“So, you want to start a technology company?” !!Nick Barendt November 4, 2014

Overview

! Some background

! Some practical, tactical advice

! A survey of tools and frameworks

Two Stories

Electronic Instrumentation

2003-2006

We have a product for measuring strain in materials

But “Sales” sells this product instead

We don’t actually have this product…

This is surprisingly common… engineers hate it.

But we build it. It is very complicated.

Customer is Happy!

Lesson: !

Signed Purchase Order equals

Solid Validation

Sidebar: IEEE 1588 Precision Time Protocol (PTP)

High-accuracy clock synchronization and syntonization on a LAN (single ns level)

Kendall Correll - CWRU Senior Project Presented in Zurich, Switzerland

Correll, Kendall, Nick Barendt, and Michael Branicky. "Design considerations for software only implementations of the IEEE 1588 precision time protocol." Conference on IEEE. Vol. 1588.

2005.

Unfortunately, developed at a

“breakneck” pace

Need a change...

I know — Cofound a Software

Startup!

Online, remote data backup

with Gary Bernhardt & Dr. Michael Branicky

Amazon S3Storage

Amazon EC2

BitBackerBackup/Restore

Server

Customer Computer

Cloud!

Elegant Mac Client!

Scalability!Security!

Roadmap!Deduplication!

But we took too long...

MVP could have been simpler & faster to build

& we could have validated earlier

Sigh

Lesson: !

“Scratching your own itch” can lead to myopic vision and shadow customer

personas !

Lesson: !

Modern product design is a skill (more on this later)

!

Lesson: !

Splitting equity is thorny !

Noam Wasserman The Founder’s Dilemmas

!

“Rich vs. King” !

Harvard Business School

Lesson: !

Cutting-edge technical experience is rarely a waste

!

Meta Lesson: !

You often learn more from the failures than from the successes.

!

Where to next?

Design & DeliveryWe design and deliver custom software, whether green-field or legacy systems, for startups to enterprises.

On-site coachingWe transform companies and their cultures by helping them embrace and adopt Agile development practices. We also offer Agile training and can even augment your development teams

Helping companies improve their culture and their products

Some Recent Portfolio Samples

New Top Level Domain

Innovative Vending Machines

Wellness Informatics

“I have an idea for a great product!”

What is it worth?Nothing! (Execution matters.)

What should I do with my idea?

! Build a prototype?

! File for Intellectual Property (IP) protection

! License it?

! Found a company?

What should I do with my idea?

! Build a prototype?

! File for Intellectual Property (IP) protection?

! License it?

! Found a company?

What does founding a company mean?Business Entities

DISCLAIMER: I AM NOT A LAWYERDo not take my advice on legal matters.

Founding a company is a legal and financial action

! Default - you’re a sole proprietor (aka Schedule C)

! Generally, though, you create a new legal entity

! Partnership

! Limited Liability Company (LLC or Ltd)

! Corporation (C or S)

Which entity type to choose?

! Schedule C not sufficient beyond consulting

! Partnerships only if you are in a professional services biz

! LLC is simplest and lightest weight - good default

! Corporation

! legal and accounting quickly become complicated

! some investors only comfortable with corporations

! Not irreversible decision - there are ways to convert between them, with some time and money

Why bother?

! Your status changes - you now own some/all of entity

! The business is separate from you

! Your business can accept investment in exchange for equity

! Reduce liability risk

! Allow easier collaboration (partners, employees, etc.)

! Lifetime of business is not limited to your lifetime

Where to get help?

! Find a good lawyer

! Educate yourself first, though

! I like nolo.com books

! Most libraries have them

! Cheap, fast education

! Laws are slightly different by state

How will I pay for everything?Funding

Types of Businesses

! “Startup” means a particular thing - a company designed to scale quickly

! “Lifestyle” business - create income for the owners and employees, but limited scale (e.g., consulting)

! sometimes a pejorative in funding circles

! generally not fundable

! Business to Business (B2B)

! Business to Consumer (B2C)

! Hardware vs. Software

Funding & Investment Options

! Bootstrapping (savings and consulting)

! Customers

! Friends and family round (tricky to do legally)

! Crowdfunding

! pre-order sales (Kickstarter)

! equity - still complicated, despite JOBS Act

! Accelerators (Y Combinator, TechStars, etc.) ~$20-$50k

! Angel Investors ~$50-$100k

! Venture Capital >$250k

Brad Feld Venture Deals

!

