Business Model for Startups
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The document discusses the differences between a business plan and a business model. A business plan collects untested hypotheses about a business, while a business model diagrams the flows between a company and its customers. The document explains that a business plan should contain hypotheses about key areas like market size, customers, sales, and financing, as well as plans to test and execute those hypotheses. It emphasizes that the goal of a business model is to diagram all aspects of how a business works to create profits.
Business Model for Startups
- 1. Business Models Steve Blank www.steveblank.com Clean Tech Open Accelerator 2009, San Jose, California
- 2. Iʼm Confused • What is a Business Plan? • How does it differ from a Business Model?
- 3. Business Plan 1. A document your investors make you write that they don’t read 2. A useful place for you to collect your guesses about your business • Size of Opportunity • Customers • Channel • Demand Creation • Revenue/Expenses/Profit
- 4. Business Model 1. A diagram that shows all the flows between your company and its customers
- 6. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power
- 7. Clean Tech Markets - Risk Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power • Which markets have technology risk? • Which markets have customer risk? • Which have both?
- 8. Clean Tech Markets - Risk Definitions Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power • Technology Risk – risk is in development of the product (i.e. fuel cells, thin-film arrays, etc.) then customers automatically adopt • Customer risk – risk is in customer and market adoption • Which have both? • You spend your time differently depending on risk
- 10. Clean Tech Markets - Hypotheses Size of Opportunity Customer Competition Sales • Your business plan is a set of untested Marketing hypothesis Biz Dev • What are they? Customer Dev Bus/Rev Model • How do you test them? IP/Patents • How do you execute them? Regulatory Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity
- 11. Clean Tech Markets - Hypotheses Size of Opportunity Customer Competition • Size of Opportunity Sales – TAM, SAM Marketing • Customer Biz Dev – Who’s the end user? Economic buyer? Reimburser? Customer Dev • Sales Bus/Rev Model – What’s the distribution channel? IP/Patents • Marketing Regulatory – How do you create end-user demand Time to Market • Customer Development Prod Dev Model – How do you test your hypothesis Manufacturing • Business Model Team – How do all the parts work to create profits? Seed Financing • Financing Follow-on – What is the path to cash flow positive Liquidity
- 12. Finally… Your Hypothesis Go Here
- 13. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport Waste Efficiency Building Power Size of Opportunity Customer Competition Sales Marketing Biz Dev Customer Dev Bus/Rev Model IP/Patents Regulatory Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity
- 14. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport Waste Efficiency Building Power Size of Opportunity Customer Competition Sales Marketing Biz Dev Customer This Is Important Development Bus/Rev Model IP/Patents Regulatory Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity
- 15. Business Plan - Sum of Hypotheses • Business plan collects your hypothesis • Adds facts as you know them today • Contains a plan of how to turn hypothesis into facts • Extrapolates results if hypothesis turn into facts • Has a business model which is clearly articulated
- 16. Business Model… Start with the Pieces
- 17. Business Model • Goal is to get to a single diagram of your business • Start by drawing pieces of your business – Problem/Opportunity – Market Size – Distribution Channel – Demand Creation – Financial assumptions • Then put it all together
- 18. Problem/Opportunity Why Are You in Business?
- 19. + Pain Points in Inter-District Development of Curricula
- 20. Recognize Your Market Type Can Save a Ton of Dollars
- 21. Market Type? • Existing Market • Resegment a Niche • Resegment on Low Cost • New Market
- 22. Definitions: Types of Markets Existing Market Resegmented New Market Market • Existing Market – Faster/Better = High end • Resegmented Market – Niche = marketing/branding driven – Cheaper = low end • New Market – Cheaper/good enough can create a new class of product/customer – Innovative/never existed before
- 23. Type of Market Changes Everything Existing Market Resegmented New Market Market • Market • Sales – Market Size – Sales Model • Customers – Cost of Entry - Needs – Margins – Launch Type – Sales Cycle - Adoption – Competitive – Chasm Width Barriers – Positioning • Finance - Ongoing Capital - Time to Profitability
- 24. How Big is It? So if You Succeed Do I Care?
