Why do some startups succeed while so many do not? The answer is simple - Strategy. This presentation addresses the question by introducing several conceptual frameworks created to help entrepreneurs better plan and design their startup strategy.

1. PREPARED FOR WEBVISIONS
BY NEAL CABAGE
Startup
Strategy

2. INTRODUCTION
Author & Speaker
NEAL CABAGE
Digital Product Architect
• Product manager and entrepreneur.
• Founded ProductCamp.LA and PMA.LA.
• Built and sold two startups.
• Principal authored, The Smarter Startup.
neal@smarterstartup.org@NealCabage

3. THE SMARTER STARTUP
STRATEGY FOR STARTUPS
The Smarter Startup looks at why some
startups succeed while others fail. By taking a
more strategic approach to entrepreneurship,
founders can improve their own outcomes.
Written by Neal Cabage and Sonya Zhang, PhD,
and published by Pearsons/NewRiders.
INTRODUCTION
The Book

4. CONCLUSION
SmarterStartup.org
We have posted in-depth articles,
diagrams, and downloadable references
and worksheets on our website.
Everything is free to use, so check it out.
www.SmarterStartup.org

5. INTRODUCTION
Overview
Problem Statement
Startup Heuristics Vision Definition
Value Creation
Business ModelsIntroduction
We’ll establish the challenges that startups face and introduce strategic principles
and frameworks to better understand and reach your startup’s objectives.

6. INTRODUCTION
Startup Strategy Framework

7. PROBLEM STATEMENT
The Great Mystery
8
in
10
Startups
Fail
in
the
First
5
yrs
WHY DO SOME SUCCEED?
We’ve all met people who worked very
hard to make a business succeed and yet it
failed. We’ve also met people who did
seemingly everything wrong and yet they
succeeded. Hard work is a necessary
component but it is not the entire story.
WHY DO SOME NOT?

8. Benjamin Franklin
PROBLEM STATEMENT
Conventional Wisdom
Diligence is the mother of good luck.
Thomas Edison
Genius is one percent inspiration and
ninety-nine percent perspiration.

9. Benjamin Franklin
PROBLEM STATEMENT
Conventional Wisdom
Diligence is the mother of good luck.
Thomas Edison
Genius is one percent inspiration and
ninety-nine percent perspiration.
It
is
True?

10. Diligent Negligent
SuccessFailure
IS HARD WORK THE ANSWER?
Hard work alone is NOT a reliable
predictor of success. Hard working
people sometimes fail and negligent
people sometimes succeed.
PROBLEM STATEMENT
Conventional Wisdom
NOT ENTIRELY

11. x
Working hard is analogous to throwing a ball hard. The velocity is an important part of
reaching the target, but you cannot ignore other interactive forces like gravity and drag.
Gravity
(:ming)
Direc:on
(customer
need)
What Is the Whole Story?
PROBLEM STATEMENT
Drag
(compe::on)
Velocity
(hard
work)

12. James Carville
Political Straegist
PROBLEM STATEMENT
A More Strategic Approach
It’s the economy STRATEGY, stupid!
Why are some startups more likely to succeed?

13. Startup Heuristics
Startup Strategy
Best Practices

14. THE FUNDAMENTAL CRITERIA
START HERE
There are 6 fundamental criteria to
consider when developing a startup
concept. Every new idea should be
considered from this starting point.
STARTUP HEURISTICS
The 6 Heuristic Categories
customer
product
compe::on
:ming
financial
team
Startup
Strategy
Heuris:cs

15. STARTUP HEURISTICS
The 18 Rules of Startup Strategy
Startup Heuristics
Finance
13. Low Sunk Costs
14. Working Capital Float
15. Economies of Scale
Timing
7. Recent Innovation Enabler
8. Demand Already Established
9. No Signs of Commoditization
Competition
10. Clear Market Inefficiency
11. Low Barriers to Entry
12. Differentiable Position
Team
16. Subject Matter Expertise
17. Functional Competence
18. Supplier Partnerships
Product
4. Customer Focused Solution
5. Low Barriers to Adoption
6. Clear Value Proposition
Customer
1. Unmet Need or Desire
2. Right Size Market or Segment
3. Reliable Access to Customers
© 2014 Cabage & Zhang

