kbs+ Ventures Fellows #2: Building a Business - Product/Market Fit 11.19.14

1
FELLOWS CLASS #2
NOVEMBER 19TH, 2014
Friday, December 12, 14

IN TODAY’S CLASS... 2
• LAST WEEK’S READING / VIDEO
• PRODUCT / MARKET FIT
• COMPETITION
• REAL WORLD PERSPECTIVE: SATISH POLISETTI, ADSNATIVE
• HOMEWORK #1: PROBLEM LOGS
• HOMEWORK #2: DILIGENCE (DUE DECEMBER 12TH)
• QUESTIONS

3 INGREDIENTS TO A SUCCESSFUL STARTUP:
3
TEAM
PRODUCT
MARKET

4
TEAM
PRODUCT
MARKET
CALIBER OF THE TEAM DEFINED BY...
✓ SUITABILITY OF THE CEO
✓ SENIOR STAFF, ENGINEERS, AND
OTHER KEY TALENT
✓ TEAM DYNAMIC
Will
range
from
outstanding
to
remarkably
flawed

5
TEAM
PRODUCT
MARKET
QUALITY OF A STARTUP’S PRODUCT
CAN BE DEFINED AS...
✓ HOW USEFUL IT TO CONSUMERS
✓ EASE OF USE
✓ HOW DEFENSIBLE IS IT?
✓ HOW MANY FEATURES?
✓ HOW FAST IS IT?
✓ HOW BUGGY IS IT?
Will
range
from
outstanding
to
remarkably
flawed
Will
range
from
a
masterpiece
of
engineering
to
barely
func7onal

Will
range
from
a
masterpiece
of
engineering
to
barely
func7onal
6
TEAM
PRODUCT
MARKET
SIZE OF A STARTUP’S MARKET IS
DEFINED BY:
✓ NUMBER OF CUSTOMERS
✓ GROWTH RATE OF USERS
✓ POTENTIAL REVENUE
Will
range
from
outstanding
to
remarkably
flawed
Will
range
from
booming
to
comatose.

WHICH FACTOR DOMINATES? 7
TEAM, PRODUCT, MARKET, SHOOT!

8 WHICH FACTOR DOMINATES?
GREAT MARKET WINS.
“BAD MARKET BEATS GREAT TEAM OR PRODUCT EVERY TIME.
IT DOESNT MATTER, YOU’RE GOING TO FAIL”

9
WHICH FACTOR DOMINATES?
“IN
A
GREAT
MARKET
-‐
A
MARKET
WITH
LOTS
OF
POTENTIAL
CUSTOMERS
-‐
THE
MARKET
PULLS
PRODUCT
OUT
OF
A
STARTUP.”
-‐
MARC
ANDREESSEN

SECRET TO SUCCESS? 10

SECRET TO SUCCESS? 10
FINDING PRODUCT/MARKET FIT

FINDING PRODUCT/MARKET FIT 11
• BECOME AN EXPERT IN THAT MARKET
• OBSESSIVE RESEARCH
• GET IN THE SHOES OF YOUR CUSTOMERS - LITERALLY
• LISTEN TO YOUR CUSTOMERS
• BE FLEXIBLE: MAKE CHANGES TO THE TEAM AND VISION
• ITERATE YOUR PRODUCT: HYPOTHESIS, TEST, LEARN, REPEAT
• BE SELF AWARE: KNOW YOUR STRENGTHS AND DEFICIENCIES
DO WHATEVER IS REQUIRED TO GET THERE...

FINDING PRODUCT/MARKET FIT: HOMEJOY 12
TRY DOING IT YOURSELF READ UP ON IT JOIN THE COMPETITION START A BETTER
BUSINESS

13 FINDING PRODUCT/MARKET FIT
GOLDILOCKS PRINCIPLE:
SOMETHING MUST FALL WITHIN CERTAIN MARGINS, AS OPPOSED TO REACHING EXTREMES. IT’S
USED IN THE “RARE EARTH HYPOTHESIS” TO STATE THAT A PLANET MUST NEITHER BE TOO FAR
AWAY FROM, NOR TOO CLOSE TO THE SUN TO SUPPORT LIFE.

GOLDILOCKS PRINCIPLE 14
BUT FOR TECHNOLOGY....
“TOO HOT” .... (“STRATEGIC” OR “CORE”) “TOO COLD” ....

✓ POTENTIAL PARTNER BUILDS IT IN HOUSE
✓ POTENTIAL PARTNER SAYS YES, BECAUSE
THE PRODUCT IS SO DEFENSIBLE
✓ POTENTIAL PARTNER ACQUIRES TECH

✓ NOT USEFUL TO POTENTIAL CUSTOMERS
✓ NOT USEFUL TO POTENTIAL PARTNERS
✓ RE-LOOK AT YOUR PRODUCT/MARKET,
AND LIKELY PIVOT THE BUSINESS

✓ NOT USEFUL TO POTENTIAL CUSTOMERS
✓ NOT USEFUL TO POTENTIAL PARTNERS
✓ RE-LOOK AT YOUR PRODUCT/MARKET,
AND LIKELY PIVOT THE BUSINESS
TO BE A SUSTAINABLE BUSINESS, YOU NEED TO BE “JUST RIGHT”

