This document provides an agenda and overview for an introductory class on web startups and the Lean Startup methodology. The class covers the context and history of web startups, including the dot-com bubble. It discusses that ideas have little value on their own and that execution is key to success. The document then introduces the Lean Startup methodology, including minimum viable products, agile development, and the customer development process of discovery, validation, creation and company building. It concludes with assigning reading materials and noting that next class will involve practice startup pitches to form project teams.
2. Humor of the day:
Question of the day:
What makes a great entrepreneur?
3. The Agenda If you have business ideas
during this class, write
Intro to the class
Syllabus
them down. We will do
Policies, outline practice pitches at the end
of class.
Context of Web Startups
Startup Culture (risk vs reward)
History of Startups and “disruptive innovation”
idea vs execution
Startup stories
Entrepreneurs (Personality test)
The Lean Startup
Lean Startup Methodology
Customer development model
Practice Pitches
Next week… real pitches and form teams
4. What is this class?
Fast paced… lots to cover
Hands on… all about tools and using them
A real trial… build your own mini-startup
Who is it for?
Entrepreneurs… serious about starting startups
The curious… have an idea but not sure what it takes
5. Syllabus Important Points
Grading
60% = daily quizzes over reading material (8 of them)
40% = Final project and presentation
Mondays and Wednesdays 6-9 pm. Last day is July 9th
No class July 4th
If you miss a session, you will fall behind. We move fast.
Other notes
Textbook (“The Lean Startup”) is great, but not required
Weekly reading is for the quizzes
Best time to talk to me is before/after class, or by email
6. Course Outline
1: Today… context of web startups and the Lean Startup
2: Next session, immediately start building a startup
Pitches and teams
Business planning
Intro to Websites
3: Market research and web tools
4-7: Four sessions on web product development
8: Marketing your product
9: Finance and Legal
10: Final project presentations
8. Web Startups… What are they?
Web
Websites, Mobile apps, Tablets
Infrastructure
Software as a Service
Startups
New and unproven business model
= New way of solving an existing problem
Disruptive innovation = disrupts the existing market
9. A quick history of web startups
Those who cannot remember the past are condemned to repeat it.
- George Santayana
1991 - World Wide Web becomes available for the public. Internet users multiply at a rate of
3500 times a year, reaching the number of 295 million users by the year 2000.
1992 - launch of Windows 3.1
1993 - price of a PC 486/33 with 250 MB HDD, 1MB memory and floppy disk: $1,260.00
1994 – Amazon.com founded by Tim Bezos as an online bookstore
1995 - launch of Windows 95
1997 – Amazon.com IPO, made $70.5 million in one day, valuing the company at $438 M
1995-1999 – Grow grow grow!
1999 – Time names Tim Bezos person of the year.
12. Amazon.com stock chart
1997
open at
$18/share
1999
Peak
$199/share,
Closed at
$107/share
2001
$5.67/share
2012
$208/share
What happened during the bubble?
“Growth over profits” = bad business models
13. Web Failures of the dotcom bubble
Pets.com
sold pet supplies to retail customers.
Founded in 1998, bankrupt by 2000.
In 2 years, lost $300 M.
Boo.com
online consumer fashion Web store
Founded , bankrupt in 2000
Spent about $188 M in 6 months
WebVan
an online grocery store
Founded in 1999, bankrupt by 2001.
In 18 months, spent roughly $1.2 Billion
Many, many more…
15. Silicon Valley history
“South Bay”, Especially Palo Alto, Santa Clara, San Jose
Named for the number of silicon chip (semiconductor)
manufacturers, back in 1971
A very special place in the world
Today, SV accounts for 1/3 of all venture capital in the USA
A 2006 The Wall Street Journal story found that 12 of the 20
most inventive towns in America were in California, and 10 of
those were in Silicon Valley
Culture of risk tolerance, of trying high risk ventures
The “entrepreneurial spirit”
17. Web Startups… What are they?
Web
Websites, Mobile apps, Tablets
Infrastructure
Software as a Service
Startups
New and unproven business model
= New way of solving an existing problem
Disruptive innovation = disrupts the existing market
18. What is “disruptive innovation”?
Let’s use the law firms industry as an example
“Standard Process”
College student with good grades goes to law school
Studies for 3 years, graduates with law degree
Joins or starts a law firm
You need legal forms, so you go to this person.
The result of this “standard process”?
Costs $$$ hourly
Requires in-person meetings
Non-standardized
19. Disrupt it!
Enter LegalZoom.com
An online website with pre-made forms that consumers fill
out via questionnaires
New Process
You need legal forms, but don’t have the $$$ for an attorney
Go to the website, fill out questionnaire, pay $ fee, done!
The result?
Mostly automated = minimal human interaction = low cost
Online = flexible hours and geographic location
Standardized forms = consistency
Is it better?
