Friday, October 21, 2016

Just one Lean Experiment to progress to a Data driven Startup

When people use the Lean Canvas well, not only do they fill out the canvas, they generate hypotheses and then run tests around each of the hypotheses to see which are valid

That process includes something like:

  •  Make a hypothesis
  •  Craft a test of that hypothesis
  •  Have clarity on the success metrics
  •  Execute the test
  •  Report out on the results of the test
  •  Make a plan for the next cycle ( Perservere or Pivot) 

@adamberk put together the MilValChal to explore a process to engage more deeply in running customer development tests.

The goal is to help people make more effective progress towards doing a complete experiment cycle, with the belief that transparent experimentation will lead to value creation at a higher ROI than not.

We have been having a conversation about how to help people focus on the basics of doing explicit experiments. So very often people skim through the experiment effort jumping directly to the conclusions they already had in mind. In our discussion about how to move people forward, we discussed doing a single full experiment. We want to bring the MilValChal vision together. So we want to experiment with having people do one complete experiment. 

To bring people full circle through one complete experiment, @adamberk has $25K to help 25 companies make focused progress to complete a Lean Experiment. He will pay out $100 to as many people as fill out the first half of the Experiment Report Board (left side) within a week of this post being published and $900 to anyone (of those people who enter the funnel in the first week) who fills out the second half and writes a medium post sharing their learnings and next steps based specifically on those learnings.

To collect the $100, you must do the following

  • Accept the challenge publicly by going to and entering your email
  • Click to tweet
  • Tweet a copy of the left side of this canvas filled in CORRECTLY or make it to column 3 of this hypothesis board

For you to get this $1000, do the following:
Complete a single experiment cycle (it is harder than it sounds!)

In the SUBJECT of the email write = “My is, my Twitter is . A Lean Experiment:

In the BODY of the email write = “I believe that 15 submitted Interviews will prove that out of of <$Y> who are will take by November 1st, 2016.

You will have a significant number of experiments ahead of each of these key milestones:
  • Customer/Product fit
  • Product / Solution Fit
  • Customer / Solution / Value proposition Fit
  • Clarity on Existing alternatives
  • Clarity on where to find early adopters
  • Clarity on the Revenue/Expense fit
  • Clarity on the Sales Funnel Metrics mechanisms

If there is an experiment proving each of these milestones, the chances of your startup having a good foundation are greatly improved.

This pathway starts by doing one experiment. Will it help you to do a complete experiment to start with this $1000 challenge?

Tuesday, February 16, 2016

The Startup experience: Linear vs Exponential

When you are starting a company, the week by week growth rate is important to track. Initially, it will be very chaotic. Hopefully, early on, you will find a way to make your revenue process predictable. Investors are looking for evidence of this predictability. They are also looking for something else. They are looking for evidence of growth. When they are thinking about growth in revenues, they are looking for a percentage growth on a week by week basis. More data points can help you get a handle on the foundations of your business model. 

Looking at the curve above. This company starts with $1000 Monthly Recurring Revenue (MRR). The blue line represents an initial growth rate of $100/month, which is 10% growth in the first month. The Orange line represents a Monthly growth rate of 10% a month, month over month. While the Red line represents a 5% month over month growth. 

All of these start out at the same point, but the 10% month over month growth quickly outstrips the linear growth. At the end of 3 years (36 months) , the 10% growth represents a 5X increase compared to the 5% growth curve. 

More interestingly, while the linear growth started at 10%, by month thirty, it has crossed over and is the same as the 5% curve. 

When you are looking at your growth oriented startup, you should be looking at at least kind of exponential growth. That is growing at a regular X% growth month over month. 

If you have a 10% month over month growth, your company is approximately a 3X company. If you have 20% month over month growth, then your company is a 9X company. If you are aiming at a 10X company, you need to reach 22% month over month growth on a sustained basis. 

Sunday, February 14, 2016

Cashflow Projection: A Pillar of your Startup

The last two boxes in the Lean Canvas are Income and Expense. From a canvas point of view it is meant to get you to be thinking about the key factors involved in your business. However, the point of the Lean Canvas is to built the foundations of your business model. To get your model to a sufficient level of detail that you can use it over time, you build a cashflow projection.  Each of the details of your startup that are critical to the business process will show up in this spreadsheet.

Each box of the Lean Canvas provides assumptions and critical factors for your business model and they will form the basis of your cashflow spreadsheet. As you run your business, you will want to compute and recompute how your business model as represented by the spreadsheet matches up with the actual results that you see in your business. You will want to do this on a weekly basis. 
Looking at the graph above, we see a business that is subscription business, which has very limited expenses and which has a 15% growth rate as the basis of this chart. The ongoing expenses over whelm the income for a long time. While we see the income starting to turn the corner, this business will be cashflow negative for more than 3 years. 

However, small changes in growth rate can change the experience dramatically. 

This next graph is the same company, but with a 25% growth rate each month. This is a company , which is a 10X company, but in order to survive, it will need to take $200,000 in outside funding. 

