Entrepreneurship for the 99%

This is a guest post from Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps (and the Founding Faculty Director of the Lester Center for Entrepreneurship at UC Berkeley.)

———–

The 99%
As the morning fog burns off the California coast, I am working with Steve Blank, preparing for the Lean LaunchPad Faculty Development Program we are running this August at U.C. Berkeley. This is a 3-day program for entrepreneurship faculty from around the world how to teach entrepreneurship via the Lean LaunchPad approach (business model canvas + customer development) and bring their entrepreneurship curriculums into the 21st century. Over the past couple of years this Lean LaunchPad model has proven immensely effective at Berkeley, Stanford, Columbia and, of course, the National Science Foundations Innovation-Corps program. The data from the classes seem to indicate that we’ve found have a method how to make scalable startups fail less.

While we’re excited by the results, we’ve realized that we’ve been solving the problem for the 1% of new ventures that are technology startups. The reality is that the United States is still a nation of small businesses. 99.7% of the ~6 million companies in the U.S. have less than 500 people and they employ 50% of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.)

While we were figuring out how to be incredibly more efficient in building new technology startups, three out out of 10 new small businesses will fail in 2 years, half fail within 5 years.  The tools and techniques available to small businesses on Main Street are the same ones that were being used for the last 75 years.

Therefore, our remaining challenges are how to make them fail less – and how can we make the Lean LaunchPad approach relevant to the rest of the 99% of startups.

Serendipity
A serendipitous answer came to us around noon. His name is Alex Lawrence. Alex, vice provost for Innovation & Economic Development at Weber State University in Utah and completing his first year of teaching entrepreneurship. Alex is a successful serial entrepreneur –with the same drive and energy of many we have known here in Silicon Valley, but different. His nine startups have ranged from franchised fruit juice shops to Lendio a financial services company for small businesses. Alex had been recruited back by his Alma Matter to create an entrepreneurship program. In fact he had just been charged with creating an entrepreneurship minor – five or six courses for students of any major at the University that would help prepare them for the challenge of starting their own businesses.

Alex’s first insight was that the traditional “how to write a business plan” was as obsolete for Main Street as it is for Silicon Valley. So he had adopted Steve’s Lean LaunchPad class and was using The Startup Owner’s Manual as his core text. He had contacted us seeking advice on developing his curriculum, and it just seemed natural to invite him out to the ranch for a deeper dive.

As we dug into learning about Alex’s teaching experience we naturally asked him about the ventures his own students were creating. It was clear Alex was a bit apologetic; photo studios, online retail subscriptions to commodity household and personal hygiene products, etc. Alex explained that in his community building a successful venture that generated nice cash flows – not IPO’s – were the big win. To his students these were not “small businesses”, but ‘their businesses’, their livelihoods and their opportunities to create wealth and independence for themselves and their families.

Mismatch for Main Street
As we walked out to the pond, Alex explained that while he found the teachings of the Lean LaunchPad directly applicable and effective, there was a mismatch for his students in the size of the end goal (a great living versus a billion dollar IPO) and the details of the implementation of the business model (franchise and multilevel marketing versus direct sales, profit sharing versus equity for all, family and SBA loans versus venture capital, etc.)

Sitting by the pond we had a second epiphany: we could easily adjust the Lean LaunchPad class to bring 21st century entrepreneurship techniques to ‘Main Street’. To do this we needed to do is change the end goals and implementation details to match the aspirations and realities that these new small businesses face.

We called this Mainstream Entrepreneurship.

Mainstream Entrepreneurship
Mainstream Entrepreneurship recognizes that with the Lean LaunchPad class we now have a methodology of making small businesses fail less.  That accelerating business model search and discovery and using guided customer engagement as a learning process, we could help founders of mainstream businesses just like those starting technology ventures.

For the rest of the afternoon, Steve and I brainstormed with Alex about how he could take his 20 years of entrepreneurial small business experience and use the Business Model Canvas and Customer Development to create a university entrepreneurship curriculum and vocabulary for the mainstream of American Business.

We think we got it figured out.

Alex Lawrence will be one of the presenters at the Lean LaunchPad Educators Program August 22-24th in Berkeley.

Lessons Learned

  • Small businesses make up 99.7% of U.S. companies
  • “How to write a business plan” is as obsolete for Main Street as it is for Silicon Valley
  • Using the Lean LaunchPad (the business model canvas and Customer Development) are the right tools
  • Small businesses have different end goals and implementation details
  • We can adapt/modify the Lean LaunchPad approach to embrace these goals/details

Listen to the post here: or download the podcasts here

39 Responses

  1. Steve, any news on the Lean LaunchPad online course you posted end of last year? We are a bunch of people around the world looking forward to it!

