Steve Blank, Author, The Startup Owner's Manual: SVB CEO Summit West 2012

so you know you're talking to an old guy when he's described as the father of something and so uh I really appreciate being the last guy between you and the drinks so I'm going to talk as fast as I can the subject of the talk is how to fail less I wish I could tell you the subject was how to succeed more but we might know how to do that in another 10 years but now we've kind of figured out how to make startups fail less and we know that because we've learned a lot we didn't quite understand the difference between startups and large companies and the distinction is is that startups used to be thought of as smaller versions of large companies everything a large company did your investors used to tell you you need to do that as well large companies hire VP of Sales marketing and business on day one you needed to do that they used to write business plans you needed to do that everything they learned in Harvard Business School you're supposed to do that as well we know that's just not true what we now know is that startups search your first year you're in search mode will tell you what you're searching for but large companies execute and that distinction wasn't clear for the first hundred years of innovation and entrepreneurship what we used to believe for strategy was all I need to do is execute the plan anybody ever write a business plan yeah well here's what we know about a business plan and by the way anybody you have to do appendix a the forecast in the back ok anybody ever realized that it's called the five-year forecast the five-year plan anybody ever make that connection that the Soviet Union used to have a five-year plan and this one's probably as valid as the Soviet five-year plan I now believe we ought to teach business plans and still in universities and colleges but they ought to be taught in the English department because they're best examples of creative writing we're ever going to see because what we now know is no business plan survives first contact with customers it's a big idea if anybody's done a startup done creative writing gie formatted it correctly look at those great charts you know what a surprise five-year forecast is a hundred million dollars blah blah blah I used to tell my students there's a secret Excel code key to kind of auto-generate that and there's still classes searching for those code keys but essentially you could put together a canonical plan which wouldn't last an hour and a half in front of customers what we now know this is the big idea what we now know is that planning needs to come before the plan what we need to do instead of a business plan we need to start with a series of hypotheses best exemplified in something called the business model and I'll explain what the business model is in a couple minutes but if you don't have this book you ought to get it it's by a guy named Alexander Osterwalder and it's called business model generation anybody ever see it before Osterwalder basically says look you know while you think you're doing sales and marketing etc you're actually trying to solve a business model problem and I'll show you what a business model looks like in some detail but I just want to point out that the first thing that startups are doing are searching for a business model they're searching for a series of hypotheses and testing them and only after they find them do you get to execute that's when you get to write an operating plan and financial model but I will contend you really don't know enough even though your VCS told you to do it and you learned it in school excuse me that's somebody's fantasy who actually never had the job they write checks but they've never done the job anybody's actually built the startup knows all you have is a series of guesses on day one and trying to make those guesses formatted correctly so somebody could approve the PowerPoint is just an exercise in futility on all sides now the next thing we used to believe is that we built startups by managing processes you hire product management you went into waterfall engineering you know we had a canonical diagram that looks something like this you had a concept you went the product development alpha test beta test first customership if you would have drawn that for the last 30 years VCS would high-five - told you where genius you would hired sales and marketing in that plan you would have said yeah I need sales and marketing we need to get buzz going and you know where's our social media and the TechCrunch article needs to show up over here right and it all looks and it's culminating in first customership and how we built the product was we did waterfall with a requirements document in design and you know we locked it down and we implemented and we came out with the release one that first customership two fundamental problems with this idea and with this chart first fundamental problem is it implies that you understand the customer problem you're solving now maybe because you actually saw a burning bush and somehow voice came out and told you exactly what the customer problem was but I kind of doubt it or maybe you think you and your co-founder understand the customer problem but I doubt it what happens to the consequence of you having some hallucination that you actually understand what problem you're solving is you also tend to make an egregious error of let's go write the entire product because I understand all the features on day one that's a failure strategy because I will guarantee you the safest bet in this room is even though you think you are absolutely convinced you understand