With this new cash infusion, the company is able to remain solvent, at least in this model. However, if the growth rate was higher , with just a 30% per month growth rate, that same company would not need to take outside money at all. 
The small differences in revenue and the growth rate of the revenue can make substantial differences on the lifespan of your company. Digging into the details of the consequences of your assumptions will be vital to your progress. 

​There are several key factors you need to work with:
  • The initial amount of cash you bring to the company
  • The point at which you run out of cash. Which is determined by your Burn Rate. This company has a one year Runway
  • The point at which you get to cash flow positive.
  • And the point that you break even. 
Spend the time to build  and then regularly revise your cashflow projection for your startup. 

Tuesday, April 28, 2015

Throwing out good work

“You did great work on the scenario documents”, I said. They really were a lot better. The language was clearer, the instructions for the readers were better and the actual stories were more to the point. A major improvement, after having struggled with the scenarios for months.

“We decided to throw them out of the game altogether”, I continued.

Katie looked understandably confused. Didn’t I just say that they were much better? Had all the work gone to waste?

Making Playing Lean, the board game that teaches Lean Startup, has been a great challenge. Besides the actual playability of the game, we have had to make sure that there are enough startup lessons taught for the game to have value. Finding that balance had been a major part of the job.

That is why we introduced the scenarios. They were documents describing the beginnings of well known companies in a familiar industry. The first go was at Social Media. Players could be Friendster, Myspace, Facebook or Twitter. The outcome would be up to the choices players made, counterfactual history in the making.

Except something always felt wrong with them. It felt forced, we had to keep reminding players to read them out loud. Reading became a little awkward as the game progressed, but we could not really put our fingers on why.

We just assumed that it was because the quality of the documents themselves were so poor.

When the typos were weeded out, the structure was better and everything was much improved, it only took one playtesting to realise it: The scenarios had to die. The concept still felt forced and awkward.

Though the actual writing was discarded altogether, it lead to a major improvement in the game.

The broader lesson is that we fell into a trap. We convinced ourselves that the quality of our work wasn't good enough, that we could not rely on our testing until there had been major improvement. This made us discard a lot of of good feedback.

It may sometimes be the case that low quality experiments gives the wrong idea about an experiment. But be aware, it is a dangerous line of thinking. At the extreme end of it, only a fully functional, thoroughly designed and well engineered product can invalidate your idea.

It is important to be pay attention to what kind of people you are testing on as well. Some testers are more inclined to look past visual design and basic quality issues and evaluate the core idea of a product. Others won't get past the typos and poorly matched colors before they pass negative judgement.

Before my next experiment I will ask myself: What kind of people am I testing with? How high must the quality be before I will accept a negative result? It may just save me, Katie and the rest of the Playing Lean team a lot of time.

Twitter: @simenfurLinkedin:
Bio: Simen is the CEO of Iterate, a consultancy based in Oslo, Norway. He is also the co-creator for Playing Lean, the board game that teaches Lean Startup.

Friday, February 14, 2014

Startup Weekend as a game of Pickup Ball

Startup Weekend is a great way to sprint from Idea to Revenue in a weekend. I am thrilled with some of the results that I have seen. However, when I encourage people to engage in a startup weekend, I often get resistance. "Oh, I already have a startup" or "Oh, I don't have an idea" or "I am already happy working at XYZ Big company"

Startup Weekend is a skill building sprint. It creates urgency and focus, which allow you to learn things faster than you would in most other contexts. Just as when you do pushups and situps to prepare for your marathon run, Startup Weekend gives you a chance to build skills and connections that are hard to get other ways. 

Think of Startup Weekend as a game of Pickup basketball. It may not take you into the big leagues, but it does let you practice that shot in a way that makes you stronger and faster. 

Every weekend, there are over 1,000 people who are out picking up some new skills, trying new roles and exploring new ideas. Even if you are at XYZ Big company, or are already deep in a project  with a startup, Startup Weekend will give you a chance to gain some new muscles. 

Tuesday, February 5, 2013

Startup Weekend: What is the Point of Tweeting?

As a fan of Startup Weekends, I engage with them as often as I can. As a mentor, as a participant, as an organizer and as a facilitator. I often support people to engage in social media as a part of the process. Not only for the benefit of the event , but also for the benefit of the team. 

Some folks find the discussion of social media and twitter for a team a distraction. As Eli Rubel @eli_rubel eloquantly puts it in his post "How to rock Startup Weekend and land venture funding":

-Social media BS.
Seriously, no one is impressed by your teams Facebook friends liking your ‘Companys’ Facebook page. Also, if you somehow land more than 1K followers, the vast majority of the audience will assume you bought them. THIS IS A WASTE OF TIME AND DOESN’T COUNT AS MARKET VALIDATION. Want to impress the crowd? Go land a real customer or two.
I have seen this thought expressed in many different ways, but basically articulating that Social Media is a waste of time for a Startup Weekend. In addition, as I study the Lean Startup Methodology, I see that there are several places where premature marketing and PR is a way to distract you from getting your critical work done. So, why do I still encourage people to engage in Social media as a part of a team at Startup Weekend? 