16. WHAT’S A GOOD CUSTOMER?
The ideal customer has an unmet need or
desire. The size of this market should
match your ability to compete and ability
to deliver justify solving the problem.
Validate you can control means of
customer acquisition along the way.
STARTUP HEURISTICS
Customer Criteria
UNMET NEED OR DESIRE
Unsatisfied Customer Desire
RIGHT-SIZE MARKET OR SEGMENT
Need to Segment? Too Niche?
RELIABLE ACCESS TO CUSTOMERS
Diversified Channels? Gatekeepers?

17. FOCUS ON HELPING OTHERS
FOCUS ON CREATING VALUE
Mom was right! Focus on helping others and
everything else will fall into place. Find a need
or desire that is not yet sufficiently addressed,
where the customer is so passionate they’d
happily pay for a solution. This approach is
much more likely to create real value than
copying an existing solution.
CUSTOMER CRITERIA
Unmet Need or Desire

18. CUSTOMER CRITERIA
Right-Size Market (or segment)
BIG FISH STRATEGY
PURSUE QUIET NICHES
BIG MARKET STRATEGY
PURSUE LARGE MARKETS
Select a market to service that meets your needs and abilities. You must have enough opportunity to warrant
the effort. Be weary of large markets however, if you do not have significant funds and plan to be aggressive.

19. MARKET MANIPULATION
GOVERNMENT, MONOPOLIES
CHANNEL DEPENDENCE
SINGLE POINT OF FAILURE
0
5000
10000
15000
20000
25000
30000
35000
March April May June July
CUSTOMER CRITERIA
Reliable Access to Customers
A sustainable business requires control over customer supply. Don’t rely on a single marketing channel (Google
SEO). Government or monopolistic manipulation of markets can also be challenging (Online Gambling).

20. WHAT’S A GOOD PRODUCT?
A good product will be a direct response to
a customer need or desire. If the value is
well articulated and the customer is
passionate about your new solution, the
reason to buy will be compelling. Consider
deterrents also – are their high switch
costs and is the solution easy to use and
understand?
STARTUP HEURISTICS
Product Criteria
CUSTOMER FOCUSED SOLUTION
Solves Unmet Need or Desire?
LOW BARRIERS TO ADOPTION
Low Switch Cost, Usability
CLEAR VALUE PROPOSITION
Compelling Reason to Buy

21. PRODUCT CRITERIA
Customer Focused Solution (benefit)
ADDRESS NEED OR DESIRE
FOCUS ON CLEAR GOAL
KEEP IT SIMPLE!
DON’T AMBIGUATE THE VALUE
The purpose of your product is to create value by addressing a specific need or desire. Stay Zen focused.
Don’t ambiguate the value created with distracting features that aren’t aligned with the goal.

22. Albert Einstein
Physicist, Professor
Any intelligent fool can make things bigger and more complex... It takes a
touch of genius - and a lot of courage to move in the opposite direction.
PRODUCT CRITERIA
Customer Focused Solution (benefit)

23. PRODUCT CRITERIA
Low Barriers to Adoption (cost)
LEARNING CURVE
INVESTED TIME & NEW COSTS
FINANCIAL IMPACT
PRIOR INVESTMENT & NEW COSTS
WORKFLOW INTEGRATION
DOES IT EASILY INTEGRATE?
Even if you create new value, customers may hesitate to adopt your product if they’ve already invested
too much in an existing solution that is good enough, or if adopting your solution is too disruptive.