the customer problem and you're going to nail those first set of features the safest bet is your rock because there's no possible way sitting in your office or your room or your lab that you can because entrepreneurship is an np-complete problem it can't be pre calculated getting out of the building turns it just into an np-hard problem but it is fundamentally in calculon till you get out of the building and so both the product management nature and the waterfall execution problem is what got us spending a lot of money and a lot of time inefficiently what we now know for strategy is more startups fail from our lack of customers than from the failure and product development and so what we want to do is have a process to get out of your office get out of your building early which we call customer development to search for the truth and so what we want to do is customer in agile development first and then we could hire product people and then we could go into more extensive development the third thing we used to believe his organization charts you know everybody used to sketch the org chart and when I was a CEO my fantasy was to have an org chart that looked like this and this would just be my my administrative staff you know and I wanted it to look you know massive people etc we also now know and this is the most subtle problem what we now know is that if you're hiring a VP of Sales head of marketing head of biz dev on day one you're screwed you might know the average half-life of a VP of Sales and a start-up nine months all right track n by n sales now if you're in sales you should go to Americas there's actually a bull's-eye painted through your back you've never actually noticed the half-life is the shortest of any job Silicon Valley the mistake we made was taking those organizational theories from large companies that execute and assuming that that's what we're doing in a start-up on day one in fact the other mistake is thinking that the same job specs that work in large companies work for startups I used to think the best thing that could ever happen is I could hire a VP of Sales from name of large company and one day actually got my wish start with some about eight people I managed to hire a director of sales from Oracle and what happened I should have known better by then we're now I don't know four months into the company VP of Sales and IJ Larsen great guy are now calling on the fifth company in a row and we just got thrown out again I mean I don't even mean we finished our presentation I mean we weren't like slide six and we must have put something offensive up again because we're standing in a parking lot in the rain and we get into the car and J is putting the key in the ignition and I go Jay where are you going he said well Steve we're making our next sales call I said Jay we were just thrown out five times in a row he said that's why you hired a world-class salesperson we have thick skins we just you know keep going and I went well maybe we should think about why we're getting thrown out is it Steve you just don't understand corporate sales this happens all the time and so I pull out knees driving I'm pulling out the laptop and I'm I'm like typing away and it goes what are you doing I said Gaea the presentation obviously isn't working I'm changing the slides and the car almost goes off the road he says you can't do that I've memorized those slides now for all of you ought to be laughing here because obviously this is the difference between search and execution when you hire a world-class VP of Sales who's been in executor what they know how to do is execute Christina Lee against a known product known price list and known customer target set we were making it up it gets back on the road I'm now typing something else what are you doing I'm changing the pricing struck most went into the media I fired J four weeks later turned out he was a world-class salesperson and I needed him 18 months later I didn't need him on day one because on day one what you really want is the founders running a customer development team you want no sales no marketing no biz dev until you've found the repeatable and scalable business model and so first you want to do customer development with a customer development team and then you eventually want to hire functional organizations by departments not that you never want these people it's just by the time you start layering in execution people they're looking at their business card going why yes we're executing on the PowerPoint slides but your PowerPoint slides are probably changing every you know 30 days or more you don't hire and build functional organizations to your PowerPoint stops moving it's good your wrists ik all this stuff is covered in the startup owners manual and ultimately your goal is to be an execution organization but I will contend that all or most of you are in search so first question is what are you searching for what's a startup you know I did eight startups in 20 years and I don't think I ever had a formal definition so let me give you Steve started startup definition to me startup is a temporary organization it's a big idea there's no such thing as a 10 year old startup there's a two year old startup attached to an eight year old failure keep that in mind for those you looking at the calendar okay your goal is not to be a startup even though the food's great and you bring the dog and you know it's whatever and it's collegiate it's not the goal the goal is that believe it or not a temporary organization designed to search and the question is one I thought it's designed to code or build product or get customers or users