1. How to Think like Startup
Brief summary notes and observations made by Artem Rumiantsev artem@roomian.org
and based on the brilliant Steve Blank’s course on Udacity.com

2. General Approach
If you know how to go from the idea to the business:
• Do some research and write business plan and you will know how to
run your own business – this MBA-like advice is wrong! Startups are
NOT just smaller versions of larger companies, and all MBA tools are
irrelevant on a startup’s day one. This wrong belief is based on that we
can start absolutely any company just by spending a lot of time on
writing complicated operating plan and financial model and then hire
people to execute this plans.
• BUT now we know that no plan survives first contact with customers!
First days of startup are completely unpredictable.
• Business plans and financial forecasts are just silly as it was in the
Soviet Union. This doesn’t mean we shouldn’t have any planning, but
what we need is planning before plan. This means you need some real
facts before we can do that. And you need to organize your facts in what
is called Business Model Canvas.
• So, first you need to draft Business Model Canvas that helps you to
organize your thinking and get out of the building to turn your
hypothesis into facts and update canvas on regular basis. Canvas
becomes a score card.

3. General Approach
Please, don’t be Soviet Planning adept. Or you’ll fail!

4. Startup Founder’s Education
Sure, if your startup will grow into a large company you’ll need all MBA
set of skills to EXECUTE your company.
BUT for the first days of your startup you need a different set of skills
that just never existed before to SEARCH:
• Business Model Design – set of guesses
• Customer Development – how to change guesses into facts
• Startup Team Building
• Entrepreneurial Finance
• Agile Development
• Marketing
What can happen to a Startup?
 It can grow into a company – I’m sure you want this with all your heart!
 It can pivot and iterate as it continues to search for a right business
model
 It can grow very slowly and barely break even
 It can run out of money and shutdown

5. What is a Startup?
• A temporary organization
• Aims to become a company
• Designed to SEARCH for something… that is…
 Repeatable and
 Scalable
So, you’re searching for a Business Model…
Business Model is how company creates value for itself while delivering
products or services to its clients.
So, to define the exact Business Model of your Startup you should draw a
diagram named BUSINESS MODEL CANVAS and think about all pieces of
business.

6. The 9 Building Blocks of Canvas*
The CANVAS is a SET OF GUESSES.
* www.businessmodelgeneration.com

7. 1. Value Proposition
It’s not about you idea or product, it’s about SOLVING A PROBLEM OR NEED
for a customer.
Technology is only part of your Value Proposition. Customers don’t care
about your technology. They are trying to solve problem or fulfill a need.
Example of problem:
• Accounting problem or Word processing.
Example of need:
• Entertainment or Communication with friends.
Market for solving needs is HUGE comparing to solving specific problems.
Value Proposition works hand in hand with Customer Segments. This
relationship is what makes Startup succeed of fail at Day 1. And we called that
relationship PRODUCT MARKET FIT. This means that your product FITS
needs of special customer segments.
Product Market Fit allows us to search and make iterations or doing PIVOTS
to understand what customer really want without going out of the business.

8. Value Proposition Services
Which core services are part of your value proposition?
• Consulting
• Haircut
• Investment advice
Which pre-sales or sales services?
• Help finding right solution
• Financing
• Free delivery
Which after-sales services?
• Free maintenance
• Free disposal of something
Value Proposition Common Mistakes
• It's just a feature of someone else's product
• It's "nice to have" instead of "got to have" (don't forget to prioritize pains
and gains!)
• Not enough customers care

9. Minimum Viable Product
In the Startup you're GUESSING and you could guessing LONG. Because
customers didn't have input, many products were made that didn't satisfy
customers' wants and needs. So rather than waste a lot of time and
money, you should go outside the building before you build something and
waste engineering efforts and cash!
MVP:
1. Build the minimum features in order to get FEEDBACK
2. Quickly and iteratively get customer feedback
3. As you get more feedback you can ADD MORE FEATURES
But on a new market, of course, you can’t go outside the building to get
customers feedback.
But in case of sitting in your office there is no way to understand your
customers’ problems and needs.

10. 2. Customer Segments
Your customers are not exist to buy, you exits for them.
And you need to go out of the building and figure out:
• WHO are they (customers archetypes)
 Geographic
 Social
 Demographics
• WHY would they buy
Jobs to be done:
• What functional and social jobs are getting done?
• What emotional jobs?
• What basic needs are you helping your customers satisfy?
Spend day in the life of customer!

11. 3. Channels
How does the product get from your company to the customer?
• Physical channels
• Virtual (web, mobile) channels
Web Distribution Channels:
• Dedicated e-commerce
• Platform app-store
• Two-step distribution
• Aggregator
• Social Commerce
• Flash Sales
Some observations:
• You can’t afford multiple distribution channels at Day 1. Pick one.
• You should pay attention to Channel economics.

