sitra portfolio company day 090711
TRANSCRIPT
SITRA Portfolio Company Day
Steve Blank
www.steveblank.com
Twitter: sgblank
Slides: www.slideshare.net/sblank
A startup is all about focus and execution of the business plan
#2
No business plan survives first contact with customers✓
A startup is all about a great idea
#3
An A-team with a B-product always beats a B-team with an A-product✓
A startup is a temporary organization designed to search
for a scalable and repeatable business model
#5
Customer Development = process to search
Business Model Canvas is the Scorecard
Agile Engineering is How We Build Startups
#7
Customer Development =process to search
Business Model Canvas =the Scorecard
Agile Engineering is How We Build Startups
#8
• Research Labs
• Equipment Manufacturers
• Distribution Network
• Service Providers
• Technology Design
• Marketing
• Demo and customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents
• Video Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Organic Farmers
• Weeding Service Providers
• Conventional Farmers
• Dealers• Direct
Service• Indirect
Service• … then
Dealers
• Asset Sale• Direct Service with
equipment rental• … then Asset Sale
Value-Driven
Customer Development is the process used to search
Business Model Canvas is the Scorecard
Agile Development is How We Build Startups
#9
CUSTOMER SEGMENTS
which customers and users are you serving? which jobs do they really want to get done?
CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
REVENUE STREAMS
what are customers really willing to pay for? how? are you generating transactional or recurring
revenues?
28
KEY ACTIVITIES
which activities do you need to perform well in your business model? what is crucial?
31images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
Customer DevelopmentThe Search For the Business Model
CompanyBuilding
Customer
Discovery
Customer
Validation
Customer Creation
Pivot
• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders
Customer Discovery
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
The Minimum Viable Product (MVP)
• Smallest feature set that gets you the most …
- orders, learning, feedback, failure…
The Pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic
Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
20 interviews, 6 site visits…We got OUR Boots dirty
WeedingVisited two farms in Salinas Valley to better understand problem
Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator
MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and
lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)
Business Plan Autonomous Vehicles for Mowing & Weeding
We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)
Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider
Weeding- Farmers with manual weeding operations
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers
- Mowing Dealers- Ag Dealers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Autonomous vehicles, GPS, path-planning
Found weeding in organic crops is HUGE problem; 50 - 75% of costs
Crews of 100s-1000
Back-breaking task
(Ilegal) labor harder to get
1-5 weedings per year/field
$250-3,500 per acre and increasing
Food contamination risk
Decision to make – mowing vs weeding
Application If ROI is < 1 yr they will
buy
Labor costs significant?
Autonomous would solve
problem?
TAM
Mowing of large fields
Yes.Professionally
run organizations
Yes Yes Adjusted up toxxx
Weeding in Agriculture
Agri Industry: YES!
Large Growers: Yes
Small Growers: No
YES! for organic crops
They are spending $500/ac!
Not necessarily
Key need is weed vs. crop differentiation
TAM increased to $2.6 B (Total
organic)
Target Market (organic
specialty) 162 M/yr
18%/yr growth
Autonomous vehicles WEEDING
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers
- Ag Dealers- Ag Service providers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Dealers- Ag Service providers
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Machine VisionTwo problems:- Identification- Elimination
CARROTBOT
Machine Vision data collection platform Monochrome & Color
Cameras Laser-line sweep
(depth measurement)
Encoders (position/velocity)
Onboard data acquisition & power
CarrotBot 1.0
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturers
• Distribution Network
• Service Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Organic Farmers
• Weeding Service Providers
• Conventional Farmers
• Dealers• Direct Service• Indirect
Service• … then
Dealers• Asset Sale• Direct Service
with equipment rental
• … then Asset Sale
Value-Driven
Visit Highlights
Above: Organic Carrots, 7wks. Top right: Conventional carrotsBottom Right: Very weedy. Will require multiple passes of hand weeding
Customer Hypothesis
Hypothesis Confirmed• Growers interested in own
equipment • Industrial (10,000s of acres) • Large (1,000s of acres)• Willing to pay $100k for one
unit
• Smaller growers (100s of acres) usually subcontract the labor services or rent equipment
• All purchases through local dealers• Customer service is essential
Pre-Test
Post-Test
Customer Map #1 – Industrial Growers
Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr
• Equipment Operator
• Director, Ag Technology
• Justin Grove, interviewed
• VP, Growing Operations
• CFO, CEO (Jeff Dunn)
• Local Farm Mgr• Cliff Kirkpatrick, visited
Equipment Operator
Cliff, Farm Mgr
Customer Map #2 – Service Providers
Example: Ag Services – Service Provider, Salinas Valley
• Equipment Operator
• Service Mgr
• ?? (service mgr’s boss)
Me (left), Marty (middle, Service Mgr), Doug (right, Grower)
• Grower
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturers
• Distribution Network
• Service Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations
• Weeding Service Providers
• Mid/Large Conventional Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental
• ($1,500/d; 120d/yr )• Low density:
$1,500/d• High density:
$6,000/d
Value-Driven
World Ag Expo interviews:the need is real and wide spread
• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude
competitor sells for $171 K
• Revenue Stream– Mid to small growers prefer a
service– Large growers prefer to buy, but
OK with service until technology is proven
– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)
Confidential
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturer
• Distribution Network
• Service Providers
• 2 or 3 Key Farms
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations
• Weeding Service Providers
• Mid/Large Conventional Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental
• Low density: $1,500/d
• High density: $6,000/d
Value-Driven• R&D• Bill of Materials• Training &
Service• Sales
Autonomous weeding - Final
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Direct- Provide high quality service at competitive price
Direct - Alliance with service providers- Eventually sell through dealers
- Innovation- Customer Education- Dealer training
Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Service providers
- Research Institutes (eg UC Davis, Laser Zentrum Hannover)
- 3-4 key farms
Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale
Engineers on Machine VisionTwo problems:- Identification- Elimination
Role the Board
• Dumb Money• Smart Money• Connections• Connections to more money• Hire/Fire the CEO• Advice• Good Advice• Wisdom
We Act Like It’s the 19th Century
• Why do we need to get together in one room?
