How to build a successful start-up
I started this series a month ago with the 1st blog on Generate an idea (but remember that it’s worthless) followed by In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users”. I have copied the intro to the series directly below and you will then find part 3: “Document your Plan A” – the subject of this post
Original intro to the series:
The goal of a founder who wants to create a big company is to find product/market fit in a large market – one that is at least £0.5B/$0.75B in size. Much smaller than that and a venture investors won’t be confident that he or she will get 10x on their investment (and note that it doesn’t matter at which stage you’re working, as if an early stage investor like us, we need to believe that we will be able to sell you onto a Series A/B investor who also has to believe he or she can get 10x and so on). It’s not right all the time, but it’s a rule of thumb.
The Lean methodology, thought up by Eric Ries and then evolved by many others, is the best way to work through the early stages to product/market fit.
We like Running Lean by Ash Maurya for a clear outline of what this entails.
What Ash excludes from his thinking is in-depth customer observations, as developed by IDEO, the design firm founded by David Kelley in Palo Alto, right next door to Stanford University, my alma mater, and a clear definition of “strategy” for the start-up.
(Overly) Simply put, we think a founder needs to take the following steps:
- Generate an idea (but remember that it’s worthless)
- In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users”
- Document your Plan A – the subject of this post
- Identify the riskiest parts of your plan
- Systematically test your plan
- Get to Release 1.0
- Reach product/market fit
- Define your strategy (Goals, Scope, Competitive Advantage, Logic)
I will write a barebones explanation for each of these 9 steps with as many links and references as I can so you can read better writers’ thoughts on the subject.
And please note that at some point on this journey you need to find a co-founder. It’s pretty rare for a solo founder to manage it all on his or her own. It happens, but it’s rare. I’ll write about that as an additional point 10:
10. How to do the co-founder thing
And the last thing that you absolutely need is a great culture.
11. What is a great culture?
Here we go:
3. Document your plan A
Having observed 5-10 users in-depth you will be able to synthesize your observations and create a point of view (POV) about the user and their problem. A POV has 3 key elements: a specific user, that user’s need, and a surprising insight.
eBay: Pez dispenser collectors want to easily trade dispensers and would trust a marketplace where they pay before they receive the product
AirBnb: Young professionals in San Francisco want to make money from their spare rooms and would be happy to have strangers rent their spare rooms via the web
Zappos: Young professionals want to buy shoes in a hassle free way and would be happy to buy over the web if the returns of unwanted shoes was really easy
CarWow: Mid-market car buyers want to get a good deal on buying a new car and would be happy to buy a car sight unseen over the web if a site could remove the hassle of negotiating
With a clear PoV, you can create your first prototypes – plural, because you should create multiple simple prototypes to start with and test them with multiple users to learn from them. This whole process is about learning to build the right product or service – one that people actually want enough to pay for. These prototypes should be rudimentary and simple: wire-frames or simple screen shots are fine, but they must be visual, not a verbal or written description.
Now comes the real documentation of your Plan A. Take your learnings from the above and create what Ash has called a “Lean Canvas” – a single page business plan in the form of a table. You need to build a Lean Canvas for each customer segment (which you will later rank to prioritise which to address first).
Ash writes a lot about this in his book, so read it there or use his free Lean Canvas creation tool (free for 2 users) here: http://leancanvas.com/