24. Easy Workflow
Integration
Addt’l Benefits(value complex)
Solves My
Problem
Existing
Investments
Learning
Curve
IS THE VALUE CLEAR?
VALUE = BENEFIT - COST
PRODUCT CRITERIA
Clear Value Proposition (value)
Perceived
value
must
exceed
cost.
If
you
can
clearly
describe
your
product
is
beneficial
and
a
compelling
case
for
purchasing
it,
then
you
have
created
sufficient
value
to
overcome
cost.
Theodore
Levitt
People don’t want quarter-
inch drills. They want
quarter-inch holes. cost
benefit

25. WHAT IS GOOD TIMING?
Every market has a natural lifecycle
driven by innovation and circumstance.
Look for new demand or interest in
something that wasn’t possible just a
couple years ago. Be a “fast follower”
into a validated emerging market rather
than speculating on new opportunity.
STARTUP HEURISTICS
Timing Criteria
RECENT INNOVATION ENABLER
Was it Possible 2-5 Years Ago?
DEMAND ALREADY ESTABLISHED
Build It & They Might Not Come!
NO SIGNS OF COMMODITZATION
Shrinking Margins. More Products.

26. Every market has a natural lifecycle driven by innovation and circumstance. Look for something that
wasn’t possible just a couple years ago & ramp up before the market capitulates (supply > demand).
TIMING CRITERIA
Innovation Life Cycle
Innovators
(2.5 %)
Early adopters
(13.5 %)
Early majority
(34 %)
Laggards
(16 %)
Late majority
(34 %)
The Golden Era The
Squeeze
ConsolidationEarly Movers
Capitulation
*
Innovation Adoption Curve

27. Opportunity to enter diminishes as the market matures. Geoff Moore suggests entering at “the
chasm” after demand is validated but still early enough to ramp before the market capitulates.
TIMING CRITERIA
Innovation Life Cycle
Innovators
(2.5 %)
Early adopters
(13.5 %)
Early majority
(34 %)
Laggards
(16 %)
Late majority
(34 %)
Chasm
Innovation Adoption Curve
Ideal point to
enter a market
- Geoff Moore
New Entrant Opportunity

28. Nicholas Carr
Harvard Business Review, 2003
TIMING CRITERIA
Commoditization of Technology
It is difficult to imagine a more perfect commodity than a byte of data.
As information technology’s power and ubiquity have grown, its
strategic importance has diminished.

29. $5,000,000
What cost $5 million to accomplish
12 years ago can now be done with
less than $5,000. Mark Suster
observed that commoditization and
availability of more building blocks
has radically reduced cost and risk
of developing a software product.
Commoditized
Technology
Hosting Commoditized
Open Source Software
Cloud Services (SaaS/PaaS)
MLS
IDX/RETS
Feeds,
SendGrid
Email,
etc
WordPress
Pla=orm,
Real
Estate
Themes,
RESO
&
Placester
IDX
Plugins,
$500,000
$50,000
$5,000
A
Web/Mobile
App

30. As cost has fallen, so has the
competitive barrier to entry.
Competitive positioning is now the
key strategic issue, not
technological capability for most
consumer Internet products. How
do you cut through the noise?
Commonplace
Commodity
2000 2002 2004 2006 2008 2010 2012 2013
!"
#!$!!!$!!!"
%!!$!!!$!!!"
%#!$!!!$!!!"
&!!$!!!$!!!"
&#!$!!!$!!!"
!"#$%&'%()*+%)&
Data From NetCraft 2013 Web Server Survey
50x

31. GOOD COMPETITIVE LANDSCAPE?
Avoid being marginalized by excessive
undifferentiated competition. That
drives margin compression, commodi-
tization and market consolidation. Look
for inefficient markets where there’s
still ‘play’ and find ways to develop a
sustainable competitive advantage.
STARTUP HEURISTICS
Competition Criteria
CLEAR MARKET INEFFICIENCY
Stagnant or Fragmented Market
LOW BARRIERS TO ENTRY
Easy & Cheap to Compete?
DIFFERENTIABLE POSITION
Something Special or Different?

32. COMPETITION CRITERIA
Inefficient Market
FRAGMENTED MARKET
NO CLEAR MARKET LEADER
NEW MARKET
DEMAND EXCEEDS SUPPLY
STAGNANT MARKET
READY FOR DISRUPTION?
When a market is efficient, a single entity captures
all of the value of a market. Look instead for a
market that isn’t efficient either because it is new,
stagnant, or splintered (fragmented).