  2. I am so glad that someone is finally realizing that the majority of new businesses are not tech-oriented. However, we still have some of the same needs and issues. I look forward to learning more about your “mainstream entrepreneurship” concept.

  3. Steve, great article, but the 99% includes those who have been downsized, outplaced and unemployed, not just academia and Silicon Valley. Sure, seeding the next generation startups, and fueling innovation and entrepreneurism are necessary, but in the stalemated US economy, and with people 50 years old and over getting shut out of the job market, there is an acute need for a system that offers this group an opportunity to earn a living with a higher likelihood of success. How about something outside of academia, possibly in the form of a seminar or video series for those in transition?

  4. Even though I am in the silicon valley I simply want to create an innovative business that provides a great lifestyle for the very few that it employs.

    This is great news that you realized this and figured it out. So far I was thinking mine was just a different case and had to adapt the startup manual to my situation.

    My only question – how do i and others learn what you have figured out?

    Thx.

    • I love your articles Steve and I’m a dedicated reader of your work but this this comment by Sanjay is exactly what I’m wondering as well. Is there any plan for making these insights available to current startup/small business founders?

      • Ralph/Sanjay/JP –

        I’ve recognized the need for this too and am trying to do something about it.

        In NYC, I’m promoting a class that would bring first-time founders together to learn and discuss Customer Development and other Lean Startup principles in a supportive setting, outside traditional educational institutions.

        Think of it as a distributed model or peer-to-peer network of founders.

        You can learn more here: http://www.skillshare.com/Getting-Started-Stop-Dreaming-and-Launch-Your-Startup-Today/782816352/945097167

        Connect with me to discuss. I’d love to hear what you think is needed and how to roll it out online and offline in other markets.

        Drew

        • Drew/Sanja/JP/All – nice work, Drew! I would very much like to connect to discuss in-depth. Perhaps we can set up a face to face since I am in the Phila area, or assemble a web conference brainstorming session.

        • Great initiative Drew. I’d be happy to connect and share my experiences and learn what others are experiencing. My main problem has been in going from book to the street. A community that gets the lean concepts can be quite helpful. You do not have to start at explaining why we have three or four different business models and not a business plan.

    • Hello Sanjay – stay tuned. The work will be shared. It’s going to take some time to put it together and of course, test it!

  5. I’m glad this conversation is finally happening. I’m currently attempting to apply Lean LaunchPad techniques to a small business startup, but one that is for Professional Services. Remember that many of us aren’t selling a product at all. We’re selling architectural services, law consulting, midwife services, or other things that can be challenging to produce prototypes for.

    And for those of us in this 99.7%, we don’t get to fail with other people’s money. If we fail, it usually wipes out our savings and puts us in debt. We need these tools more than anyone!

  6. Great post Steve, as always. the great benefit to any new business (scalable tech start-up, small business or even new division on existing org) is about dealing with uncertainty(the search problem), so BMC+CustDev+mindset of design thinking+Agile help on this (the solution tool kit). There is no single solution to a single problem, but a lot of experiences like yours translated into a methodology/ process/ mindset that could help people to achieve their dreams->start a new company. 90% of the people who participated on our BMC course (http://bmgenbrasil.com) is there because want to learn and open a new business because it does not feel that the corporate world, still on Main Street mindset, is giving them the whole “fullfilment”.

    Cheers from Brasil,

    Renato Nobre

  7. Steve,
    As a long time follower of your work and that of Alex and Eric I glad to see this Mainstreet movement beginning. We have been adapting all of this work to exactly those kinds of businesses as well as our tech clients. We are anxious to see what comes out of this epiphany!!!!!

  8. Steve, I have been teaching entrepreneurship for the 99% through Kauffman Foundation programs and now the Lean Startup program for twelve years. My partners and I in Arizona (stealthmode partners) have been working with various municipalities to fund our programs. We have touched over 700 entrepreneurs.

    • Francine – you rock. If we could just clone you and plant the clones around the US, the economy would be fixed in no time. Hope you are well. Say hi to the GP crew for me.

  9. A simple walk and talk at the pond and you figured out how to make small businesses fail less…any chance y’all can bottle that water? Interested to hear more…

  10. Glad to see you are doing this. If you could apply it to those of us who want to be solopreneurs that would be great.