20. Big and Famous Web Startups
Amazon.c (1994) Groupon (2008)
Ebay (1995) (2008)
Googl (1998) (2009)
Paypal (1998)
Wikipedia (2001) (2010)
LinkedIn ( (2003)
Facebook (2004)
YouTube (2005) (founding date)
Twitter (2006)
22. High Risk
Literally thousands of web startups…
Lots of direct competitors…
Very few startups break even…
Even fewer become profitable…
The default future for any new startup is to die
What’s the statistic? Depends on how you count…
http://www.quora.com/What-is-the-truth-behind-9-out-of-10-startups-fail
23. Great Reward
But those that do succeed are extremely successful…
(over 1,000:1)
change the world (or at least their industry)
can make MEGA $$$$$$$$$$$$ (via IPO or Acquisition)
24. Back up… what about a small reward?
That’s fine. Actually there’s 3 ways to exit a company.
Option 1: IPO = Initial public offering
Makes the most money ($1 billion +)
Hardest to do (very few companies make it this far)
Notables: Facebook, Groupon, LinkedIN
Option 2: Acquisition
Usually makes less money ($10 million - $1 billion)
“Easier” to do
Notables: YouTube (Google), Skype (Microsoft), Instagram (FB)
Option 3: “Lifestyle business”
Makes the least money (recurring “passive” income of <$1 M)
“Easiest” to do
No angel or VC investor will invest in a lifestyle business.
Notables: 4-hour workweek
25. Make a decision, plan ahead
How high do you want to aim?
Higher aim = more risk, greater potential
reward
Lower aim = lower risk, less potential reward
You can’t really get the best of both worlds…
it costs more to aim higher
Pretend you’re starting a lemonade
stand
What if your goal is to make $100?
What if your goal is to make $100 million?
The strategies differ a lot
“Standard” web startups = aiming high
26. High Risk, Great Reward
It’s playing the “Startup lottery”
Assume financial loss, with the small possibility of
great reward
It’s done for the experience and the potential
It’s NOT random.
You have control over many of the factors for success.
Skill
Hard Work
Luck
27. So then, how to Be Successful?
The idea is worth $0.00 = nothing
28. If you leave with nothing else from this class,
leave with this:
The idea has virtually no value.
(it’s entirely in execution)
29. The fallacy of the idea
The idea is only a seed.
Bags of seeds are cheap. Growing actual plants takes work
We will prove this later, with practice pitches
Investors who bet on “ideas” are not betting on “ideas”
They are betting on the team behind the idea
No one buys an “idea”
The closest you get to an idea being valuable is a patent,
trademark, or copyright which is a lot more involved
30. How to Be Successful?
The idea is worth $0.00 = nothing
Execution is everything!!
What does that mean? What is “Execution”?
Planning
Marketing Here's the truth of the matter: ideas are
pretty much worth zilch. What IS
Design
valuable is the ability to implement an
Development idea, turn it into a product, and then sell
Sales that product in the marketplace and
Fundraising make money. That's the real work, and
Legal the real reward should go to the people
who do that, not the fools who pretend
Accounting that they should be rewarded for the
Partnerships product of their divine creativity.
31. Better Execution
Business Plans vs. The Lean Startup
Business Plans = Plan and Pray
Like planning a rocket ship. Every little detail planned ahead.
Lean Startup = Release and React
Like driving a car. Just go, and make adjustments on the way
Lean Startup
Low overhead, low costs
Agile Software Development
Rapid customer-centric development
32. Break time before section 2
…
A fun activity while we’re on break:
Entrepreneur personality quiz
http://www.forbes.com/2010/08/02/entrepreneur-personality-quiz-thomas-
harrison-entrepreneurs-management-serial-startups-10-quiz.html
…
Section 2: The Lean Startup
33. The Goal = Hockey Stick!
http://smartfaststartup.com/2011/06/08/real-secret-to-startup-success/
34. The Reality… assuming success
http://www.avc.com/a_vc/2012/03/the-startup-curve.html
35. The Startup Lifecycle
http://www.netvalley.com/silicon_valley/Legal_Bridge_From_El_Dorado_to_Silicon_Valley.html
37. The Lean Startup (Eric Ries)
A methodology/philosophy of building
startups
1. Use of free and open source software
Groupon was started as a wordpress blog
2. Agile Software Development
Release as frequently as possible
Iterate development as quickly as possible
3. Ferocious customer-centric rapid
iteration
Customer Development Process
Build a minimum viable product – launch fast!
Learn from your users/customers
38. Software Product Development
Creating the Minimum Viable Product (MVP)
Functional Requirements
Wireframes
Graphic Design
Code
Content (Copywriting, Social Media accounts, analytics, etc.)
Deploy (aka Release)
40. Agile Software Development
Start Small
Minimum Viable
Product
Iterate quickly
Track user data
Flexible software
Release frequently
Cycle weekly or every
two weeks
41. Customer Development Process
Customer Discovery = Understanding your customers
Customer Validation = Develop a Repeatable Sales Process with
early evangelist buyers
Customer Creation = Scaling your customers from few to many
Company Building = Rebuild your company’s organization and
management. Re-look at your mission
47. That’s it for customer development
now… practice pitches!
48. Homework
Think about what project you actually want to work on
Pitches next week to form teams
Reading material
Fantasies vs Realities of a Startup infocomic
http://grasshopper.com/assets/blog/2011/03/fantasy-vs-
reality-infocomic-v2.jpg
Steve Blank’s slides on customer development
http://www.slideshare.net/venturehacks/customer-
development-methodology-presentation