33. Sun Tzu
War Strategist, Wrote The Art of War
The general who makes many calculations before battle is wise. He who
knows when he can fight and when he cannot will be victorious.
COMPETITION CRITERIA
Low Barriers to Entry

34. Avoid a fight you cannot win! A market can be much harder to enter if a
competitor already has a mature offering that you must catch up to.
THINGS TO AVOID
• Existing Economies of Scale
• Existing Mature Product (feature set)
• Well-Established Brand (halo)
• Price Competition
COMPETITION CRITERIA
Low Barriers to Entry

35. SEGMENTED MARKET
FOCUS ON SPECIFIC CUSTOMER
LOW PRICE LEADERSHIP
FOCUS ON VOLUME & COMMODITY
DIFFERENTIATED PRODUCT
DISRUPTIVE OR INNOVATIVE
HOW ARE YOU DIFFERENT?
WHAT MAKES YOU SPECIAL?
COMPETITION CRITERIA
Differentiable Position
In order to be a desirable signal that stands out against a background of noise, you need to have a
compelling value to some customers that others do not. There are 3 viable positioning strategies.
Porter’s Generic Competitive Strategies

36. GOOD FINANCIAL PROFILE?
Look for opportunities to maximize
returns without excess capital risk.
Look for opportunities to start cheap
and to realize higher margins through
focused efforts and economies of scale.
Avoid locking up too much capital.
STARTUP HEURISTICS
Financial Criteria
LOW SUNK COSTS
Up Front Capital at Risk?
WORKING CAPITAL FLOAT
Gap Between Payable/Receivables
ECONOMIES OF SCALE
Margins Increase With Volume?

37. How much up-front capital must you commit to
develop this product or business? Sunk capital
represents risk since you don’t know if you’ll get it
back, as well as opportunity cost since that money
could be committed to other opportunities.
FINANCIAL CRITERIA
Low Sunk Costs
HOW MUCH CAPITAL RISK?
OPPORTUNITY COST

38. Some businesses require large cash
outlay every month and payment can
take 3-4 months to arrive. As a
result the business may need to have
cash or credit to cover the gap of 3-4
months of operating costs. This is
both a cost (interest) and a risk!
Working
Capital Float
DO YOU NEED A LINE OF CREDIT?
WHAT’S THE COST & RISK?
Accounts
Receivable
60 - 120 Day
"Capital
Float"Accounts
Payable

39. Look for opportunities where profits
increase with volume (scale). Supply,
development, and distribution costs all
diminish on a per-unit basis when working
in volume. As a result profit margins and
competitive advantage both increase.
Economies
of Scale
Quantity
Profits
Marginal Cost
Scalable
Profits

40. WHAT’S GOOD TEAM FIT?
Just because an opportunity exists, doesn’t
mean your team is likely to succeed. Are
you fit to compete? Does your team have a
competitive advantage? Do you possess
deep knowledge, technical skills to deliver,
& access to key partners and resources?
STARTUP HEURISTICS
Team Fit & Fitness Criteria
SUBJECT MATTER EXPERTISE
Deep Knowledge of Market?
FUNCTIONAL COMPETENCE
Technical Skills to Deliver
SUPPLIER PARTNERSHIPS
Access to Materials at Good Cost

41. TEAM-FIT CRITERIA
The Hacker & The Hustler
“The Hacker”
Technical skills to design &
develop a well-crafted and
scalable solution.
“The Hustler”
Knowledge of customer or desire, and
understanding of market dynamics to
effectively position an offering.
A team needs deep subject matter expertise and technical skills to design a solution, in order to
succeed. It is difficult for a single person to be efficient at “heads up” and “heads down” work.
The Functional ExpertSubject Matter Expert

42. TEAM-FIT CRITERIA
Supplier Partnerships
Preferred Sourcing
Are you able to procure
supplies at competitive prices?
If affiliate mktg, can you get
preferred commissions?
Available Data APIs
Are you able to access the data
or integration APIs needed to
build your product?
Outsourced Vendors
If planning to manufacture
physical products or software, do
you have a quality vendor you
can rely on?
Consider the dependencies you may have on external sources of materials, data, and services. Do
you have access to the necessary resources to deliver your product and to price competitively?

