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9/22/2017 1 STARTUP 101 & THE LEAN STARTUP Eric Hartman Director, Lexington Office, Kentucky Innovation Network WHAT IS A STARTUP? “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” Eric Ries The Lean Startup

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Page 1: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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STARTUP 101 & THE LEAN STARTUP

Eric HartmanDirector, Lexington Office, Kentucky Innovation Network

WHAT IS A STARTUP?

“A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”

Eric RiesThe Lean Startup

Page 2: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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STARTUP CHARACTERISTICS

Innovative

New

Technology

High Risk

Entrepreneur

Unknown

Failure

Small Business

Rich & Famous

InvestorsLean

Nymble

Fast Paced

Pivot

Idea

Flexible

WHAT IS THE PURPOSE OF A STARTUP?

Page 3: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

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STARTUP BUSINESS DEVELOPMENT PROCESS

Creation Pre-Revenue Breakeven GrowthStage

IdeaIP Protection

PrototypeBusiness Plan

Beta CustomersSales/Marketing

Paying CustomersGrowth PlanActivity

Value

RiskHigh Low

VALUE CREATION

IS DIRECTLY PROPORTIONAL TO

RISK REDUCTION

Page 4: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

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STARTUP RISK QUESTIONS

Will customers like our product?

Will customers buy?Will anyone use the product?

How much will customers pay?

Will customers tell their friends?How do they want to buy?

How will we make our product?How will we sell our product?

Do we understand the customer’s problem?

Is there a need in the marketplace?

Do we understand our value proposition?

Are customers willing to change?Is our product better than the competition?

How will we make money?

What features does the product need?

Who is our customer?

LEAN STARTUP PRINCIPLES

• Identify Leap of Faith Assumptions (‘risk’)

• Run experiments to test assumptions• Collect data to answer questions

• Design and development work [only] to support experiments

• Adjust business plan based on experimental results (‘pivot’)

• Track progress (‘innovation accounting’)

Page 5: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

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ROI RATIO

• Assess Degree of Risk Reduction (ΔRisk)

• Budget (Cost)

• Calculate Return on Investment – ROI Ratio

• Prioritize by Ratio• If High Ratio (High ROI), Execute ASAP

• If Low Ratio (Low ROI), Delay to later stage

ΔRisk

CostROI Ratio =

Stage 1 Stage 2 … Stage N

10

3

5 7

2

6 9

4

1 9

3

4

Page 6: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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Stage 1 Stage 2 … Stage N

10

3

57

2

69

4

19

3

4

STARTUP ENTREPRENEUR’S CHARGE

Identify and mitigate risks - quickly, efficiently - thereby creating value.

Page 7: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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THE LEAN STARTUP

https://youtu.be/sobxOzRjAGg

"The Lean Startup" by Eric Ries - BOOK SUMMARY

Page 8: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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LEAP OF FAITH ASSUMPTIONS

• “An Entrepreneur’s Super Power”

• What assumptions?• Value Hypothesis

• Growth Hypothesis

BUILD – MEASURE – LEARN

• Kaizen - Continuous and incremental improvement

• Small Batch Approach

• Steer the Ship

Page 9: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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BUILD – MEASURE – LEARN

MINIMUM VIABLE PRODUCT - MVP

• Types of MVP

• Video MVP (looks like)

• Concierge MVP (works like)

• START!!!

Page 10: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

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MVP RESTAURANT EXAMPLE

End GoalMVPMVP2

THINK LEAN CHALLENGE

• Can we answer the question Cheaper?

• Can we answer the question Faster?

• Can we take it to the customer Sooner?

• Do we really need to do this / build this?

• How does this mitigate risk?

There is nothing so useless as doing efficiently that which should not be done at all. – Peter Drucker

Page 11: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

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WHY ENTREPRENEURSHIP?

New York Times columnist Thomas Friedman writes:

“Graduates today will have to ‘invent’ a job … and, given the pace of change today, even reinvent, re-engineer, and reimagine that job.”

Page 12: STARTUP 101 & THE LEAN STARTUP - Von Allmen Centervace.uky.edu/venture-studio/download/The Lean StartUp Presentation.… · STARTUP 101 & THE LEAN STARTUP Eric Hartman Director,

9/22/2017

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Eric Hartman

[email protected]

kyineric @KyINeric