- 25. Total Available Market, Served Available Market, Target Market TAM = how big is the universe Total Available Market Served Available Market Target SAM = how many can I reach Market with my sales channel Target Market (for a startup) = who will be the most likely buyers 25
- 26. sizing up the market $123 billion tourism industry inside the U.S. $1 billion English travel guides sold annually $210 million 20-35 year old travelers SF (Initial test market)
- 27. OLED’s ‐ Billion Dollar Opportunity TAM: En@re consumer electronics market Our target market is the Flat ($790 million) SAM: Size of TV market Panel display market. ($500 million!) Target products: Camcorders, DVD Target Mkt: $155 players and recorder, digital cameras, million! computer monitors, LCD and Plasma TV Apex: ≥ 3.5M OLED TV market will grow to $15.29 billion by 2015 YEAR 1 PROJECTIONS Units sold : 1,000,000 Price per unit : $700 - $1,000 Revenue from Royalties (assuming .5-1.0% of shelf price): Worst case = $3,500,000 Best Case = $10,000,000
- 28. Distribution Channel How Does Your Product Get to Your Customer?
- 29. + Sales Ecosystem Discussion channel Mandate channel Sale Superintendant Another District district IT Director Engagement (Early Stages) School Dept. Head Another school in the district Teacher Teacher
- 30. Distribution Channel Licensed Partners: • Sony Consumer electronics • Samsung • Flat Screen TVs through (Other possibilities - LG, Toshiba, Panasonic, DuPont) Fry’s, Best Buy, Magnolia, etc IP A P Patents Manufacturing DistribuDon Retail E X 2 patents owned by Apex! Partners’ distribution channels • Technology patent - SOLED • Sony • Long-Brite and inkjet printing process • Samsung (Other possibilities - LG, Toshiba, Panasonic, DuPont) Dollar flows: Wages: founders & Consultants PA IP Costs: Lawyer A P License fees RT NE & Patent costs. RS E Royalties Premises: Dev’t labs. X
- 32. Demand Creation How Do You Drive Demand Into Your Channel?
- 33. + Demand Creation State-by-state rollout: educational standards Continuous iteration of feedback CA Pilot Broad Grow Adoption Adoption Hypotheses: Will Hypotheses: Will Hypothesis: How they adopt, use, they buy hands- well does it sell and pay? off? Can it scale? itself? 10 schools f2f: CA telemarket All telemarket Sales: $1,066 F2f elsewhere $533/dist Travel: $1,000
- 34. distribution and demand creation Unique Idea: website and iPhone app form symbiotic relationship Travel AdWords App traffic Listing TravelSpy.com iPhone App traffic Blogs (ex. Magazines Travelblog.org)
- 36. Financial Assumptions What are the Ten Numbers that Matter?
- 37. Financial Assumptions • Ten Numbers that matter depends on your business – Average selling price – Life time value – Material cost – Distribution channel cost – Customer Acquisition cost – Time to market – Time to cash flow positive – Etc. • Do this before 45 pages of financials
- 38. Business Model How Do The Pieces Work Together?
- 39. Bird’s Eye View of our Business Model Hardware ($155) Online Distribution • Own website ($208+.3x) Customer • Amazon.com ($40+32x) • eBay ($300+25x) Acquisition Target Market Cost: ($41) Demand Creation Viral MyNote • SEO/SEM ($156.00) Marketing • Blogs • Forums • Bookstore promotion • Sales force • Viral marketing Offline Distribution • Website $399.99 • College bookstores ($0.02) Software (in-house) ($1.00)
- 40. BUSINESS MODEL iPhone Application Subscription Based Service $ 2.99 (x.7) $ 5/month Year 1: $ 40K END-USERS END-USERS Year 1: $ 50K Year 2: $1M Year 2: $1.2 M C E SE VI E NU R RV RE SE VE IC V E EN RE Third Nightlife UE party venues affiliates CITYBEATS.COM Two Revenue Streams March | 2011 Total Revenue (year 1) = $ 90 K Critical Mass: 500,000 users Total Revenue (year 2) = $ 2.2 M
- 41. IP license for WiBat technology Manufactured Smaller Router Product $3.01 companies Distributors ie Netgear, $60.19 ie Windsor Meru Product Delivery Planet Batteries $93.75 Retail Stores i.e. Best Buy, Fry’s End User $125 Sale Corporate Investors •Partner router companies •Intel (they are interested in End Users wireless technology) i.e. college students (See appendix E for figures)
- 42. Other Investors/Channels • Mission Point Capital JFink@missionpointcapital.com • Westly Group http://www.westlygroup.com/ • California Public Utilities Commission http://www.cpuc.ca.gov/SMBUS/