How We Used to Give Startups Very Bad Advice. 2 Minutes to See Why

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No Business Plan Survives First Contact With Customers. 2 Minutes to See Why

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Watching My Students Grow

“You cannot teach a man anything, you can only help him find it within himself.”
Galileo Galilei

One of the great things about teaching is that while some students pass by like mist in the night others remain connected forever. I get to watch them grow into their careers and cheer them on.

Its been three and a half years since I first designed and taught the Lean LaunchPad class and lots of water has gone under the bridge since then. I’ve taught hundreds of teams, the National Science Foundation Innovation Corps has taught close to 400 teams led by our nations top scientists, and the class is being taught around the world.

But I still remember a team from the first class, one which wanted to build a robotic lawnmower. It’s now been over 3 years since the team has left my classroom and I thought I’d share with you what the two founders, Jorge Heraud and Lee Redden, learned then and what they’re doing now.

The Autonomous Lawnmower
They called their company Autonomow. And they were absolutely convinced what the world needed was an auto-driving lawn mover for institutions with large green spaces.

You can see their first slide deck in class below (and here)

Like in all our Lean Launchpad classes we teach a combination of theory coupled with intense and immersive experiential learning outside the classroom. Students need to get out of the building and talk to 10-15 customers a week.

The next week they came back in class and presented this:

Each week we’d teach them about one more part of what makes up a business model. All teams struggle with finding product/market fit.

By week four their presentation looked like this:

Notice something different about the cover slide? Massive pivot. Like all great Silicon Valley companies they started with a technology and guessed who the customers will be. They’re almost always wrong. They could have never figured this out sitting inside a classroom writing a business plan.

At week five (see here) they were actually getting into farm fields wearing hip boots and overalls. Now they were figuring out how to create demand.

The Customer Development process, this relentless drive to turn hypotheses into facts is what makes this learning so rapid.

At week six they were trying to figure out their distribution channel (here) after another pivot. They got their minimal viable product (a machine vision platform) up and running in the lab.

At week seven (here) another pivot happened when farmers taught them about how to price their product. Instead of an of selling hardware they were selling a service.

BTW, notice that they were now dragging their machine vision platform through the farm fields!  If there was ever any question of whether a minimal viable product can work for hardware, see what they say in their video below.

By week eight they were learning who they needed to partner with (see here). Most importantly they found a customer who taught them while weeding carrots was nice, thinning lettuce was where the money was.

After 9 weeks their final presentation looked like this.

When I teach in universities I’m not running an incubator. What I’m trying to do is to get students to learn a way of thinking about new ventures that will stick with them for life. And I try to do by having them teach themselves, rather than us teaching at them. Whether they start a company or not, I don’t keep score.

But some teams remain connected forever. I get to watch them grow into their careers and cheer them on. This was one of those teams. After class they took this idea and formed a company – Blue River Technology.

Over the last three years they turned their vision and PowerPoint slides into real hardware that solves real customer problems. And with 3 rounds of funding, including a grant from the National Science Foundation, they’ve raised $13 million.

Take a look and see what they’ve done.

If you can’t see the video click here

“The customers had way more insights then we had. They had been thinking about their own problems for so long…If you just go out and try to sell maybe you’ll find some buyers, but you won’t be learning about what you should be doing.”

Lee Redden – Blue River Technology

——

I’m off next week on the next great adventure. We’re going to launch the I-Corps @ NIH and change how our country commercializes life sciences.

How To Find the Right Co-Founders?

How do you figure out what’s the right mix of skills for the co-founders of your startup?

Surprisingly if you’ve filled out the business model canvas you already know who you need.

——-

I was having breakfast with Radhika, an ex-grad student of mine who wanted to share her Customer Discovery progress for her consumer hardware startup. She started by sketching her business model canvas on a napkin, but somehow the conversation quickly shifted to what was really on her mind. “After reading your post on Why Founders Should Know How to Code it looks like web/mobile startups have it easy. They seem to know the right mix of skills on their founding team is a hacker, hustler and designer. But what about for us, a consumer hardware hardware company? Trying to figure out what the right set of co-founders isn’t so clear. How do I decide who I need to have on board on day one?  Who can I hire later? And what can I outsource?”

