I joined the board of Cafepress.com when it was a startup. It was amazing to see the two founders, Fred Durham and Maheesh Jain, build a $100 million company from coffee cups and T-shirts.
But Cafepress’s most memorable moment was when the founders used a “Lessons Learned” VC pitch to raise their second round of funding and got an 8-digit term sheet that same afternoon.
Here’s how they did it.
Fail Fast and Cheap
Fred and Maheesh had started 9 previous companies in 6 years. Their motto was: “Fail fast and cheap. And learn from it.” Cafepress literally started in their garage and was another set of experiments only this time it caught fire. They couldn’t keep up with the orders.
Tell the Story of the Journey
The company got to a point where additional capital was needed to expand just to keep up with the business (a warehouse/shipping center collocated with UPS, etc.) Rather than a traditional VC pitch I suggested that they do something unconventional and tell the story of their journey in Customer Discovery and Validation. The heart of the Cafepress presentation is the “Lessons Learned from our Customers” section. Their presentation looked like this:
- Market/Opportunity
- Lessons Learned Slide 1
- Lessons Learned Slide 2
- Lessons Learned Slide 3
- Why We’re Here
Telling the Cafepress Customer Discovery and Customer Validation story allowed Fred and Maheesh to take the VC’s on their journey year by year.
After these slides, these VC’s recognized that this company had dramatically reduced risk and built a startup that was agile, resilient and customer-centric.
The presentation didn’t have a single word about Lean Startups or Customer Development. There was no proselytizing about any particular methodology, yet the results are compelling.
The VC firm delivered a term sheet for an 8-digit second round that afternoon.
Your results may vary.
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Filed under: Business Model versus Business Plan, Customer Development, Customer Development Manifesto, Venture Capital |
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Steve, sorry to do this in your comment forum, but I don’t see an email or contact. page I know you are speaking in NYC tonight, and that it’s sold out. I am a young entrepreneur here, absolutely dying to hear the talk. If there’s any way to wrangle an extra ticket (standing room or whatever), I’d do just about anything. I’m at jordan.cooper@gmail.com or blogging here: jordancooper.wordpress.com
Or maybe it’s just the last slide that convinced the VCs. You already have the hockey stick and exponential growth. The rest is just fluff.
Thanks for sharing those slides. This is my new favorite post on your blog. 9 companies in 6 years….. did any of those other ones catch on?
Hi Steve,
Just listened to your “Retooling Early Stage Development” for about the 10th time tonight as I was cleaning my room. There are some very valuable insights revealed in that talk, and that’s why I keep coming back to it periodically.
Your “Customer Development Process” has really resonated for me. I use it as a frame of reference for measuring progress in my startup.
We are currently in the process of validating our hypotheses about our product, customers, and markets. Seeing the key events/lessons learned presentation deck from Cafe Press tells me we’re on the right track with how we are measuring our progress in each of those areas.
Thank you for sharing your insights.
Best regards,
Dan
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[…] Prioritizing the stuff that matters is critical to building a successful business. And many of the best entrepreneurs experience failure a number of times before building a legendary business (thanks Steve Blank, you’re an info sharing rockstar). Lesson learned, review how each action […]
[…] The primary goal of customer development is to reduce the cost of mistakes. Just like catching a bug in development is cheaper than fixing it once it has been released, confirming lack of customer demand prior to ramping up a sales engine is cheaper than finding out once you have a paid sales team. This is basic enough that I don’t think anyone can argue with it – reduce the cost of mistakes. Actually, the essence of everything in CD is the same as Marc Andreesen’s Product-Market Fit. First, build something you think people want. Second, find out if people want it and at a price you can sell it at. Third, if they don’t, return to step 1. Fourth, when you have a repeatable scale model, you have very little risk and can either scale profitably or take investment on good terms to scale quickly. […]
[…] We’ve been inspired by Steve Blank and the Customer Development / lean startup model. Not just because we can command a 3-4x step up in valuation if we find product/market fit pre […]
[…] elevator pitch and follow it up with a substantive presentation is the difference between a funded entrepreneur and those having coffee complaining that they’re out of cash. It’s a litmus test of how you […]
Very insighful post. I am about to talk to an entrepreneur on how to approach his pitch to VC’s and I believe this is a great approach to it.
Thanks!
[…] CafePress says “Fail fast and cheap. And learn from it.” […]
[…] type of VC pitch – http://steveblank.com/2009/11/12/%E2%80%9Clessons-learned%E2%80%9D-%E2%80%93-a-new-type-of-vc-pitch/ – use this presentation as a good reference for your Demo day pitch. We will provide a […]