43. Evaluate your startup idea across the six
scorecard criteria and be mindful of the attributes
described in each one. Give yourself a letter
grade and then an overall score, for the idea. This
provides a structured approach to evaluating the
opportunity and helps to improve objectivity by
accounting for a full spectrum of important
criteria and reducing blind spots.
Evaluating a
Startup Idea
Startup Scorecard
Finance
• Low Capital Requirement
• Clear Profit Model
• Economies of Scale
Finance Score ______
Timing
• Recent Innovation Enabler
• Demand Already Established
• No Signs of Commoditization
Timing Score ______
Competition
• Clear Market Inefficiency
• Low Barriers to Entry
• Differentiable Position
Competition Score ______
Team
• Subject Matter Expertise
• Functional Competence
• Supplier Partnerships
Team Score ______
Product
• Customer Focused Solution
• Low Barriers to Adoption
• Clear Value Proposition
Product Score ______
Customer
• Unmet Need or Desire
• Right Size Market or Segment
• Reliable Customer Channels
Customer Score ______
Overall Score _______
SmarterStartup.org
Title _____________________________________________________________________
A A
B- B+
D A-
B
Real Estate IDX Integrated CRM

44. Business Model
Archetypes
The 7 Fundamental
Business Personalities

45. BUSINESS MODEL ARCHETYPES
What is a Business Model?
A business model describes the rationale of
how an organization creates, delivers, and
captures value … Well-known business models
can operate as "recipes" for creative managers.

46. BUSINESS MODEL ARCHETYPES
Business Models Everywhere!
BRICKS & CLICKS
COLLECTIVE
CUT OUT THE MIDDLE MAN
DIRECT SALES
DISTRIBUTION MODEL
VALUE ADDED RESELLER
FREE IN, FREE OUT
FREEMIUM
AUCTION / ONLINE AUCTION
ALL-IN-ONE
LOW-COST BARRIER
LOYALTY
MONOPOLISTIC
MULTI-LEVEL MARKETING
NETWORK EFFECTS
PRO OPEN SOURCE
PYRAMID SCHEME
RAZOR & BLADES
SERVITIZATION OF PRODUCTS
SUBSCRIPTION
etcetera,
etcetera
…
There
are
many
disparate
business
models
that
were
defined
in
isola:on
but
nothing
comprehensive
that
describes
the
fundamentally
unique
paPerns
in
a
single
and
concise
framework
that
suited
our
needs.

47. Describes 7 abstract business model
archetypes (fundamental personalities)
from which every business model is
inherited. Two prototypes (applied
examples) are given for each archetype.
This represents a holistic view of the
possibilities.
BUSINESS MODEL ARCHETYPES
Business Model
Archetypes
Trade
Product
Service
Marketplace
Ecosystem
Subscription
Brokerage
prototypes:
• e-commerce
• lead generation
prototypes:
• software
• content
prototypes:
• service platform
• service agency
prototypes:
• ad network
• dropship program
prototypes:
• content as a service
• software as service
prototypes:
• products market
• services market
prototypes:
• technology platform
• media platform

48. Carl Jung
Psychologist
BUSINESS MODEL ARCHETYPES
What is an Archetype?
A philosophical idea, referring to pure
forms which embody the fundamental
characteristics of a thing.
The concept is based on Carl Jung’s Personality Archetypes, describing fundamental
personalities and roles that we draw from to develop our own unique personality.

49. PRODUCT
TANGIBLE SOLUTION
SERVICE
CUSTOM SOLUTION
TRADE
CONNECT BUYERS & SELLERS
The Business Model Archetypes framework
takes a step back from specific business
models to say there are 7 abstract archetypes
(fundamental personalities) from which every
business inherits. Two prototypes (examples)
are given for each archetype. This represents
a holistic view of the possibilities.
BUSINESS MODEL ARCHETYPES
Primary Archetypes

50. BUSINESS MODEL ARCHETYPES
Product Archetype
HALLMARKS OF A PRODUCT
TRADE
PRODUCT
SERVICE Properties:
• Up-front Investment
• Sell for One-time Fee
• Highly Scalable
Online Prototypes:
• Software Product
• Content Product
Develop a tangible good and sell on a one-time fee
basis (purchase or license). Requires high up-front sunk
capital but is able to leverage economies of scale.