The answer lies in the Point of the engagement. Social Media for social media sake is not very helpful, and may in fact be a distraction. However, When we look at Dave McClures ( @davemcclure )  "AARRR, Metrics for Pirates"  ( Dave McClure Blog ) 

Inline image 1

We see that there are several channels for acquisition. As a person, I can only talk to a few people an hour. On the Phone, perhaps a few more. However, if I have done my Twitter Dance right, then I can have thousands of people who are interested in what I am doing and interested in the questions that I am asking. 

I agree completely with Eli when he says "Get a real customer or two". Where I disagree is that I think that social media , when done right, is a great way to develop and audience and to acquire customers. There is a huge difference between Social Media Blathering and Social Media as a method of conversation with an audience. If you are good at Social Media Blathering, then I would have to side completely with Eli. On the other hand, if you are working to understand the Growth Hacking process of finding , engaging and validating customers , then the effective use of twitter and other social media is a great channel. 

I see twitter as a much more effective tool for spreading the word to people you don't know , compared to facebook. Facebook is great for connecting between friends and those that are already connected. It is not as effective as reaching far into new audiences who have less of an initial connection to you.  So understanding the Twitter Dance and how to engage an audience is a great skill for any Growth Hacker, even at a Startup Weekend. Or especially at a Startup Weekend. 

If you come to a Startup Weekend as a coder, you do not come unprepared. You have a set of skills, libraries, previously built environments,   github accounts and other tools of the trade. You are not building a whole system from scratch, but you are building upon the previous work which allows you to rapidly deploy a website or application in hours.  As a Business Development person/ Growth Hacker, you should not be coming in unprepared either.  Coming into the Startup Weekend with an ongoing conversation with an audience is a great resource to bring to the event. If you have a pathway to finding hundreds or thousands of potential customers, then you have an important resource for your team at the startup weekend. 

Having watched some Twitter Mavens take website traffic from 0 to 1000 unique visitors in less than an hour, I know that twitter can be a powerful tool. I also know that the twitter dance starts weeks before the event. 

It will impress the audience and judges at a Startup Weekend, when you have clear picture of your sales funnel, with your social media metrics in place and some hard numbers for your conversion rates, where you can watch people move from  Acqusition , to Activations to Revenue in a rapid series of tests. 

When I facilitate a Startup Weekend, I work coordinate around a regular stand up meeting, every 1.5 to 2 hours, with an effort to help people get into the pattern of setting short term rapid milestones, which they target. If you can show that you have a Sales Funnel (preferably on Friday Night) and that by noon on Saturday, you are actively working your sales funnel, and actively working to acquire customers, you will have the key business engine built. 

If you want to rapidly build an effective business, you need to practice the process of growing an audience. One of the key skills for any growth hacker will be to figure out how to Find, Acquire and Activate new customers for the project. Startup Weekend is a great place to practice this skill. And this is why I focus on the question of twitter and social media as part of Startup Weekend business sprints. 

Are you able to attract 1000 twitter followers in an afternoon? And can you then convert 40% of them into active signups on your project by the end of the weekend? If you can, you are seriously on your way to something interesting.  

Friday, February 10, 2012

Six books for Startups wanting to be Lean

As the Lean Startup conversation brings some new experiences and processes to startups derived from Lean Programming and Lean Manufacturing, there are times when folks ask about what books would help then engage in the process more deeply. There are six books that often come up in conversation for one idea or another. Here is a quick list of a core set of books that are helpful for people engaged in taking the next step. 

The Lean Startup By Eric Ries    
                      - Click Here to see The Lean Startup on Amazon

The Lean Startup is the current hot book on the topic. It is a good strategic overview of the conversation and it puts a lot of the pieces in perspective. 

The 4 steps to the Epiphany by Stephen Blank
                      - Click Here to see Four-Steps-Epiphany on Amazon

The 4 steps is the seminal book for this area. This is Lean Startup Before it was Lean startup and it covers some very important tactical issues around how to approach the market place directly. 

It is a bit of work to go thru, but it is worth the effort. 

The Entrepreneurs Guide to Customer Development by Patrick Vlaskovits
                      - Click Here to Entrepreneurs Guide on Amazon

This is the Cliff-notes version of the 4 Steps. It helps simplify and focus some of the conversation. 

Business Model Generation by Alexander Osterwalder
                       - Click Here to See Business Model Generation on Amazon

The Business Model Generation is a fun crowdsourced book aiming at focusing on the process of getting the right questions answered for your business and getting clarity on your business model. 
Running Lean by Ash Maurya 
                      - Click Here to See Running Lean on Amazon

Running Lean is a story of the journey for a startup software company using the 4 steps and the Business model generation to get to the end. Ash tells an interesting pattern and it leads to the Lean Canvas. I have used often to help focus the conversation about a startup. 

Personal Kanban by Jim Benson 
                       - Click Here to See Personal Kanban on Amazon 

One of the hardest things for entrepreneurs is to focus on the right thing. Personal Kanban presents an interesting method of keeping focus and getting teams to play together and to as a group focus on what they need in order to make rapid progress.