what's this designed to search about I'll explain it's designed to search for something that's repeatable and scalable and what you're looking for is a business model a start-up is a temporary organization designed to search for repeatable and scalable business model your goal is to become a company not stay a startup but the question is what's a business model and so for me it starts with this definition so a business model is how a company creates value for itself while delivering products and services for customers and it's kind of arbitrary we could make up a business model of any components but I kind of like this definition which is says you know a business model has nine boxes and the first one that's most important is what's the value proposition which is a very fancy word for what's the product or service you're offering customers and it's not about your idea or your product its what job are you getting done for a customer or what need are you fulfilling or satisfying and so understanding that it's not about here's our feature specs or even our benefits it's about understanding you're fulfilling something for a series of customers and the next question you need to ask is who are they who's our customers they don't exist to buy which I used to think you actually exist for them who are they why would they buy can you describe them by archetypes geographic demographic social you know 24 years old male lives in urban areas next is how am I going to get the product to these customers what's my sales channel and channels could be something as simple as I'm selling on the web of a direct sales force I'm using indirect channels but something to keep in mind is that channels are radically different for web and mobile products than they are for physical channels so in one case you have to deal with Walmart or Best Buy another is you're dealing with the Apple Store or the Android store etc and some things are even more complicated with indirect channels in between the next thing you want to think about is customer relationships which is a fancy word for how do you get keep and grow customers how do i acquire them activate them and keep them and customer relationships are probably the most expensive part or your business particularly from the web how do I do customer acquisition what's the sales funnel look like how does it differ if I'm a mobile app from a web app from a physical Channel and just like in thinking about your channels these are very different for mobile versus physical revenue streams how do you make money well these are actually strategies the revenue model is a strategy pricing is a tactic and in some businesses you'll have multi-sided markets I'm acquiring users so I could sell them to advertisers and so what you want to think about is what value is the customer paying for in Google advertisers are actually paying for access to those users and pricing is just the tactic what key resources are you going to need one one of the most important assets for your business so for example if you really think about any stardom you need money so financial assets are important Silicon Valley Bank and I heard they're giving out money in between now and one when I've stopped talking physical access intellectual assets and human assets all these are kind of things you need to think about that make up your startup and then next what are the key activities it was me when next what are the key partners you know the Apple iPod and iPhone and tablet would have been useless without third-party software both apps and music at first who are the key partners and suppliers necessary to make your model work you know what activities do you want them to do for you is it just to provide content there were to provide supply or actually do something active for your business and understanding these are just really important even on day one will I need some potential partners key activities well if you're in the software business writing code is really important but if you're in the manufacturing business G it might be manufacturing skill it might be mastering supply chain so what you need to be thinking about what are the important things the company must do to make your business model work production problem solving if you're in consulting manufacturing or supply chain as I said if you're making physical products and you need to understand all this because it rolls up just like it rolled up for revenue on the right side of the business model rolls up into costs what are the key costs and expenses in your business so what are the costs to operate the business model are there fixed costs are there indirect costs now in the old days we'd make you do an income statement balance sheet cash flow in fact your bank probably requires that but until you figure out all this other stuff and figure out what are the metrics that matter it's not even easy to start this so we kind of start with a cost structure now even after you do all this guess what you're now left with a series of hypotheses this is kind of looks exhausting but you could do this very quickly you could download this business model canvas from the web you could post it on your wall you and your co-founders could put yellow stickies on all your on all those nine boxes but at the end you're still left with nine boxes full of hypotheses now I got to tell you the truth I used the word hypotheses because I teach at Stanford anybody go to Stanford okay now you know what tuition is now $50,000 a year so for every big word I use people's parents feel like they've made money so that's why I use the word hypotheses but in reality what we're doing is