1. Growing The Next Big Idea
What We’ve Learned About Startups

2. What Have We Learned?

3. What Have We Learned?
Lesson 1: Types of Startups
Lesson 2: Ecosystem
Lesson 3: How to Fail Less
Lesson 4: Can we Teach Entrepreneurship?

4. Lesson 1:
Types of Startups

5. Lifestyle Startups
Work to Live their Passion

6. Lifestyle Startups
Work to Live their Passion
Startup
• Serve known customer with
known product
• Work for their passion

7. Social Entrepreneurship Startups

8. Social Entrepreneurship Startups
Social Large
Startup Non-Profit
• Solve pressing social problems
• Social Enterprise: Profitable
• Social Innovation: New Strategies

9. Small Business Startups
Work to Feed the Family

10. Small Business Startups
Work to Feed the Family
Small
Startup
Business
• Serve known customer with
known product
• Feed the family

11. Small Business Startups
Work to Feed the Family
Small
Startup
Business
Exit Criteria
• known customer - Business Model found
known product
- Profitable business
• Feed the family
- Existing team
< $500K in revenue

12. Small Business Startups
Small
Startup
Business
• 5.7 million small businesses in the U.S. <500 employees
• 99.7% of all companies
• ~ 50% of total U.S. workers
http://www.sba.gov/advo/stats/sbfaq.pdf

13. Scalable Startup

14. Scalable Startup
Search Execute
Scalable Large
Startup Company
• In contrast a scalable startup is designed to grow big
• Typically needs risk capital
• What Silicon Valley means when they say “Startup”

15. Scalable Startup
Search
Scalable Large
Startup Company
Goal is to solve for:
unknown customer and
unknown features

16. Scalable Startup
Born to Be Big
Search Execute
Scalable Large
Startup Company
Exit Criteria
- Business model found
- Total Available Market > $500M
- Can grow to $100M/year

17. Buyable Startup
Born to Sell

18. Buyable Startup
Born to Sell
Search Sell
Scalable $5 to 50M
Startup Acquisition
Typically:
Internet, Mobile, Gaming Apps

19. Buyable Startup
Search Sell
Scalable $5 to 50M
Startup Acquisition
Goal is to solve for: Sell to larger company
Internet and Mobile Apps

20. Large Company Sustaining Innovation
Innovate or Evaporate
Sustaining Innovation
Scalable Large
Transition
Startup Company
• Existing Market / Known customer
•Known product feature needs

21. Large Company Disruptive Innovation
New Large
Transition
Division Company
Disruptive Innovation
•New Market
•New tech, customers, channels

22. Large Company Disruptive Innovation
New Large
Transition
Division Company
Disruptive Innovation
•Build
•Partner
•Acquire
- IP
- Talent
- Product
- Customers
- Business

23. Large Company Disruptive Innovation
New Large
Transition
Division Company
Disruptive Innovation
• Build
• Partner
•Acquire = an internal corporate startup

24. Summary Lesson 1:
Multiple Types of Startups
Policies, Funding and Tactics Differ
Techniques to build them are the same

25. Lesson 2:
History of a Startup Ecosystem

26. Silicon Valley Was a Series of
Unintended Consequences

27. Outward-Facing Research University
Building Weapons System
1946 – 1968 WWII/Cold War

28. Massive Government R&D
Investment in Weapons Systems
1956 – 1980’s Cold War

29. One Professor Changes The System
1925 – 1965 University/Military/Industry

30. Sputnik Launches
Venture Investing
1958 – SBIC Program

31. Regulatory Change Accelerates
Venture Capital
1979 – Change in Employee
Retirement Income Security Act
Pension Funds Pile In

32. Culture Embraced
Technology Risk
1958 – Today
Recognized that 90% of startups fail

33. Culture Embraced
Financial Risk
1968 – Today
Experienced Advice
Tolerance For Risk
Long Term Interest Aligned

34. So What Lessons Can We Learn
To Build Innovation?
Without Cold War Funding

35. Technology Ecosystem: Infrastructure
Venture
Entrepreneurs
Finance
Motivation Crisis Profit
Management Customer Agile Business Model
Tools Development Development Design
Culture Risk Taking Entrepreneurial
Outward-Facing Free flow of
Tech Universities People/Info
Infrastructure Research Predictable Stable
24/7 Utilities
Universities Economic System Legal System

