startup marketing slides from lean startup circle la

Sean EllisLean Startup LAAugust 10, 2010

Lean Startup Marketing

Driving Sustainable Growth at Normal Vs Network Effect Startups

Objectives for Today’s Meeting

1. Apply lean startup principles to driving

growth

– Normal startup

– Network effect startup

2. Refine based on group feedback

2startup-marketing.com

What are the Lean Startup Principles?

• Nail it then scale it

• Rapid hypothesis testing about market,

pricing, customers (customers & markets

unknown)

• MVP (Minimum viable product)

• Low burn by design (no scaling until revenue)

• Metrics, iteration, agile development

• Learn fast (fail fast)

startup-marketing.com 3

“Lean-ish” Mktg = Back-to-Back IPOs

First Startup Goals (1996 launch)

– Lead online game category

– Get users at cost lower than user value

(ARPU)

– Minimize waste via sophisticated metrics

Second Startup Added Goals (2003

launch)

– Understand user perceptions of value

– Optimize funnel (reduce friction)4startup-marketing.com

“Value” in Normal Vs Network Effect

Normal

Value same with 1

user or 1m users

– Google

– LogMeIn

– Xobni

Network effect

Value improves with

more users

– Facebook

– Skype

– Ebay


Growing Valuable “Normal” Startup


Creating Value: Normal Startup

• Product/market fit = product is “must have”

(value)

• Become a “must have” with customer

development

– Validate “value” assumptions early (who needs/why?)

– Get users on first release ASAP

– Find “must have” users/use cases

– Facts outside building (interviews then surveys)

– Pivot if necessary to create value


startup-marketing.com

Key “Value” Question on Survey.io

“Very Disappointed”

My Recommendation

0% – 25% Keep burn low, engage, iterate

26% – 39% Try repositioning, retargeting

40% – 100% Proceed up pyramid

“How would you feel if you could no longer use Product?”

8

Start Transition to Growth


After P/M fit: Race to Scale

1. “Value” is perishable (“MH” window of opp)

2. Focus on speed rather than short-term burn*

Long-term burn will be less with speed

Difficult after “low burn” VC praise

3. Requires major shift in culture

Culture shifts from patience to speed


* During growth transition

Key Growth Transition Projects

1. Understand – core value perceived

2. Positioning - based on perceived value

3. Right metrics – to focus resources

4. Optimize conversions - LP & funnel

5. Viable economics - business model

6. Scalable growth strategy - who/intent?


Optimize Before Growing

1. Landing pages


8% 12% 13%…

12

2. Visualize/Optimize Funnel

Signup

Home Page

Path 1

200,000

100,000

100000

50000

X000PaidX00

PaidX00

FreeX000

X00025000

50%

12.5& 12.5%

X% X% X% X%

Path 1 (step 2)

Path 225000

X000

X%

X00

Free



Better conversion efficiency and rev

per user

Improves range & scalability of viable

channels

Scalable Growth Now Possible


Test from Free to Paid Channels


Channel Cost/user Scalability Viral/referral Free High Email (internal) Free Organic Blog Free Organic SEO Free or Paid Organic Widget Free or Paid Organic Biz Dev/Partners Free or Paid High Domains Paid (low) Low PR Paid (low) High Email (external) Paid (TBD) High SEM Paid (TBD) Can be High Contest Paid (TBD) Organic Affiliate/lead gen Paid (TBD) High Radio Paid (TBD) High TV Paid (TBD) High

16

Driving/Managing Growth


Spend as many positive ROI dollars as possible

Normal Startup Easy VS Network Effect



Network Effect Business Critical Mass Required for Full Validation

(Lean is normally antithesis of “get big fast”)

Pre Growth Prep for Network Effect

1. Customer Dev critical to validate up front

2. Raise enough money to get past “no man’s

land”

3. Define minimum viable critical mass (MVCM)

– Facebook – Harvard, Twitter - SXSW

– Within region, demographic, product type (mkt

place)…

4. Have strategy for “priming the pump” (or fly

wheel)startup-marketing.com 20

Scale & Optimize On the Fly

1. Scale growth to MVCM (minimum viable

critical mass)

2. Generate revenue early

3. Engage users to reposition, iterate and

optimize on the fly

4. Engage to validate gratification reached

5. Replicate approach for next critical

mass after gratification in first MVCMstartup-marketing.com 22

Priming the Pump (for Some)*

1. Create network balance

– Ebay, dating sites, etc.

2. Example short-term strategies

– Subsidize customer acquisition for dragging 1/2

– Services or hands on to “fake” balance (Aardvark)


*i.e. if buyers and sellers

Network Effect = P/M Fit After Critical Mass


Drive Growt

h

Get Efficient Conversions

Product/Market Fit(Reposition on Value)

But Standard Pyramid for Most