Co-founders Skills are the First Derivative of the Business Model Canvas
I told Radhika this is a perennial question for startups. I had struggled with this one for years. And over time every venture capitalist develops their own gut feel for what makes up a great team in their industry. I said, “If you’ve filled out the business model canvas you already know who you need on your founding team, the answer is staring us in the face.”

She looked at bit puzzled, so I continued to explain…

One of the virtues of using the Business Model Canvas as part of a Lean Startup is that it helps you frame each one of your nine critical hypotheses.

While most of the early attention in a startup is paid to finding product market fit (the match between value proposition and customer segment on the right-side of the canvas) it’s the left side of the canvas that will tell you what your founding team should look like.

product market fit 2

Understanding Activities and Resources Will Help You Spec Your Team
I suggested to Radhika that we start by looking at the canvas box labeled “key activities”.  “Activities” is where you define the most important things your company must do to make the rest of your business model work. Activities define the unique expertise your company needs to deliver the value proposition, customers, channels, customer relationships and/or revenue. (If you’re a startup it’s easy to get confused on this step. We don’t need to know your activities for your five-year plan. Just list the Activities needed to get a major early milestone – i.e. cash flow positive, or first million users, regulatory submission/approval, etc.)

For example, if you’re building a mobile app, then the key activities are: app software development, user interface design and demand creation skills. Or if you’re building consumer electronics the key activities might be: low cost hardware design, high volume manufacturing, user interface design, consumer branding and retail distribution. For medical devices it might be mechanical engineering, clinical trials, regulatory approval, freedom to operate (intellectual property) and figuring out a reimbursement strategy.

Activities Resources Partners

So What Does this Have to Do With A Founding Team?
Once you establish what activities your company needs to do, the next question is, “how do these activities get accomplished?” i.e. what resources do I need to make the activities happen? The answer to that question is what goes in the “Resources” box on the canvas (and if third parties outside your company are going to provide it, in the Partners box.)

For example, in web and mobile apps most of the resources needed at first are people: a developer (the hacker), a user interface designer, and someone to lead the team and create customer demand and if needed raise capital (the hustler).

In medical device startups these resources are expertise in the basic science, industrial design, human factors, managing Contract Research Organizations, reimbursement, Intellectual Property, and someone to lead the team and raise capital and establish strategic partnerships.  Therefore the ideal medical device team might be a physician; engineer; operator; business development/financial analyst.

Are We Missing A Founder?
Once you’ve figured out the activities and resources, you can then ask, “If these activities are crucial in building our company and these resources are the critical people skills need to make them happen. Does anyone on the founding team have these skills? Are we missing a founder? Or can we outsource these activities to Partners?”

Radhika nodded. “I get it” she said, “understanding activities and resources help me identify and then prioritize the skill sets I’ll need, but what about the individual characteristics of the individuals – resilience? tenacity? agility? team work?  How much value should I put on co-founders I’ve worked with before?”

I smiled and said, “Figure out what you need first, then we can have another coffee.”

Lessons Learned

  • Figuring out the right founding team starts with listing the critical activities to make the startup successful in the first year or so
  • Next, what human resources are necessary to make those activities happen?
  • Can these skills be outsourced to partners or are they integral to the DNA of the company?
  • If they’re integral to the company’s success, they should be part of the founding team

How To Think Like an Entrepreneur: the Inventure Cycle

The Lean Startup is a process for turning ideas into commercial ventures. Its premise is that startups begin with a series of untested hypotheses. They succeed by getting out of the building, testing those hypotheses and learning by iterating and refining minimal viable products in front of potential customers.

That’s all well and good if you already have an idea. But where do startup ideas come from? Where do inspiration, imagination and creativity come to bear? How does that all relate to innovation and entrepreneurship?