• Why do we need to wait a month to see progress?
• Why don’t we have standards for what you want?
• Why haven’t we adopted the tools we build/sell?
How to Run a Board Meeting
• Logistics– Send out board materials 2 days before, have board dinner– Approve minutes, stock grants
• Business Highlights/Lowlights– summary of key events since last meeting
• Financials versus Budget– waterfall charts
• Management asks the board to help– strategy, markets, key hires, introductions.
• Executive session– Meet without management to discuss performance
How to Run a Board Meeting
• Logistics– Approve minutes, stock grants
• Business Highlights/Lowlights– summary of key events since last meeting
• Financials versus Budget– waterfall charts
• Management asks the board to help– strategy, markets, key hires, introductions.
• Executive session– Meet without management to discuss performance
• Misc– Send out board materials 2 days before, have board dinner
Why?
What’s Wrong With a Board Meeting?
• Time between meetings (every 4-6 weeks)– Strategy-to-tactic-to implementation lag– Often no follow-up on the outcomes
• Diffuse board member attention (sits on 6-12 boards)
• Punctuated Exec Staff Performance– “The Get Ready for the Board Meeting” drill– It’s often a performance rather than a snapshot
• No standards for what each side does– What is the entrepreneur supposed to be doing?– What are the board members supposed to be contributing?
What’s Wrong With a Board Meeting?
• Time between meetings (every 4-6 weeks)– Strategy-to-tactic-to implementation lag
• Diffuse board member attention (sits on 6-12 boards
• Punctuated Exec Staff Performance– “The Get Ready for the Board Meeting” drill– It’s often a performance rather than a snapshot
• No standards for what each side does– What is the entrepreneur supposed to be doing?– What are the board members supposed to be contributing?
Why?
Focus on What’s Important
• It’s about the search for the business model– Not income statement, cash flow, balance sheet
• Advice/Guidance about metrics around the search– What are the Business model hypotheses?– What are the most important hypotheses to test now?– Progress of validating each hypotheses– What are the iterations and Pivots – and why?
How?
• Customer Development– The Process
• Narrative– Interviews– Surveys– Videos– Prototypes
• Business Model Canvas– Scorekeeping
• Real-time Feedback• Physical Reality Checks
– Skype– Face-to-face
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
InterviewsSurveysVideosPhotosetc
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
Invite your advisors and investors to your project
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
Invite your advisors and investors to your project
They can view progressby flipping thru your CANVAS diagrams
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
Invite your advisors and investors to your project
They can view progressby flipping thru your CANVAS diagrams
They can post feedback and leave comments inline
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
Invite your advisors and investors to your project
They can view progressby flipping thru your CANAVAS diagrams
They can post feedback and leave comments inline
Get email alert when newfeedback comes in
CANVAS diagram is interactive and “stateful”
Test your hypotheses andrecord learnings in blog format
Invite your advisors and investors to your project
They can view progressby flipping thru your CANAVAS diagrams
They can post feedback and leave comments inline
Get email alert when newfeedback comes in
The LeanBoard
Meeting
Sign up for private beta (FREE)http://www.leanlaunchlab.com
@leanlaunchlab
What Does this Change?For Angel-Funded Startups
• Angel funded startups can now get experienced advice– No longer requires board commitment for involvement
– Encourages investors who need visibility
– Ends repetition at each investor coffee
• Turns adhoc startups into strategy-driven startups– Invites investor participation in the process
– Professionalize the “throw it against the wall and see if it sticks”
• Highly time-efficient for investor and founders
• Eliminates Geography as a barrier to investment!
What Does this Change?For VC’s and Angels
• For the first time a structure for “search”
• Real-time monitoring of startup progress
• Zero-lag for coaching and course-correction
• Immediate follow-up on board meeting outcomes
• Allows a single VC to multiply their reach and/or depth
• Eliminates Geography as a barrier to investment!