TechStars

How much do you need? I have no idea.

(Maybe less than you think, though.)

Raising investment is hard

You essentially have to prove that you don’t need the cash.

What can you do to stack the deck in your

favor?

Business Models and Value Propositions

Business Model

! How you create, deliver, and capture value

! (Sadly, your product idea is only one tiny part of this)

! You could create a traditional 50 page business plan, but that’s likely to contain a bunch of b***s***; you likely have better things to do

! You do need to understand your proposed business, though

! Where to start…

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

What type of relationship does each of our CustomerSegments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

Day Month Year

No.

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The Value Proposition Canvas

Gain CreatorsDescribe how your products and services create customer gains. How do they create benefits your customer expects, desires or would be surprised by, including functional utility, social gains, positive emotions, and cost savings?

Pain Relievers

Do they…

Create savings that make your customer happy? (e.g. in terms of time, money and effort, …)

Produce outcomes your customer expects or that go beyond their expectations? (e.g. better quality level, more of something, less of something, …)

Copy or outperform current solutions that delight your customer? (e.g. regarding specific features, performance, quality, …)

Make your customer’s job or life easier? (e.g. flatter learning curve, usability, accessibility, more services, lower cost of ownership, …)

Create positive social consequences that your customer desires? (e.g. makes them look good, produces an increase in power, status, …)

Do something customers are looking for? (e.g. good design, guarantees, specific or more features, …)

Fulfill something customers are dreaming about? (e.g. help big achievements, produce big reliefs, …)

Produce positive outcomes matching your customers success and failure criteria? (e.g. better performance, lower cost, …)

Help make adoption easier? (e.g. lower cost, less investments, lower risk, better quality, performance, design, …)

Rank each gain your products and services create according to its relevance to your customer. Is it substantial or insignificant? For each gain indicate how often it occurs.

Describe how your products and services alleviate customer pains. How do they eliminate or reduce negative emotions, undesired costs and situations, and risks your customer experiences or could experience before, during, and after getting the job done?

Do they…

Produce savings? (e.g. in terms of time, money, or efforts, …)

Make your customers feel better? (e.g. kills frustrations, annoyances, things that give them a headache, …)

Fix underperforming solutions? (e.g. new features, better performance, better quality, …)

Put an end to difficulties and challenges your customers encounter? (e.g. make things easier, helping them get done, eliminate resistance, …)

Wipe out negative social consequences your customers encounter or fear? (e.g. loss of face, power, trust, or status, …)

Eliminate risks your customers fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)

Help your customers better sleep at night? (e.g. by helping with big issues, diminishing concerns, or eliminating worries, …)

Limit or eradicate common mistakes customers make? (e.g. usage mistakes, …)

Get rid of barriers that are keeping your customer from adopting solutions? (e.g. lower or no upfront investment costs, flatter learning curve, less resistance to change, …)

Rank each pain your products and services kill according to their intensity for your customer. Is it very intense or very light?

For each pain indicate how often it occurs. Risks your customer experiences or could experience before, during, and after getting the job done?

Products & ServicesList all the products and services your value proposition is built around.

Which products and services do you offer that help your customer get either a functional, social, or emotional job done, or help him/her satisfy basic needs?

Which ancillary products and services help your customer perform the roles of:

Buyer (e.g. products and services that help customers compare offers, decide, buy, take delivery of a product or service, …)

Co-creator (e.g. products and services that help customers co-design solutions, otherwise contribute value to the solution, …)

Transferrer (e.g. products and services that help customers dispose of a product, transfer it to others, or resell, …)

Products and services may either by tangible (e.g. manufactured goods, face-to-face customer service), digital/virtual (e.g. downloads, online recommendations), intangible (e.g. copyrights, quality assurance), or financial (e.g. investment funds, financing services).