Quite honestly I never gave this much thought. As an entrepreneur my problem was that I had too many ideas. My imagination ran 24/7 and to me every problem was a challenge to solve and new product to create. It wasn’t until I started teaching that I realized that not everyone’s head worked the same way. While the Lean Startup gave us a process for turning ideas into businesses – what’s left unanswered was, “Where do the ideas come from?  How do you get them?”

It troubled me that the practice of entrepreneurship (including the Lean Startup) was missing a set of tools to unleash my students’ imaginations and lacked a process to apply their creativity. I realized the innovation/entrepreneurship process needed a “foundation” – the skills and processes that kick-start an entrepreneurs imagination and creative juices. We needed to define the language and pieces that make up an “entrepreneurial mindset.”

As luck would have it, at Stanford I found myself teaching in the same department with Tina Seelig. Tina is Professor of the Practice at Stanford University School of Engineering, and Executive Director of the Stanford Technology Ventures Program. Reading her book inGenius: A Crash Course on Creativity was the first time I realized someone had cracked the code on how to turn imagination and creativity into innovation.

Here’s Tina’s latest thinking on the foundational skills necessary to build a new venture.

—-

There is an insatiable demand for innovation and entrepreneurship. These skills are required to help individuals and ventures thrive in a competitive and dynamic marketplace. However, many people don’t know where to start. There isn’t a well-charted course from inspiration to implementation.

Other fields — such as physics, biology, math, and music — have a huge advantage when it comes to teaching those topics. They have clearly defined terms and a taxonomy of relationships that provide a structured approach for mastering these skills. That’s exactly what we need in entrepreneurship. Without it, there’s dogged belief that these skills can’t be taught or learned.

Below is a proposal for definitions and relationships for the process of bringing ideas to life, which I call the Inventure Cycle. This model provides a scaffolding of skills, beginning with imagination, leading to a collective increase in entrepreneurial activity.

Inventure Cycle

  • Imagination is envisioning things that do not exist
  • Creativity is applying imagination to address a challenge
  • Innovation is applying creativity to generate unique solutions
  • Entrepreneurship is applying innovation, bringing ideas to fruition, by inspiring others’ imagination

Inventure CycleThis is a virtuous cycle: Entrepreneurs manifest their ideas by inspiring others’ imagination, including those who join the effort, fund the venture, and purchase the products. This model is relevant to startups and established firms, as well as innovators of all types where the realization of a new idea — whether a product, service, or work of art — results in a collective increase in imagination, creativity, and entrepreneurship.

This framework allows us to parse the pathway, describing the actions and attitudes required at each step along the way.

  • Imagination requires engagement and the ability to envision alternatives
  • Creativity requires motivation and experimentation to address challenges
  • Innovation requires focusing and reframing to generate unique solutions
  • Entrepreneurship requires persistence and the ability to inspire others

Not every person in an entrepreneurial venture needs to have every skill in the cycle. However, every venture needs to cover every base. Without imaginers who engage and envision, there aren’t compelling opportunities to address. Without creators who are motivated to experiment, routine problems don’t get solved. Without innovators who focus on challenging assumptions, there are no fresh ideas. And, without entrepreneurs who persistently inspire others, innovations sit on the shelf.

Let’s look at an example to see these principles at work:

As a Biodesign Innovation Fellow at Stanford University, Kate Rosenbluth spent months in the hospital shadowing neurologists and neurosurgeons in order to understand the biggest unmet needs of physicians and their patients.

In the imagination stage, Kate worked with a team of engineers and physicians to make lists of hundreds of problems that needed solving, from outpatient issues to surgical challenges. By being immersed in the hospital with a watchful eye, she was able to see opportunities for improvement that had been overlooked. This stage required engagement and envisioning.