guessing I will contend that almost every one of you have a business model full of untested and then unvalidated guesses because here's the bad news about a start-up how many of you founders okay you have started a faith-based enterprise it is you know don't be asked me you got the bank to believe it but you know so it's a faith-based enterprise but your job truly is to turn that faith-based enterprise into facts as quickly as possible that's what makes a business right now you have a series of I believe great good you've got other people to believe to founders need a reality distortion field but you immediately or as quickly as possible need to turn that faith into facts and that's what the next part is startups are in search and what you're searching for is the truth we use this business model canvas to kind of articulate these hypotheses but how we turn these guesses into facts is with this customer development process I mentioned earlier what we have is a formal process for steps customer discovery where we'll test some of the basic hypotheses whether the customers believe in the problem or solution customer validation will actually try to sell the product and then execution where we'll try to scale the company and so for a customer development it's kind of simple first you test the problem and then you test the solution the customer development process basically says we're going to take our guesses get out of the building physically leave talk to customers and basically run a series of experiments which start with these hypotheses we'll design a series of experiments we believe that customers will behave this way we believe that percentage of activations should be like this we believe you know conversion down the funnel should look like this we're going to run the test and we'll get some data but we're not just looking for data we're looking for insight because that insight will change or modify our hypotheses and we're continually running this hypothesis experiment test and inside loop and so the goal is to do this with something called the Minimum Viable Product Minimum Viable Product says let's start with the smallest piece of the product that will teach us something instead of building every possible feature on day one we're going to build the product iteratively and incrementally and as we get out of the building we're going to find out whether our hypotheses are correct and what we do with that is something interesting I drew a line in my first book I never named it and one of my students named Eric Ries anybody read Eric's Lean Startup book if you haven't you should all get it Eric said Oh Steve that's the pivot I went what a great name so in fact that's now so overdone like people are trying to find some other name for it but I still love it a pivot in my definition is a substantive change to one or more of those 9 business model canvass components G you get out of the building you discover who your customers you thought were male 24 years old in urban areas our middle-aged women in Nebraska that's a pivot or you decide where you figure out that the freemium model you thought was great well everybody believed in the free part but there's no upgrade path G maybe you ought to go to subscription model or you discover that the top five features you thought were important customers love features four to five all right every one of those insights changes your business model canvas and your strategy so the pivot is what happens when hypotheses don't match reality so customer development is how you search for the model and basically I'll just going to go down through the customer discovery path and the book you have will talk about the rest of it but this is a formal just on how to do this customer discovery has you stating your hypotheses drawing out your business model canvas phase two has you getting out and testing the problem your web-based startup you actually put up a Minimum Viable Product on the web we call it a low fidelity MVP and you're actually seeing whether people agree about the problem not even about the features but about the problem and the next thing is you're going to test the solution and right now you're not selling anything you're trying to see whether your faith matches facts and then you verify or pivot and so I'm going to stop here you have the startup owners manual this takes you in some detail and I'm happy to answer questions oh let me let me just give you one more by the way I don't give you one more and and that's um why do we do this let me tell you why we do this hey may ever see this movie let's see if it works maybe not maybe we won't see the movie hello yeah alright we're not gonna see the movie but why did why we do this is because we did now it's working keep pressing you're more optimistic than me press again yep let's see if it works and try quick No somebody's moving that cursor not me all right why we do this is because is entrepreneurs we realize that there's nothing more important in our lives than to take the passion and the vision we have and make it real I have to tell you at least for me doing eight startups in 20 years this was just something that was driving me I believe entrepreneurs are closer to artists than anything else while you might have been engineers but he might have been MBAs or product managers at the end of the day founders of companies see things that other people don't you see a vision and you want to make it real and you build the company to actually make that happen and for me everything else was secondary it was nice to make money it was nice to build the team it was great you know to see my product used