  11. Reblogged this on ramblingbog.

  12. Finally the light bulb gets lit! Small businesses are the backbone of this country and deserve more education, mentors and funding.

    Small businesses do not “speak” or understand the language and principles of high-growth startups and without the glamor and high-growth potential, get little attention. LaunchAmerica.com is preparing an online education and mentoring program to help create more successful small business startups. We are looking for contributors to help prepare content and assist with classes and would appreciate to hear from all those interested in helping more Americans fulfill their American Dream. Please contact us.

    To provide support for the importance of small businesses and the need for more funding for all types of startups, my new book, Launch America! Reviving the American Dream, presents the Launch America Initiative to championing legislation for a major tax credit incentive program for the investors that fund all types of startups, not just the high-growth startups that get all the media, angel and VC attention.

    22 states have tax credit programs for high-growth startups, but few programs for the hundreds of thousands of small businesses started by the men and women across America every year. Family and friends fund over three times as much money into small businesses as angel investors, but get little support or tax credits. It is time to change this and fuel the growth of all types of small businesses. Join us at launchamerica.org.

    I look forward to more programs and materials coming from Steve and all those interested in helping the 99%.

  13. [...] and Stanford University entrepreneur professor Steve Blank, and is reiterated in a recent guest post on Steve Blank’s website by Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps(and the Founding Faculty [...]

  14. The main difference is not in tech startup vs mainstreet startup IMO but scalable (exponential growth) vs. normal growth.
    In my experience , a lot of “non web tech startups” like laser or medical devices businesses are very similar to mainstreet businesses.
    On the contrary , i find similarities between a new streetfood chain and a web startup (high potential team, capital).

  15. When it comes to inner cities and more mainstream businesses (linear growth models, unlikely IPO candidates, no hockey-stick like projections) traditional venture capital is just not the right tool as the “spray & pray” Silicon Valley model doesn’t work in this context.
    What’s needed is more creative funding (revenue finance, mezzanine products, etc.)

    While there is great wealth being amassed in the Valley, and high-paying jobs created for engineers, the venture capital industry is guilty of playing it safe. There’s no magic in funding 10 food delivery apps and waiting for one to hit and nothing innovative about an incubator that sprays lots of small checks into low capex businesses. For an industry that prides itself on being on the bleeding edge, it’s awfully staid.

    Sorry, but I am not nearly as enamored with the tech startup scene as it is with itself. It would be much more interesting if people could figure out exits in tough to exit businesses (i.e. ones that actually create jobs.)

  16. Can’t wait to hear more about Mainstream Entrepreneurship and application of Lean LaunchPad approach to small businesses.

    Although we are a technology startup, truthfully we are more of a small business at this stage until our growth ramps. And yes, I do mentally “sneer” at the idea of being more small business than startup.

  17. As a privately funded non-profit dedicated to fostering entrepreneurism, we have been using the Lean Launch principles in our accelerator and incubator programs.
    Seeing the same need to mainstream these principles, we are launching tools and training that builds on Steve’s work and that of Nathan Furr at BYU entitled “Nail it and Scale It”. We feel strongly that such training and assistance is really needed for the many entrepreneurs who are no longer students, who don’t have access to the professors and rich resources of academia, and slug it out each day to rapidly grow their innovative businesses. We strongly support Steve’s and Alex’s efforts to keep the focus on mainstream. It will pay off for us all.

  18. [...] o professor e autor co-autor do conhecido livro The Startup Owne’s Manual,  Steve Blank postou essa semana , um vídeo interessante sobre: Startup x Pequeno négocio. Gostar disso:GostoSeja o primeiro a [...]

  19. Terrific post, and a great time to remind ourselves that:

    — 90% + of all new businesses operate in mature or slow-growth markets, not high-growth sectors

    — Only a tiny fraction of new businesses are truly scalable

    — Most new business owners are “technicians” (nurses, bicycle mechanics, software developers) completely swamped working “in” their businesses–they’re not professional managers with the bandwidth/knowhow to work “on” their businesses

    Jerry and Steve, I also suggest we broaden the definition of “entrepreneur” to include anyone with the guts, drive, or need to strike out on their own, regardless of whether or not they pursue a scalable model. The worldwide economic downturn means more and more entrepreneurship is necessity-driven, not opportunity-driven, and these new business owners need conceptual frameworks that apply to the very different, non-venture worlds in which they live.