In the creativity stage, the team was struck by how many people struggle with debilitating hand tremors that keep them from holding a coffee cup or buttoning a shirt. They learned that as many as six million people in the United States are stricken with Parkinson’s disease, and other conditions that cause tremors. The most effective treatment is deep brain stimulation, an onerous and expensive intervention that requires permanently implanting wires in the brain and a battery pack in the chest wall. Alternatively, patients can take drugs that often have disabling side effects. The team was driven to help these patients and began meeting with experts, combing the literature, and testing alternative treatments. This stage required motivation and experimentation.

In the innovation stage, Kate had an insight that changed the way that she thought about treating tremors. She challenged the assumption that the treatment had to focus on the root cause in the brain and instead focused on the peripheral nervous system in the hand, where the symptoms occur. She partnered with Stanford professor Scott Delp to develop and test a relatively inexpensive, noninvasive, and effective treatment. This stage required focus and reframing.

In the entrepreneurship stage, Kate recently launched a company, Cala Health, to develop and deliver new treatments for tremors. There will be innumerable challenges along the way to bringing the products to market, including hiring a team, getting FDA approval, raising subsequent rounds of funding, and manufacturing and marketing the device. These tasks require persistence inspiring others.

While developing the first product, Kate has had additional insights, which have stimulated new ideas for treating other diseases with a similar approach, coming full circle to imagination!

The Inventure Cycle is the foundation of frameworks for innovation and entrepreneurship, such as design thinking and the lean startup methodology. Both of these focus on defining problems, generating solutions, building prototypes, and iterating on the ideas based on feedback. The Inventure Cycle describes foundational skills that are mandatory for those methods to work. Just as we must master arithmetic before we dive into algebra or calculus, it behooves us to develop an entrepreneurial mindset and methodology before we design products and launch ventures. By understanding the Inventure Cycle and honing the necessary skills, we identify more opportunities, challenge more assumptions, generate unique solutions, and bring more ideas to fruition.

With clear definitions and a taxonomy that illustrates their relationships, the Inventure Cycle defines the pathway from inspiration to implementation. This framework captures the skills, attitudes, and actions that are necessary to foster innovation and to bring breakthrough ideas to the world.

Lessons Learned

  • The Inventure Cycle defines entrepreneurship as applied innovation, innovation as applied creativity, and creativity as applied imagination
  • Entrepreneurship requires inspiring others’ imagination, resulting in a collective increase in creativity, innovation, and entrepreneurship
  • This framework allows us to parse the skills, attitudes, and actions needed at each step in the entrepreneurial process.

Why Founders Should Know How to Code

By knowing things that exist, you can know that which does not exist.”
Book of Five Rings

A startup is not just about the idea, it’s about testing and then implementing the idea.

A founding team without these skills is likely dead on arrival.

—-

I was driving home from the BIO conference in San Diego last month and had lots of time for a phone call with Dave, an ex student and now a founder who wanted to update me on his Customer Discovery progress. Dave was building a mobile app for matching college students who needed to move within a local area with potential local movers. He described his idea like “Uber for moving” and while he thought he was making real progress, he needed some advice.

Customer Discovery
As the farm fields flew by on the interstate I listened as Dave described how he translated his vision into a series of hypotheses and mapped them onto a business model canvas. He believed that local moves could be solved cheaply and efficiently through local social connections. He described when he got out of the building and quickly realized he had two customer segments – the students – who were looking for low budget, local moves and the potential movers – existing moving companies, students and others looking to make additional income. He worked hard to deeply understand the customer problems of these two customer segments. shutterstock_158330768After a few months he learned how potential customers were solving the local moving problem today (do it themselves, friends, etc.) He even learned a few things that were unexpected – students that live off campus and move to different apartments year-to-year needed to store their furniture over the summer breaks, and that providing local furniture storage over the summer was another part of his value proposition to both students and movers.

As he was learning from potential customers and providers he would ask, “What if we could have an app that allowed you to schedule low cost moves?” And when he’d get a positive response he’d show them his first minimal viable product – the mockup he had created of the User Interface in PowerPoint.