but it was just something that I needed to make happen from a sketch in the dining room table until I built a company and you're all on that journey so I'm happy to take questions and thank you very much questions yes the four steps to epiphany I'm curious with the differences between this new book that you've released and the four steps to epiphany $40 so I'm in a banking conference I'm so no let me give you an honest answer so in in ten years we've learned a lot I'll tell you the maybe the top two big ideas one is the four steps to the Epiphany I had this notion that we should organize our hypotheses but I really didn't understand the in fact it was before Alexander Osterwalder wrote the business model canvas and when I saw it I realized that was the world-class best way for an entrepreneur to organize their thoughts and so customer discovery which used to have its own worksheets with my own terminology basically Alexander and I have worked together we're going to do another book together etc uses his methodology so we didn't invent another one once you understand business model canvas boom that is the front end of customer discovery the thing I added to Alexander's thinking was he was thinking of it as a static two-dimensional you draw your hypotheses when you do customer development you're adding a z-axis in time to the canvas which he never thought about and now every time you update your business model canvas you can actually watch the entrepreneurial process happen so one is business model canvas is kind of the integrating scorecard to is and this one I pondered for a while is that while the theory for physical products stuff sold through Walmart is the same as stuff sold on the Apple App Store what you do for tactics are radically different right in the time you go out and finally get to Bentonville Arkansas you know you could have 10,000 users on an app store and so there needed to be a parallel track and so the book is written that there really are parallel paths about whether you're in a physical channel and web mobile channel and so those are two of the many upgrades is this book is more tactical and prescriptive and the other one was basically stream-of-consciousness in fact I'll tell you guys the secret story and that the forceps the Epiphany if any of you read it were my class notes from Berkeley and when Eric Ries was a student he said why are you seeing these things you're on the board of Cafe Press why don't you have them printed and you could put it on Amazon so we have Eric to blame for all the unfinished sentences in there and I thought it was a badge of honor that the thing was that my class notes were actually selling and then I made it but almost a joke as' and you could finish the sentences yourself and come out with whatever Theory you wanted but so the startup owners manual that would the intent was to actually take the book from class notes into something that was usable as an execution document long answer to a great question yes I have a question sometimes some startups are networked effect startups so in order for them to succeed they not only need to solve some viable a problem they probably depend on something else like minimal like user base yes so so how do you thing is the lean approach different for that kind of startups harder no no seriously it's harder but you can't ignore it so one of the things that you need to do in a networks affects businesses see if you could simulate some of the network that is how can I simulate what would happen if I have a hundred people actually referring here I'll give you a parallel version maybe a simpler example because yours is hard and I'm not I'm not trying to dodge it but it is hard but you could simulate part of it think about Google search which I used earlier is a example of multi-sided market which happens a lot think about it if you think about Google search there are hundreds of millions of users they might use Google search any way in the room grab comments how much do you pay how much you pay nothing but Google is the most profitable company in the world 99% of it coming from search who's paying who pays advertisers well think about it now in the customer segment you have two boxes users and payers well anytime you have two different customer segments guess what you have two different value propositions because if you go back to the value prop box you're looking at the Google search bar what's the advertiser sing what product are they saying AdWords oh wait a minute so now you have two different value props you have two different customer segments guess what you have two different revenue models what's the revenue model for you zero what's the revenue model for advertisers how they pay I'm sorry cost per click very interesting all right now so they're not the only one to have a user in payer model right it could be very easy for you to say you know what Porges going for 10 million users will worry about payers later ok no one's going to stop you from building that business and ignoring the users but you know what if I was advising you I'd say perhaps you ought to talk to one of your potential payers and just see if what you think is valuable now gee if I got 10 million of these you know your assumption is oh people will pay you know so many cents per these users you might find out that the users are acquiring happen to be stuff that people don't want at all so I tend to have people go down through their business model and actually test each part of the model first in your case you have to simulate part of the model because there is a network's effects part but I would actually try to test as much