12. 4. Customer Relationships
How does a company GET, KEEP and GROW customers.
Customer archetypes:
• What's their role
• Who are they
• How do they buy
• What matters
GET (WEB):
• Paid demand activities designed to FEED SALES FUNNEL: Public
relations; Advertising; Trade shows; Webinars; E-mail/Direct mail; SEM
• Earned demand activities: Publications in Journals;
Conferences/Speeches; Blogging/Guest Articles; Social Media
KEEP (WEB):
• Loyalty Programs; Contests/Events; Blogs/RSS/E-mail; Social Media
Be afraid or customer CHURN!
GROW:
• Just like in the physical channel: up-sell; next-sell; cross-sell; referrals.
Lifetime Value NEEDS to be greater then Customer Acquisition Costs!

13. 5. Revenue Streams
• What value is the customer paying for. Price should be based on VALUE
not just the cheapest product!
• Revenue models are the STRATEGY.
• Pricing is the TACTICS.
Mistakes:
• Revenue Stream is the PRICE I charge customers
• I set the price based on how much it costs to make it
• My price has to be less than my competitor's price
It's important to understand how much are they currently paying for the
same product?
Revenue streams possibilities:
• Assets Sale (Ford, Walmart)
• Usage Fee (Verizon Wireless, Amazon Web Services, FedEx, SunRun)
• Subscription Fee (Salesforce.com, NetFlix)
• Renting (Chegg, Borrowlenses.com)
• Licensing (Microsoft, EA)
• Intermediation Fee/Matchmaking Fee (Airbnb, Etsy)
• Advertising (Google, Mint, Facebook)
Different pricing tactics inside (fixed and dynamic)!

14. 6. Key Resources
What are the MOST IMPORTANT ASSETS required to make the business
model work?
• Finance (raising money)
• Physical (PCs, vehicles, manufacturing)
• Intellectual (Patents, Customer lists or databases, People)
• Human (Human Engineers, Scientists)

15. 7. Partners
Who are the KEY PARTNERS AND SUPPLIERS needed to make the business
model work?
And before sign the deal you need to understand:
• What key resources are you acquiring from the partner?
• What key activities do they perform and when?
Types of partners:
• Strategic Alliance
• Joint Venture
• Traffic Partners
• Coopetition
• Joint Business Development
• Suppliers
Find companies the same size as you. Remember, you're Startup!

16. 8. Activities
What are the MOST IMPORTANT THINGS you need DO to make business
model WORK.
Depending on the area of your expertise:
• Production (fixed, variable costs)
• Problem solving (consulting, engineering)
• Supply chain management

17. 9. Costs
What are the COSTS to operate the business model.
• Most important costs
• Most expensive resources
• Most expensive activities

18. Customer Development
This is how you change GUESSES into FACTS!
Get out of the building, start talk to customers, partners, vendors and test
your hypothesis!
2 steps of SEARCH:
• Customer discovery
• Customer validation
• Customer creation
• Company building
So, instead of firing and hiring sales managers in the future you should right
now get out of the building and test some primary assumptions! Usually if
Sales didn’t match the sales plan we’re making changes simply by firing
executives instead of having Founder engaged at Day 1. And that is the idea
of getting the Founder outside of the building.
Customer Development should be done by FOUNDERS! Only Founder can:
• Change the product
• Make pivots
• Hear customer feedback first hand
Pivot – initial steps that will save your job!

19. Pivot
What do you do when your GUESSES do not match REALITY?
• Pivots are the results of hypothesis and experimentation
• Pivot is a substantive change to one or more business model components.
An iteration is a minor change.
• You should anyway do those iterations to match better your guesses with
reality!
FIRE THE HYPOTHESIS not the FOUNDER!

20. Market Opportunity Analysis
Before you start do Market Opportunity Analysis:
• Identify a Customer and Market Need
• Size the Market
 Total Available Market and
 Served Available Market
 Target Market
• Define Competitors
• Growth Potential
To understand Market Size:
• Talk to customers and Sales Channels
• Market Size by Competitive Approximation (Analyst Reports)
• Market Research Firms (Forrester, Gartner)
Keep in mind that research data is wonderful on the size of markets in the
PAST, but researchers are not good in predicting FUTURE (that is why they
do not run hedge funds).

21. Market Types
Market type Customers Customer
Needs
Competitors Risk Example
Existing Known Performance Many Lack of
branding, sales,
distribution
Google
Resegmented Possible
Known
Better Fit Many if
wrong, Few if
right
Market and
product re-
definition
Southwest
Airlines
New Unknown Transformati
onal
improvement
None Education and
Evangelism,
tons of money to
create market
Groupon
Clone Possible
Known
Local Version None Misjudge local
needs
Baidu
Rank of markets due to the shortest time to profitability:
1. Existing Market
2. Clone Market
3. Resegmented Market
4. New Market

22. Points of Attention
• Building Business Model Canvas is a MUST for Startups!
• Understanding of Market Types is ESSENTIAL for Startups!
• Pre-mature spending is a KILLER for Startups!
Metrics that Matter:
• Value Proposition
• Market Type
• Revenue Streams
• Burn Rate
• Operating Costs
• Customer Relationships
• Channel

23. Recommendations
If you’re a big fan of startup culture,
If you’re a Startup or have just got a brilliant idea that needs
implementation,
If you are a company executive that appreciates new ideas and technologies
and wants to benefit from open innovation
Please feel free to contact me
artem@roomian.org
I strongly recommend Steve Blank’s
course on Udacity.com
and book “Business Model Generation”
www.businessmodelgeneration.com