2017 Day 2 Deliverables ¤ Write out your Value Prop ¤ Customer Development ¤ Write your questions ¤ Build your forms ¤ Get first 20+ interviews scheduled ¤ Review your results ¤ Metrics ¤ What are you tracking today? ¤ What should you be tracking ¤ Product Market Fit ¤ Forecast/predictable revenue ¤ Write out your Product Roadmap ¤ Pick a: ¤ Marketing Method ¤ Sales Model ¤ Revenue Model ¤ Price
  87. 87. Copyright DKParker, LLC 2017 THANKS!

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