of the as the business model as you can it doesn't mean that you need all the payers but I would be figuring out how to test them and I know that's not a complete answer but this as good as the dodges I'm going to give you tonight at other questions when you have something very disruptive and one thing that is thrown at you by customers is feature parity they try to compare you with something that exists and they want many of the useless features to be put on the new disruptive solution how do you fight that you say that you're not going to ever do that because you don't really need it or do you say that over time it will be there knowing very well that it would not do great so let me give you the big picture and then drill down it turns out we only have one word for start-up may ever hear the apocryphal story that Eskimos have 43 names for snow you know like the slushy snow and dry snow and snow that the polar bear eats you on and you know they on the other kind we only have one word for start-up turns out there are four in my taxonomy four types of startups one is your entering the existing market how do we know it's an existing market what do we know about an existing market customers what else do you have competitors great what else what can those customers tell you if there are competitors what can I tell you look at those customers tell you in an existing market yeah I can tell you features they could tell you're pricing etc and in fact in an existing market you just go out and talk to them they'll tell you the basis of competition some existing markets have dominant competitors where you don't want to go head-on and so you might decide that you want to resent an existing market that is either take a niche because you understand customer features better than or needs better than anybody else or you might want to be a low-cost superb supplier that's my definition of existing or there's a third type you think you're so disruptive you're going to create a new market how many customers are in a new market zero okay by the way you can enter a new market how much cash do you need in a new market might be a lot you might better you and your investors better be aligned about market type because if you're giving them the five year forecast that you know is linear or even worse the canonical hockey-stick that says all magic happens here right all of a sudden you're betting on some tipping point that truly is some fantasy so what customers have been telling you is one of two things you're trying to describe it as disruptive but they're willing to buy some segment is willing to buy now interesting play or they don't quite believe that you're disruptive because an you haven't found in early Vangelis so let me explain in every market if you're building something other than an existing and re segmenting or new if you can't find people who share your vision early on you're hallucinating you're not a visionary right you're ninety five percent of the time you know you think you're a visionary you've actually been smoking something or where right so you need to decide right if no one else doesn't mean everybody in a new market or resegmented you're actually an existing market if if one out of 20 or one out of 50 says I've been dreaming about the same thing if you can't find any of those people you're wrong does that make sense or not all right so I'm not trying to discourage you I'm saying there's a lot more moves and choices because by the way if you are disruptive you don't want everybody to say why yes I get it because that's the wrong thing that you're trying to build right and you don't want everybody to say yes this is exactly what I want yeah I have time for more you guys pick anybody else go pump yeah with some magic ah yes so 10 years ago you know the way I when people would ask that question I changed the subject by saying is that Steve Jobs coming in the door and you know we change the subject and five years ago you know people would say well that's nice theory and that's great I say probably now in Silicon Valley almost every VC gives lip service to lean and customer development and whatever and I'd say there's probably maybe five who actually understand what the hell it means but there's at least every one of them will say something like it's important that why I'm no joke aside I now teach with ten of them that is in the different classes I offer for Stanford and for Berkeley and National Science Foundation I kind of co-opted a bunch of existing Silicon Valley VCS who actually teach the process and you know they drink they not only have they drank the kool-aid they've begun to see the difference in their portfolio it might be an age thing it might be but I tend to find VCS under forty kind of get it more than the guys who grew up like I did which were write the business plan for me and when you're when you come in give me your PowerPoint slides but I'll give you the equivalent in fact let me tell you a story because it it works every time so all of you probably as good as my students might and you know I'd give a challenge for my students which is I bet you if you lock yourself away a Stanford library for a weekend Business Library you could write a world-class business plan and derive the VC PowerPoint slides for them because that's by the way what a V standard VC pitch is show me your PowerPoint slides which is essentially the summary of your business plan you get fake it in a weekend as my point here's what you can't fake get out of the building and talk to a hundred customers in eight weeks 100 customers I have students who do this 100 customers in 8 weeks and now go in with