51. BUSINESS MODEL ARCHETYPES
Service Archetype
Intangible work for a client, monetized on a per-use
basis. Low sunk costs but high float cost
requirements. Professionals or technicians with
expert knowledge and limited capital prefer it.
TRADE
SERVICE
PRODUCT
HALLMARKS OF A SERVICE
Properties:
• Intangible Value Creation
• Low Sunk / High Float Cost
Online Prototypes:
• Service Agency
• Platform as a Service

52. PRODUCT
TRADE
SERVICE
BUSINESS MODEL ARCHETYPES
Trade Archetype
Connecting prospective buyers with a product they
seek, making profit on the spread between sell price
and cost of acquisition. Requires moderate capital
and good sourcing connections.
HALLMARKS OF TRADE
Properties:
• Connect Buyers/Sellers
• Sourcing is key
• Profit from Arbitrage
Online Prototypes:
• Ecommerce
• Lead Generation

53. Carl Jung
Psychologist
BUSINESS MODEL ARCHETYPES
What is an Archetype?
The meeting of two personalities
(archetypes) is like the contact of
two chemical substances; if there is any
reaction, both are transformed.

54. MARKETPLACE
TANGIBLE SOLUTION
SUBSCRIPTION
CUSTOM SOLUTION
BROKERAGE
CONNECT BUYERS & SELLERS
Secondary Archetypes are created by
combining the primary archetypes, similar to
how new colors are derived by combining 2or
more colors. In this way, all archetype
possibilities are accounted for, starting with a
model of three simple types of businesses.
BUSINESS MODEL ARCHETYPES
Secondary Archetypes
ECOSYSTEM
CONNECT BUYERS & SELLERS

55. SERVICE TRADE
BUSINESS MODEL ARCHETYPES
Brokerage Archetype
BROKERAGE
Sourcing on behalf of a client for a retainer or per-
transaction fee. The client then profits from any
arbitrage spread rather than the sourcing partner.
HALLMARKS OF A BROKERAGE
Properties:
• Trading for Clients
• Paid by retainer not arbitrage
Prototypes:
• Real Estate Broker
• Ad Network

56. TRADE PRODUCT
BUSINESS MODEL ARCHETYPES
Marketplace Archetype
MARKETPLACE
Create a platform that facilitates trade, rather than
actually trading. This is a network effects business
that depends heavily on bringing together sufficient
demand and supply.
HALLMARKS OF A MARKETPLACE
Properties:
• Network Effects
• Build Trade Platform
Online Prototypes:
• Products Marketplace
• Services Marketplace

57. SERVICE PRODUCT
BUSINESS MODEL ARCHETYPES
Subscription Archetype
SUBSCRIPTION
Building, maintaining, and supporting ongoing use
of a product, rather than a one-time sell. Customers
pay a monthly subscription service and benefit from
continued improvements.
HALLMARKS OF A SUBSCRIPTION
Properties:
• Monthly Billing
• “Freemium” Pricing
• Ongoing Updates
Online Prototypes:
• Software as Service
• Content as Service

58. SERVICE
TRADE PRODUCT
BUSINESS MODEL ARCHETYPES
Ecosystem Archetype
ECOSYSTEM
A mature market leader may expand as a result of
success. They develop a marketplace and/or
community for customers and/or service/support
vendors to offer augmented solutions.
HALLMARKS OF AN ECOSYSTEM
Properties:
• User Community
• ISV or Dev Community
• Enhanced Product Marketplace
Online Prototypes:
• Tech Platform
• Media Platform

59. BUSINESS MODEL ARCHETYPES
Business Model
Archetypes
Trade
Product
Service
Marketplace
Ecosystem
Subscription
Brokerage
prototypes:
• e-commerce
• lead generation
prototypes:
• software
• content
prototypes:
• service platform
• service agency
prototypes:
• ad network
• dropship program
prototypes:
• content as a service
• software as service
prototypes:
• products market
• services market
prototypes:
• technology platform
• media platform
Primary archetypes Review:
• Trade, Product, Service
Secondary archetypes Review:
• Product + Trade = Marketplace
• Service + Trade = Brokerage
• Product + Service = Subscription
• Product + Service + Trade = Ecosystem

