Startups are NOT smaller versions of large or existing companies. Starting a company is about SEARCHING for a business model, not EXECUTING a known business model. A startup is a temporary organization whose goal is to become a large company. A startup is putting together resources to search for a repeatable, scalable model. Most startups fail because of a lack of customers, not because product development fails. Startups should validate their BUSINESS MODEL before any thought is given to writing a BUSINESS PLAN. Many well-written business plans do not survive first contact with customers.
This competition acknowledges the groundbreaking work being done by organizations such as the National Science Foundation, National Institute of Health, and the Department of Defense to help startups develop business models and reduce the risk of starting a business. This “Lean Launchpad” approach is based on a combination of two books:
Alexander Osterwalder’s Business Model Canvas
Steve Blank’s Customer Development
Author Steve Blank’s lectures for his class at Stanford University are available online: https://www.udacity.com/course/ep245
Business Model Canvas – 9 parts to a business model:
- Which one of our customers’ problems are we helping to solve?
- Which customer needs are we satisfying?
- What is the specific product / service?
- What are the features that match customer needs?
- For whom are we solving a problem or fulfilling a need?
- Who are the customers?
- Does the Value Proposition match their needs?
- Is this a single-sided or multi-sided market?
- Through which Channels do our Customer Segments want to be reached?
- How will we get, keep, and grow customers?
- What Key Activities do our Value Propositions require?
- What Key Resources (suppliers, etc.) do our Value Propositions require?
- Who are our Key Partners?
- What is the revenue model?
- What are the pricing tactics?
- For what value are our customers willing to pay?
- What are the most important costs in our business model?
- An editable Power Point slide is available for download on the website.
The development of a business model is based on the scientific method. You begin by creating an initial Business Model Canvas, which is considered your initial hypothesis. These are your “best guesses” to things such as who your customer is, how you will monetize your product and with whom you will partner. You then test these hypotheses by performing a process called Customer Development. Based on the insight gained from actual potential customers and other industry contacts, you “iterate”, meaning make a small change to your business model, or perhaps even “pivot” to a drastically different business model. Little by little, your “guesses” become facts.
Minimum Viable Products
Another tenant of the Lean Launchpad approach is the concept of the Minimum Viable Product (MVP). This means the entrepreneur develops a minimal version of the product or service, in order to gain additional customer feedback. An MVP could be anything from a wireframe, demo, mock-up, whatever is needed to get learning to occur.
Making a Pitch
Pitch presentations may take several forms. Here is a blog article on them from entrepreneur and investor Guy Kawasaki: http://blog.guykawasaki.com/2005/12/the_102030_rule.html
The preferred outline for this competition can be downloaded from the website.
Financial Models for Startup Businesses