lessons learned from a hundred customers telling the story of not where I ended up here's what I thought on day one here's what happened when I found X here's what happened wife and not talking about business models or customer Devon just the story of what you learned talking to a hundred people let me tell you if you do that in a VC boardroom even though they're think that they want to see show me the standard PowerPoint these guys will do one or two things 15% odds they'll throw you right out of the room just telling you the honest truth 85% of the time they'll put down whatever they were typing on their iPhone or Blackberry and look at you like you did what well I talked to 100 customers in here doesn't guarantee you're going to get funded but it does guarantee that they're going to pay attention because for the first time probably this month you're going to teach them something they had no idea about there it is not possible they know what you know which normally is not the case does that answer part of the question and by the way I tell everybody who gets kind of wrapped up in the lien or customer development religion for God's sake don't proselytize the religion I don't care whether it's lien or customer development or whatever come in and tell me and teach me something that you learned that you couldn't have learned anywhere else or that you know no one else has been learning I don't want to see your market forecast I want to see that you you know got thrown out of some of the best places and here's what some other people said about why they'd buy you can't fake that that's what this process is about is it one who has the best question no no best question you really have the best question room okay go we're gonna we're going to take a vote on this and and your between them in because we don't need if it's not specially yes it's incredibly hard very hard so the the gentleman who was up here the CEO before who was sitting here had exactly the right attitude I was sitting going yeah that's the right kind of founder if you haven't been thrown out you know or chase somebody or capable of telling a story in a reality distortion field you really need to get those skills somewhere in your company in the founding team so for example where do I start you know I have employees who know people I have yeah advisers and if you don't have any advisers you need some I have Silicon Valley Bank you know you want to in fact shake down by the ankles everybody you know you're a founder you're no longer polite you left good manners away the minute you took this job okay you need to be asking everybody you know for help and what you want is a name of somebody they know and my best line of starting to meet people works all the time I'll send an email or better call after 5 p.m. where their admins and secretary go home and when you get them on the phone say hi my name is X I got your name from why why is hopefully somebody they know I'm not calling to sell you something I'm calling you because so-and-so told me you were the smartest person in this industry and I need five minutes of your time now tell me if somebody called you saying that what are the odds are going to hang up let's say maybe 50% that's a pretty good hit rate i I did that for 20 years 20 years and I would call people in New York and if they said oh Tuesday that's a very funny I'm going to be in New York on Tuesday I'd get on an airplane for that I make five more of those calls and get some more meetings in New York but you need to be relentless you you know I used to think because I was an engineer my definition of a engineer the difference between an introvert and extrovert and an engineer is whether they were looking at their shoes or your shoes and I finally no no I could say that because I used to be and now I teach engineers how to make eye contact but but in the old days you know I used to think telephones we're going to dial themselves and and I would just hope that somehow this stuff would happen this was incredibly hard for me so I'm like sympathetic to you you are you an engineer all right good you have an advantage over most people in this room it is really hard to kind of impose yourself in a process that normally you don't fit it and so you're now asking for a short period of time and what entrepreneurs make the fatal mistake is thinking that customer development process is somehow on day one I need to give somebody a pitch that is I'm selling something or I want them to look at my slides I don't let you out of the building with your slides you literally are going out the first time to understand whether your hypothesis about their problem is even correct you don't need a slide deck for that that's a casual conversation all right and eventually what you're trying to do is understand the two most important parts is does my value proposition match my customer segment and the the buzzword for that is product market fit right now everybody hear that well and it's a fairly popular word once I have product market fit the value proposition and customer segment I'm like 50 percent on the way of making some money and so the conversations begin though is my assumptions about my value prop and who the customers even correct on the planet does that help for conversation okay that was a pretty good question so let's go eat talk to

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Keywords: Breakthrough CEO Summit, Silicon Valley Bank, Accelerator, Steve Blank, The Startup Owner's Manual, entrepreneur, Startup

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Length: 42min 26sec (2546 seconds)

Published: Tue May 29 2012