Rank all products and services according to their importance to your customer. Are they crucial or trivial to your customer?

GainsDescribe the benefits your customer expects, desires or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings.

Pains

Customer Job(s)

Describe negative emotions, undesired costs and situations, and risks that your customer experiences or could experience before, during, and after getting the job done.

What does your customer find too costly? (e.g. takes a lot of time, costs too much money, requires substantial efforts, …)

What makes your customer feel bad? (e.g. frustrations, annoyances, things that give them a headache, …)

How are current solutions underperforming for your customer? (e.g. lack of features, performance, malfunctioning, …)

What are the main difficulties and challenges your customer encounters? (e.g. understanding how things work, difficulties getting things done, resistance, …)

What negative social consequences does your customer encounter or fear? (e.g. loss of face, power, trust, or status, …)

What risks does your customer fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)

What’s keeping your customer awake at night? (e.g. big issues, concerns, worries, …)

What common mistakes does your customer make? (e.g. usage mistakes, …)

What barriers are keeping your customer from adopting solutions? (e.g. upfront investment costs, learning curve, resistance to change, …)

Describe what a specific customer segment is trying to get done. It could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy.

What functional jobs are you helping your customer get done?(e.g. perform or complete a specific task, solve a specific problem, …)

What social jobs are you helping your customer get done? (e.g. trying to look good, gain power or status, …)

What emotional jobs are you helping your customer get done? (e.g. esthetics, feel good, security, …)

What basic needs are you helping your customer satisfy? (e.g. communication, sex, …)

Besides trying to get a core job done, your customer performs ancillary jobs in differ-ent roles. Describe the jobs your customer is trying to get done as: Buyer (e.g. trying to look good, gain power or status, …)

Co-creator (e.g. esthetics, feel good, security, …)

Transferrer (e.g. products and services that help customers dispose of a product, transfer it to others, or resell, …)

Rank each job according to its significance to your customer. Is it crucial or is it trivial? For each job indicate how often it occurs.

Outline in which specific context a job is done, because that may impose

constraints or limitations. (e.g. while driving, outside, …)

Which savings would make your customer happy?(e.g. in terms of time, money and effort, …)

What outcomes does your customer expect and what would go beyond his/her expectations? (e.g. quality level, more of something, less of something, …)

How do current solutions delight your customer? (e.g. specific features, performance, quality, …)

What would make your customer’s job or life easier? (e.g. flatter learning curve, more services, lower cost of ownership, …)

What positive social consequences does your customer desire? (e.g. makes them look good, increase in power, status, …)

What are customers looking for? (e.g. good design, guarantees, specific or more features, …)

What do customers dream about? (e.g. big achievements, big reliefs, …)

How does your customer measure success and failure? (e.g. performance, cost, …)

What would increase the likelihood of adopting a solution? (e.g. lower cost, less investments, lower risk, better quality, performance, design, …)

Rank each gain according to its relevance to your customer. Is it substantial or is it insignificant? For each gain indicate how often it occurs.

Rank each pain according to the intensity it represents for your customer.Is it very intense or is it very light.? For each pain indicate how often it occurs.

On:

Iteration:

Designed by:Designed for:Day Month Year

No.

Customer Segment

www.businessmodelgeneration.com

Use in Conjunction with the Business Model Canvas Copyright of Business Model Foundry GmbH

Value PropositionCreate one for each Customer Segment in your Business Model

http://www.businessmodelgeneration.com/canvas/vpc

Alexander Osterwalder

OperationsKeeping the lights on

First things

! File with IRS for an Employer Identification Number (EIN)

! Open a checking account in the business’s name

Accounting

! If you’re the CEO, you need to learn accounting basics

! Essentials of Double Entry Accounting

! Accrual versus Cash Accounting (and why it matters)

! How to read and interpret

! Profit and Loss (P&L)

! Balance Sheet (BS)

! What EBITDA means

! Taxes (Payroll, Federal, State, Sales)

! Payroll

Revenue Cycle

! Sales Funnel

! Deliver Product/Service (the one thing you want to do)

