Class 15, Week 8 – Resources, Activities and Costs

The seventh “Lean Launchpad” class is the last one of curriculum. It looks at the key activities and resources, and how much they’ll cost, to make the product the business sells. Being on the left side of the business model canvas means I consider it part of the “product” side of the startup equation. One basic assumption I had going into the accelerator was that if you a team could prove there was a market for their product, a demand for it, that they would be able to build it. Building would require people and resources but those aren’t in short supply if you have the money to pay for them.

Product Market Fit

All of the work the teams did to validate their market answers the first startup question: does anyone want to buy or use what I’m making? That goes by the handy name of product-market fit.

Paying for the product

The second question is can I make money selling the product or service that people want? That gets into all the questions of customers and channels, culminating in the revenue box on the business model canvas.

A profitable business

The third question is whether the business makes enough money to be worth operating it. Costs are the critical piece of the puzzle here. If people are willing to pay for a product, are they willing to pay enough to generate the surplus needed to pay for the folks and equipment who make the product and have enough left over to return the founders’ and investors’ capital contributions.

The business model canvas (bmc)

It takes seven weeks to get through the bmc using the Lean Launchpad curriculum and I believe by the end the teams have an understanding of what it takes to put a business together. In many way, running the summer accelerator was a startup experiment of whether running teams through weekly cycles of learning about building a business and running lean startup-style experiments (link to MVP examples) would be effective. And by effective I mean could they find people willing to pay (or at least use) their product.

Coming into the accelerator, none of the teams had asked for any firm commitments from their customers. That’s a big piece to be missing! By the end of the summer, we’ve had quite a bit of success in that area. Driven Analytics has a paid pilot with two dealerships. Levaté has 150 people signed up to be beta testers. Xip (né Park Ave) has a $10,000 grant from the University of Oklahoma’s parking director to run a proof of concept. Icarus has verbal commitments from construction agencies to do paid flights this very weekend.

In my estimation, that’s a fair amount of progress to have made in two months. And that’s just from the business side. From the academic side, the students have been exposed to, and used, a variety of methodologies that are very much in vogue in the business world, particularly agile and lean. They also have experience in using the business model canvas and a kanban board. They learned how to make weekly commitments and stick to them to keep momentum always moving forward. They learned how to deal with outside investment, form a company, negotiate among founders, track cash inflows and outflows, build and test a sales channel, and how to close a customer. And most importantly, in my estimation, how to truly validate if an idea holds water and to make the tough decisions about whether to pursue ideas or change to new ones (pivot or persevere).

All that’s left is the pitch

At this point, the main event, Demo Day, is what remains of the summer’s activities. The teams need to pull together all their learnings, all their experiments, and all their progress into one five-minute presentation. There are quite few folks coming to Demo Day so the teams will have a strong audience full of critical thinkers in the entrepreneurship space.

At this point, the teams have had to officially pitch their business at least once a week at the team dinner as well as one class mid-way through on pitching. They’ve also had a storyboarding class that helped them think through the flow of a pitch. And last but not least, they had to think of how they would pitch their business almost every single day when talking to potential customers, clients, partners, and investors.

Posted in Lean Startup, Startup, Testing ideas in the real world

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