This was a great call. Dave was doing everything right. Until he said, “I just have one tiny problem.” Uh oh…

“I organized some moves by manually connecting students with the movers. And I even helped on some of the moves myself. But I’m having a hard time getting to my next minimal viable product. While I have all this great feedback on my visual mockups I can’t iterate my product. My contract developers building the app aren’t very responsive. It takes weeks to make even a simple change.”

I almost rear-ended another car when I heard this. I said, “Help me understand.. neither you nor your cofounder can code and you’re building a mobile app? And you’ve been at this for six months??” Whoah. This startup was broken at multiple levels. In fact, it wasn’t even a startup.

The Problem
Dave sounded confused. “I thought building a company was all about having hypotheses and getting out of the building and testing them?’

There were three problems with Dave’s startup.

  • He was confusing having an idea with the ability to actually build and implement the idea
  • He was using 3rd parties to build his app but he had no expertise on how to manage external developers
  • His inability to attract a co-founder who could code was a troubling sign

A Startup is Not Just About a Good Idea
As the miles sped by I explained to Dave that he had understood only two of the three parts of what makes a Lean Startup successful. While he correctly understood how to frame his hypotheses with a business model canvas, and he was doing a good job in customer development – the third component of Lean is using Agile Development to rapidly and iteratively build incrementally better versions of the product – in the form of minimal viable products (MVP’s).

The emphasis on the rapid development and iteration of MVP’s is to speed up how fast you can learn; from customers, partners, network scale, adoption, etc. Speed keeps cash burn rate down while allowing you to converge on a repeatable and scalable business model. In a startup building MVP’s is what turns theory into practice.

Dave had fallen into the new founder trap of looking at the business model canvas and thinking that coding was simply an activity (rapidly build mockups of first the the U/I and then the app). And that he could identify the resources needed, (outsourced contract developers who could build it for him) and he would hire a partner to do so. All great in theory but simply wrong. In a web/mobile startup coding is not an outsourced activity. It’s an integral part of the company’s DNA.

Having a coder as part of the founding team is essential.

Coding is the DNA of a Web/Mobile Startup
I offered that if Dave wanted to be the founding CEO then he was going to have to do two things: first, create a reality distortion field large enough to attract a technical co-founder. And second, learn how to code.

Dave was a bit embarrassed when he explained, “I’ve been trying to attract another co-founder who could code but somehow couldn’t convince anyone.” (This by itself should have been a red flag to Dave.) And then he continued, “But why should I have to know how to code, I’m not going to write the final app.”

One interesting thing about the Lean Startup is that it teaches founders about Sales and Marketing (and a bit of finance) without making them get an MBA or a decade of sales experience. Founders who go through the process will have an appreciation of the role of sales and marketing like no textbook or classroom could provide. Having done the job themselves, they’ll never be at the mercy of a domain expert. The same is true for coding.

I was glad I had a lot of time in the car, because I was able to explain my belief that all founders in a web or mobile startup need to learn how to code. Not to become developers but at a minimum to appreciate how to hire and manage technical resources and if possible to deliver the next level of MVP’s themselves.

shutterstock_161223782

Dave’s objection was to list a few successful startups that he knew where that wasn’t the case. I pointed out that are always “corner cases” and if he thought I was wrong he could simply ignore my advice.

As I was about to pull off an exit for lunch and to recharge my car I strongly suggested to Dave that for both this startup and the rest of career he put his startup on hold and invest his time in attending a coding bootcamp. It would take him to the first step in appreciating the issues in managing web development projects, identifying good developers, and finding a technical co-founder.

Weeks later Dave dropped me a note, “Boy, what I didn’t know about how much I didn’t know. Thanks!”

Lessons Learned

  • Startups are not just about the idea, they’re about testing and implementing the idea
  • A founding web/mobile team without a coder past the initial stages of Customer Discovery is not a startup
  • Everyone on the founding team ought to invest the time in a coding bootcamp
  • Your odds of building a successful startup will increase

What Job Needs to be Done? 2 Minutes to Find Out Why

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