! Invoicing or Payment Processing

! NET Terms (15, 30, 60, 90 Days)

! Accounts Receivable, Aging, and Collections :-(

!! (Note Credit Cards: use payment processor and avoid PCI)

! (“Eyeballs” are harder to get an maintain than you think)

Legal

! Find an attorney that has technology startup experience

! Learn how to read contracts - it takes practice

! Non-Disclosure Agreement (NDA) - use them, but don’t be paranoid

! IP protection

! Patents

! Copyright

!! W-2 Employees versus 1099 Contractors

Lean StartupHypothesis driven business

Lean

! Reduce Waste

! Continuous Improvement

!! Lean Manufacturing - Toyota Production System (TPS), Demming

! Waterfall Software Development Model (Royce, 1970)

! Lean / Agile Software - Agile Manifesto (2001)

! Lean Startup (2011)

! Lean User Experience (2013)

Steve Blank &

Eric Ries

Early stages of new business should focus on

reducing risk and learning.

Build -> Measure -> Learn

! Articulate Hypotheses, then test

! Increase frequency of contact with target customers

! Iterate as rapidly as possible

!! Prototype

! Learn

! Understand your customer

MVP

! Minimum Viable Product (Eric Ries) ! Minimum Valuable Product

A minimum viable product has the exact (not least) amount of features to make it desirable and sellable, thus giving value.

-Martin Christensen

Identifying your MVP

TITLE !As a [type of user]

I want to [perform some task]

so that I can [reach some goal]

Search by Book Title

!As an Amazon Customer

I want to search for books by title

so that I can find a book to

purchase

User Story Cards

Product Backlog

Prioritized Backlog Drives Team Activities

Prio

rity

Stories as Experiments

! Lean Startup - Build, Measure, Learn

! Don’t build software too early

! Prototype quickly

! How can we prove/disprove this hypothesis quickly?

! Can we do something even simpler/faster to prove X?

Tool - Experiment Mapping

! Think of experiments for hypotheses

! How to prioritize stories/ experiments?

! Optimize for rapid learning

! David Bland - Experiment Mapping

! Process alone is often illuminating

Time

Days Weeks MonthsLe

arni

ng V

alue

Tools to Track Progress

! Try to stay objective

! Lean Canvas

! Javelin Experiment Board

Tool - User Story Mapping

! Jeff Patton

! http://www.agileproductdesign.com/

! Organize and Prioritize Features

User Story Mapping

Login Synch Search

User Story Mapping - Generating

User Story Mapping - Prioritizing

Customer Development

“Get out of the Building!” - Steve Blank

! Identify Potential Users and Customers

! Talk to them; early and often, before you have the final product

! Personas and Segments

! How do you find them? (if you can’t find them now, how will you ever find them when you want to sell them something?)

! Don’t build for everyone - solve a problem for a niche

! Observe them

! Ask them questions (but stay “out of the ‘Woulds’”)

! Build empathy

! Understand their buying process and price / value calculus

! Clarify Users versus Economic Customer

This is often uncomfortable for stereotypical, introverted engineers and developers.

Just get started. It gets easier.

Ash Maurya

Team

Founding versus Co-Founding

! Rich vs. King dilemma

! Odds are, you don’t have the time and skills to do it all

! Find people that are compatible and complementary

! Founding team defines the culture - hard to change later

! Starting business can be exhausting and lonely - share the journey

Roles to consider

! Visionary (Nerd?)

! Big Picture, Systems Thinker

! Hustler (sales and marketing)

! Operator (detail oriented; get i’s dotted, t’s crossed)

!! Find mentors (business, not just technical)

Where to find?

! On Campus

! Startup Networking Events

! Accelerators

! Meetups

Motivation

Why do you think you want to do this?

! Motivation?

! Goals?

! If only for money, probably easier options

Good Answer:

to try to change the world

Questions?

Thank you for your attention. !nick.barendt@leandog.com !Some potentially useful resources: !http://www.leandog.com/dogtreats/ !http://www.leandog.com/what-we-do/studio/ !