36. Technology Ecosystem: Culture
Venture
Entrepreneurs
Finance
Motivation Crisis Profit
Management Customer Agile Business Model
Tools Development Development Design
Culture Accelerators, Outward-Facing Free flow of
Risk Taking
Incubators Tech Universities People/Info
Infrastructure Research Predictable Stable
24/7 Utilities
Universities Economic System Legal System

37. Technology Ecosystem: Tools
Entrepreneurs Risk Capital
Motivation Crisis Profit
Management Customer Agile Business Model
Tools Development Development Design
Culture Accelerators, Outward-Facing Free flow of
Risk Taking Incubators Tech Universities People/Info
Infrastructure Research Predictable Stable
24/7 Utilities
Universities Economic System Legal System

38. Technology Ecosystem: Motivation
Entrepreneurs Risk Capital
Motivation Crisis Profit
Management Customer Agile Business Model
Tools Development Development Design
Culture Accelerators, Outward-Facing Free flow of
Risk Taking Incubators Tech Universities People/Info
Infrastructure Research Predictable Stable
24/7 Utilities
Universities Economic System Legal System

39. Technology Ecosystem
Entrepreneurs Risk Capital
Motivation Crisis Profit
Management Customer Agile Business Model
Tools Development Development Design
Culture Risk Taking
Accelerators, Outward-Facing Free flow of
Incubators Tech Universities People/Info
Infrastructure Research Predictable Stable
24/7 Utilities
Universities Economic System Legal System

40. Lesson 3:
Making Startups Fail Less
Lessons From Silicon Valley
and the National Science
Foundation

41. After 50 years of Silicon Valley
We Now Know How To Build Startups

42. More startups fail from
a lack of customers than from a
failure of product development

43. What We Used to Believe

44. Startups are Smaller Versions of
Large Companies

45. What We Now Know

46. Startups are Not Smaller Versions
of Large Companies

47. Startups Search
Large Companies Execute

48. What We Used to Believe

49. All I Need to Do is Execute the Plan

50. Actual Photo of What Happens When
Plan Meets
First Contact With Customers

52. All I Need is the 5- Year Forecast

53. Previous
5-Year Plans

54. What We Now Know

55. No Business Plan Survives
First Contact
With Customers

56. Searching comes before the plan

57. What’s A Startup?

58. A temporary organization
designed to search
for a repeatable and scalable
business model

59. A temporary organization
designed to search
for a repeatable and scalable
business model

60. A temporary organization
designed to search
for a repeatable and scalable
business model

61. A temporary organization
designed to search
for a repeatable and scalable
business model

62. © 2012 Steve Blank

63. But,
Realize They’re Hypotheses

65. Customer Development is
how you search for the model

67. Summary Lesson 3:
Making Startups Fail Less
1. Startups Are Not Smaller Versions
Of Large Companies
2. Customer Development & Business
Models – Replace Business Plans

68. Lesson 4:
Can We Teach This?

69. Can We Teach This?
Lean LaunchPad Class
8 Weeks, 100 Customer Calls

70. Can We Teach This?
Lean LaunchPad Class
National Science Foundation

71. The Data Says
Yes You Can

72. Knowledge about Startups?
Coming Into the Class

73. Knowledge About Startups?
After the Class

74. The Data Says
It Will Create New Companies

75. Knowledge About Building a Company
Coming Into the Class

76. Knowledge About Building a Company
After the Class

77. What About the Other 99%
Will this Work on Main Street?

78. Small businesses are being built with
business tools from the 1950’s

79. These Techniques Now Can Help
Small Business Fail Less

80. In Closing:
So What Can States Do?

81. Recommendation 1
EncourageFail Fast and
Move Fast Culture

82. Recommendation 2
Encourage Incubators / Accelerators

83. Recommendation 3
Incent Risk Capital to Locate
Next to Your Entrepreneurial Centers

84. Recommendation 4
Encourage Your Universities to build
21st Century
Entrepreneurship Curriculum
+

85. Recommendation 5
Encourage
Small Business Initiatives
to Adopt these Same Techniques

86. I’ve open-sourced all this material
Happy to share it
www.steveblank.com
sblank@kandsranch.com
Curriculum, Syllabus, Slides, Teaching Guide and On-line Courses
all available for free www.steveblank.com