YOU’LL KNOW WHEN IT’S HAPPENING... 15
• DEFINED PROBLEM
• LARGE # OF POTENTIAL CUSTOMERS
• WILLINGNESS TO PAY
• CAPACITY TO PAY
• EASY TO REACH
• EASY TO TARGET
• PRESS OPPORTUNITIES
• LOW FRICTION
• CLEAR BUSINESS MODEL
• HIGH BARRIERS TO EXIT
• NETWORK EFFECT
• COMPETITION
• NATURAL MONOPOLY

AND WHEN IT’S NOT HAPPENING... 16
• CUSTOMERS AREN’T SEEING THE VALUE
• WORD OF MOUTH ISN’T SPREADING
• LOW CONSUMER ADOPTION
• PRESS REVIEWS ARE “BLAH”
• SALES CYCLES ARE TOO LONG
• DEALS DON’T CLOSE
• TEAM MORAL DECLINING

TITLE / HEADER 17 FINDING PRODUCT/MARKET FIT
GENERAL RULE OF THUMB:
“ACHIEVEMENT OF PRODUCT/MARKET FIT CAN BE MEASURED ACCORDING TO A SPECIFIC METRIC.
WHEN, IN A SURVEY, AT LEAST 40% OF USERS SAY THEY WOULD BE “VERY DISAPPOINTED” WITHOUT
YOUR PRODUCT OR SERVICE.”
-‐
STEVE
BLANK,
4
STEPS
TO
THE
EPIPHANY

FINDING “FOUNDER/MARKET FIT” 18
“PEOPLE WHO PERSONIFY THEIR PRODUCT, BUSINESS AND ULTIMATELY THEIR COMPANY”

COMPETITION 19
NEVER UNDERSTATE THE COMPETITION
•THINK ABOUT YOUR COMPETITION BROADLY - DON’T “DOMINATE BY DEFINITION”

COMPETITION 19
“ONLY BRITISH
FOOD IN PALO
ALTO”

COMPETITION 19
WHAT’S THE MARKET FOR ALL
RESTAURANTS IN PALO ALTO?
“ONLY BRITISH
FOOD IN PALO
ALTO”

COMPETITION 19
WHAT ABOUT RESTAURANTS IN
NEARBY TOWNS?
WHAT’S THE MARKET FOR ALL
RESTAURANTS IN PALO ALTO?
“ONLY BRITISH
FOOD IN PALO
ALTO”

COMPETITIVE CHECKLIST 20
• WHAT IS THE CORE VALUE PROPOSITION?
• BE ABLE TO CLEARLY DEFINE YOUR MARKET POSITION
• WHAT IS DEFENSIBLE, OR EXCLUSIVE TO YOUR BUSINESS?
• ARE THERE HIGH BARRIERS TO EXIT?
• WHY SHOULD YOUR CUSTOMERS CARE?
• WHO ARE YOUR DIRECT, OR INDIRECT COMPETITORS?
• WHO, OR WHAT, COULD PUT YOU OUT OF BUSINESS?

REAL WORLD PERSPECTIVE 21
FOUNDER SPOTLIGHT!
SATISH POLISETTI
• CEO AND CO-FOUNDER
• SERIAL ENTREPRENEUR
• DOUBLE MAJOR IN MECHANICAL &
ELECTRICAL ENGINEERING
• RECOGNIZED AS A “30 UNDER 30”

SATISH SLIDES 22

REFRAMING THE PROBLEM 23
• DEFINE A “SUPPORTING BELIEFS”
• SHARE AN INSIGHT THAT HASNT BEEN CONSIDERED
• WHAT’S THE OPPOSITE OF THE SUPPORTING BELIEFS?
• ASK “WHY”

HOMEWORK ASSIGNMENT #2 24
DILIGENCE REPORT: (EITHER 5 SLIDE, OR 2 PAGE OVERVIEW DOCUMENT)
• WHAT IS THE MARKET PROBLEM / INEFFICIENCY YOU ARE SOLVING?
• WHAT’S THE MARKET SIZE?
• WHO IS YOUR CORE CUSTOMER?
• WHAT ARE THEIR PAIN POINTS, AND HOW ARE THEY CURRENTLY SOLVING IT?
• WHO ARE YOUR COMPETITORS?
• HOW WILL YOUR GET YOUR FIRST CUSTOMERS / USERS?
• WHAT FEATURES WOULD BE INCLUDED IN YOUR MVP?
• COME UP WITH A STARTUP NAME
DUE: PRESENTED IN THE FRIDAY, DECEMBER 12TH CLASS

CONTACT:
JESSICA PELTZ, INVESTMENT DIRECTOR
JPELTZ@KBSP.VC
JOSH ENGROFF, MANAGING PARTNER
JENGROFF@KBSP.VC
QUESTIONS? 25

kbs+ Ventures Fellows #2: Building a Business - Product/Market Fit 11.19.14

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kbs+ Ventures Fellows #2: Building a Business - Product/Market Fit 11.19.14