    Finally, more people are studying entrepreneurship because they seek deeper meaning in their lives–they want to make a social contribution or fulfill themselves personally as well as professionally. So there’s a need for innovation in “personal business models” as well as in organizational business models. That’s a key driver behind a new, free worldwide community of businesspeople, counselors, consultants, and coaches keen on the possibilities for applying business model and entrepreneurship principles to individual career development. It’s called BusinessModelYou.com.

  20. You have already planted the idea. Other people will take it from here. Just a matter of time before we see niche versions of the startup manual for restaurants, recruiting firms etc.

    Im currently writing a “startup manual” for small niche law firms that use technology as a competitive advantage. Nothing spectacular and below 100 pages. Not sure if I will publish it online straight away or make some more money from it before.

    I use your framework/big ideas of customer development. Like a skeleton that connected all the dots like no one had never come close to before (some exceptions). Then I fill it with my own flesh. And tweak the skeleton a bit as well.

    Add things I feel is more exact information lawyers need to succeed. Things that are totally uninteresting for entrepreneurs in others sectors.

    Would love to see a competition some day between different startup manuals.

    But then a clear goal of the manual would need to be decided first. Then some kind of AB test. That would be interesting. Pure data.

    Whats the goal of customer development? How would one know if another startup manual is better? How can the progress of different startup manuals progress if there isnt away to clearly measure the quality of them, or clearly articulate what the goal(s) of them are?

    Do you think you have focused more on the flesh/details rather than the skeleton/big ideas in your second version? Do you feel customer development is a good enough model, and now you try to scale it by polishing the details? Why do you spend time on stuff like explaining online AB tests or eye tracking when not all entrepreneurs would need to do those? Why dont you focus on the skeleton, boring? You think the details are needed to help spread the big idea?

    Very impressed by your work! Only asking a million questions to try to understand the underlying thoughts. :)

  21. As a bootstrapping solo-dev I often try to tweak concepts (such as the lean startup) to fit my situation. As you’ve discovered, that’s not always easy.

    I am constantly amazed at how much longer things take to accomplish than anticipated. Rapid iteration? I’d love to but don’t see how on my own and I’m not in a position to build a team. (Nor do I want to – if I’m being totally honest.)

    I think the biggest disconnect, for me, has been the focus on getting funding in order to move mountains. Yes, cash to outsource and for marketing is ideal but at what price? 51% to someone with an eye on an exit while my eye is on holding?

    Also, I’m not a twenty-something with little to lose. I’m not in a position to shack up with a handful of like minded people and crank out V1 of the next digital toy/tool. I’m pushing 40, have a spouse and three kids and while my mind LOVES entertaining high dollar startup ideas, the truth is, I’m not after that.

    I love reading your blog and look forward to having to tweak your advice a bit less in the future. Thank you for contemplating the 99%.

  22. Tasty! I’m a 50 something looking to start my first triple-bottom-line business – an urban farm to fork enterprise that will support right livelihood and sustainable healthy food production in the inner city. I’m already a fan of LeanLaunch Pad and am eager to hear what you have cooking for the small first-time entrepreneur.

  23. glad to see some attention paid to entrepreneurship for those who aren’t specifically in technology companies. the importance of technological advancement should never be understated. it’s just not the only thing to pay attention to.

    technology has become quite the sexy thing with Facebook, instagram,twitter, etc but there are other paths to making $$ and finding meaning in life

  24. [...] from Steve Blank. This post illustrates that it is possible to modify the Lean LaunchPad approach (the business [...]

  25. Steve, you have finally validated my experience with your entrepreneurial framework in this post. I could see it applying in my situation, but you’ve confirmed that there is a way to apply at all levels. I’ll be incorporating some of your ideas and concepts and recommending your books for those that get my book, “How to Start a Business: Mac Version”. I walk people through from their “idea” to their “Grand Opening” what it takes to start a business because I could not find any “blueprint” of steps that would help me increase my success rate. Especially if I only wanted to become a dog sitter.

    I’ll be updating my content over the next few weeks to reflect new realizations and evidence. Thanks for the post, I’ve been heading in the right direction all along.

    Kevin
    Chief Business Geek
    http://www.MacStartup.com

  26. [...] the actual launch of sustainable and scalable ventures. Steve Blank’s recent posting “Entrepreneurship for the 99%“ has also given me cause to further ponder. The majority of our graduates are unlikely to [...]

  27. Any news on the “Mainstream Entrepreneurship” framework/course that you and Alex Lawrence had devised in early June? Would love to have some material to work on with my students!

  28. People should buy a franchise.

    See mcdonalds, see success !

  29. Are there any example presentations? like the MammOptics one used in SOM? or the LLP sessions?

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