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The Seven Habits of Highly Effective Startups

Errol Arkilic (errol@m34capital.com)

Founding and Former Lead I-Corps Program Director

The views expressed in this material are those of the author and do not necessarily reflect the views of the National Science Foundation

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The Seven Habits for Highly Effective People

1. Be Proactive2. Begin with The End in Mind3. Put First Things First4. Think Win Win5. Seek First to Understand, then to be

Understood6. Synergize7. Sharpen the Saw

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The Seven Habits for Highly Effective Startups:

1. Be Evidence Based2. Know Thyself3. Obsess over Product-Market Fit4. Create Measurable Value5. Search Before You Execute6. Manage Third-Party Risk7. Master Get, Keep, Grow

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M34: What you need to reach escape velocity

1. Be Evidence-Based…It’s Harder Than It First Appears

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Entrepreneurship*

• Entrepreneurship is the process of starting a business or other organization. The entrepreneur chooses/develops a business model, acquires the human and other required resources and is fully responsible for it success or failure.

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*Wikipedia: July 2014

The design, invention, development and/orimplementation of new or altered products,services, processes, systems, organizationalstructures, or business models for thepurpose of creating new value for customersand financial returns for the firm

Innovation*

*Innovation MeasurementA Report to the Secretary of CommerceJanuary 2008

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NSF,DARPA,NIH, DOE

Academia

Small Business

Investors

Industry

Valley of Death

Res

ourc

es A

vaila

ble

($)

Discovery Development Commercialization

Level of DevelopmentFrom

Angus Kingon

Technology Innovation Spectrum(The Theory)

I-Corps

Taxes

STTRSBIR

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Academia

Small Business

Res

ourc

es A

vaila

ble

($)

Discovery Development Commercialization

Level of DevelopmentFrom

Angus Kingon

Technology Innovation Spectrum(The Reality)

?

How do we explore the unknown

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In general we look for a new law by following the following process:

Then, we compute the consequencesFirst, we guess it

Then, we compare the computation results to natureWe compare it directly to observationIf it disagrees with experiment, it’s wrongThat simple statement is the key to science

Or how smart you are, or who made the guessIt doesn’t make a difference how beautiful your guess is

If it disagrees with experiment, its wrongThat’s all there is to it

-Richard Feynman

2. Know Thyself

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…Painful Lessons

• It’s Harder Than it First Appears• The Knowledge Illusion• Cognitive Biases

– What Should We Remember– Too Much Information– Not Enough Meaning– Need to Act Fast

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…And The One That Rules Them All

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Identify customersegment

With current team?

HypothesesValidated?

MarketFlow

Team/Company

Flow

FinancingFlow

IdentifyPains/Gains

3. Obsess on Product Market Fit

DevelopMVP

Build outPOC

TechnologyFlow

SEARCH PROVE SCALE

Yes

ValidatedCustomerSegment?

CustomerCreation/

Scale SalesRepeatable/scalable sales model?

Founding Team –who?

Does team Match Activities?

Equity Split – how?

What?Early Exitor Build?

Acquisition

Build Advisory

Board

Raise Seed Round

No official board of directors Raise VC “A” Round

Build outProduct

Build CustomerSupport

Team

Raise 2nd Seed

RoundNeeded?

EarlyExit

FundedPOCs?

Round outTeam/CreateCulture

Build Company

Yes

LaterVC

Rounds

Yes

No

Round outTeam/CreateCulture

No

EXECUTE

EcoATM (V.3)

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EcoATM (V.0)

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Habit 4: Create Measureable Value

• Revenue >> Costs (should be)• Unit economics are real• Don’t compete on price• Costs are more than you initially think

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…and Track Your Creation

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Hint… You Usually Have Too Many Features

Keep it Simple…..

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5. Search Before You Execute

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Startups Fail because they ConfuseSearch with Execution

-Steve Blank

Where are You in the Life Cycle

Search

Execution

6. Manage Third-Party Risk

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Business Model Canvas

??

7. Make (current) Customers “Happy”, orMaster Get, Keep, Grow

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The 7 Habits… Redux

• Character vs Personality • Principles vs Values• Dependence-Independence-Interdependence

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Thank You,Questions?

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