60. Value Creation
Its Not What
You Think!

61. Howard Schultz
CEO, Starbucks
VALUE CREATION
Creating Value
If I went to a group of consumers and
asked them if I should sell a $4 cup of
coffee, what would they have told me?
Why would someone pay $4 for a cup of coffee from Starbucks when they can brew
it at home for $0.50 per cup? Clearly there’s more to this story…

62. VALUE CREATION
Selling a Commodity
If you sell the same commodity at two different prices, which one will the customer
choose? So why would you “waste money” going to Starbucks?
Cup of
Coffee
Cup of
Coffee
Maxwell House Starbucks
Cost: $4.00Cost: $0.50

63. VALUE CREATION
Sell the Benefits NOT the Commodity
Starbucks has successfully created a complex of value around a simple commodity.
Comparing the coffee out of context misses the core of their value proposition.
Cup of
Coffee
Maxwell House
Starbucks
Premium
Coffee
Value $1.00
Ease &
Convenience
Entertainment
(desert/break)
Productivity
(lounge, wifi)
Value $5.00
Value $1.00 Value $5.00
Benefits Complex
Value!
$0.50!
!
Value!
$12.00!
!

64. Take a systematic approach to
identifying all the possible
opportunities. You will identify a
startup idea for every business model
archetype, for each business vertical
you are considering
The Value
Creation Plane
VALUE CREATION
Entertainment
(emotional desire)
Productivity
(logical need)
Innovation
(createnewvalue)
Monetization
(captureexistingvalue)
primary function
perceivedvalue

65. Starbucks repositioned their offering
by creating a value complex around
the coffee commodity. We’re paying
$4 for the entire experience, and the
commodity is only a component of it.
They innovated the value and made it
a more fulfilling experience.
Shift the
Business Function
VALUE CREATION
Entertainment
(emotional desire)
Productivity
(logical need)
Innovation
(createnewvalue)
Monetization
(captureexistingvalue)
primary function
perceivedvalue
X"cheap
caffiene"
Starbucks
Starbucks
Lounge
(free Wifi, etc)

66. Apple took a commoditizing
technology and added an emotional
connection through design and
inspiration. LinkedIn found a
productive application for social
networking. They differentiated their
products in a way that added value.
Shift the
Perceived Value
VALUE CREATION
Entertainment
(emotional desire)
Productivity
(logical need)
Innovation
(createnewvalue)
Monetization
(captureexistingvalue)
primary function
perceivedvalue
X
Apple
X
LinkedIn

67. Netflix has shifted from monetization of
products to innovating their own
content. Google has done the same by
integrating enhanced content into their
search results (maps, flight search, etc).
They stay ahead of competition through
continued innovation.
Shift the
Business Function
VALUE CREATION
Entertainment
(emotional desire)
Productivity
(logical need)
Innovation
(createnewvalue)
Monetization
(captureexistingvalue)
primary function
perceivedvalue
X Google
X Netflix

68. Vision
Definition
Begin With a
Clear Hypothesis

69. Mark Twain
Author
VISION DEFINITION
Clarity of Vision
I didn't have time to write a short
letter, so I wrote a long one instead.
A concise statement about a complex topic requires an investment of time and the
clarity of thought. That critical analysis can reveal weaknesses in a plan, before you
begin developing it. Its time to do this for your new startup.

70. Provide a concise answer to
each question on the worksheet.
Keep them as short as possible.
Then compose a 3-4 sentence
elevator pitch that includes as
many of the key answers as
possible. Then you’ll be ready to
talk to prospects!
Defining a
Startup Vision
VISION DEFINITION

71. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Real Estate IDX WordPress Themes May 9
Customer
Start with a concise description of the
customer segment and how you’ll
reach them (channels).

72. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Value Creation
Clarify the value you are
creating for that customer.
(Value = benefit-cost)

73. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Marketing Automation CRM
Software Product
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Product
What is the manifest solution you’re
proposing that will convey new value
to your customer?

74. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Marketing Automation CRM
Software Product
WordPress Theme *Product*
(not SaaS) for the DIY agent
Tech disruption. First mover
(the Spark API for IDX)
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Competition
What’s your competitive position
that will enable you to provide a
better or more authentic solution?

75. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Marketing Automation CRM
Software Product
WordPress Theme *Product*
(not SaaS) for the DIY agent
Tech disruption. First mover
(the Spark API for IDX)
1. Me (product/tech)
2. John (BizDev/Sales)
1. Spark Platorm API
2. Access to all MLS IDX Feeds
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Team
What are your teams credentials?
What’s the reason you’ll prevail over
competition in offering a
compelling solution?

76. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Marketing Automation CRM
Software Product
WordPress Theme *Product*
(not SaaS) for the DIY agent
Tech disruption. First mover
(the Spark API for IDX)
1. Me (product/tech)
2. John (BizDev/Sales)
1. Spark Platorm API
2. Access to all MLS IDX Feeds
$50,000 to build core product
$50,000 line of credit
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Finance
What is the financial cost of developing
the proposed solution? Consider the
cost against potential gains.

77. Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences
Marketing Automation CRM
Software Product
WordPress Theme *Product*
(not SaaS) for the DIY agent
Tech disruption. First mover
(the Spark API for IDX)
1. Me (product/tech)
2. John (BizDev/Sales)
1. Spark Platorm API
2. Access to all MLS IDX Feeds
$50,000 to build core product
$50,000 line of credit
IDX Website/CRM software for serious RE agents to capture & nurture online leads and
grow their business. Built on Wordpress so they can"own the system, not rent". First-mover advantage by
integratingthe Spark IDX API which makes it possible.
Real Estate IDX WordPress Themes May 9
IDX System to capture &
nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design
Elevator Pitch
Finally, develop a 3-4 sentence description of your proposed startup
that concisely articulates the important points you’ve developed
earlier on this worksheet. This is the 30 second pitch you can use to
talk to investors and client prospects about your new startup.

78. Validate
Your
Hypothesis

79. The Lean “build, learn, measure”
feedback look is fantastic for
optimizing a product concept, once a
customer or hypothesis is defined.
Lean Feedback Loop
Measure
Learn
Build
Ideas
Product
Data
HYPOTHESIS VALIDATION
LEAN METHODOLOGY
FINDING PRODUCT-MARKET FIT

80. Validate Your Hypothesis
HYPOTHESIS VALIDATION
Test Early, Test Often
PROSPECT INTERVIEWS
Do They Like the Idea? Feedback?
TEST MARKETING
Do ‘Vaporware’ Campaigns Convert?
MINIMAL VIABLE PRODUCT
Users Engaging & Using Product?
With a well-articulated vision
ready, you can begin sharing the
concept with investors and customer
prospects. If the idea is well received,
advance to vapor-ware test campaigns
and finally to building the “MVP”.

81. …But don’t just guess. Start with a well-
formed hypothesis to maximize odds of
finding product-market fit and to avoid the
number of pivots along the way.
Hypothesize, Don’t Guess
PIVOT AS
PROCESS
HYPOTHESIS VALIDATION
START WITH A HYPOTHESIS
DON’T JUST GUESS

82. THE SMARTER STARTUP
STRATEGY FOR STARTUPS
The Smarter Startup looks at why some
startups succeed while others fail. By taking a
more strategic approach to entrepreneurship,
founders can improve their own outcomes.
Written by Neal Cabage and Sonya Zhang,
PhD, and published by Pearsons/NewRiders.
SMARTER STARTUP
The Book

83. SMARTER STARTUP
Created By
NEAL CABAGE
Digital Product Architect
• Product manager and entrepreneur.
• Founded ProductCamp.LA and PMA.LA.
• Built and sold two startups.
• Co-author, The Smarter Startup.
neal@smarterstartup.org@NealCabage

84. SMARTER STARTUP
SmarterStartup.org
The framework, including the part
described here, are posted on the
website, along with downloadable
worksheets and reference material.
Everything is free to use, so enjoy!.
www.SmarterStartup.org