Are you Validating the right Hypothesis?

The above video is from the Stanford University's Entrepreneurship Corner. Alexander Osterwalder explaining his Business Model Canvas, with examples and Steve Blank joining him to discuss about Customer Development and how it all fits together. It is 53 minutes long but well worth it. There is an iPad App called Business Model Toolbox ($29) which you can buy, I think it is pretty neat because it has the Cost estimation embedded in it. The entire tool set could allow us to define our hypothesis and then we can use the canvas to define our value proposition and the customer pain vs gain map. This whole approach allows for understanding what needs to be validated. We talked a lot about Validated Learning in our meetup last week and I am still thinking about how do we know we are validating the right thing. Alexander and Steve explain this in the video. Check it out.

Related articles

• Steve Blank: Two Giant Steps Forward for Entrepreneurs (huffingtonpost.com)
• The Government Starts an Incubator: The National Science Foundation Innovation Corps (blogs.berkeley.edu)
• Challenge: Can You Tell a Business Model from a Business Plan? (timberry.bplans.com)

Why do Startups Fail?

I saw this post on Business Insider with the title "Don't do a startup, You WILL fail!" based on a presentation by Dave McClure. Dave is a colorful Super Angel and invests with an interesting investment thesis. But what Dave says is spot on and he is one of those who don't Bull S#$%. Of course Dave goes on rant about all the wrong reasons that entrepreneurs start companies and then they complain that they were not successful. Go an flip through his presentation and ask yourself if you are doing your startup for any of those reasons. I like some of the tips that he has on the presentation, I like this one:

• Doing a startup is a lesson in Pain & Sacrifice. If you are not ready to sacrifice and don't like pain, just don't bother because there will be times when you feel like you are scratching your fingernails against a rough sand paper. You need to have the persistence to ride those phases with optimism and positive energy.
• You have not instrumented your market or your product, i.e you don't know or have any metrics about how your solutions is changing market behavior. You don't know what is a Lean Startup or Steve Blank's work on Customer Development. Dave has what he calls the AARRR Metrics. Which stands for:

1. Acquisition: How are users coming to your site from various channels? Do you know the channels?
2. Activation: Are users happy with their first experience?
3. Retention: Are users coming back?
4. Referral: Are users telling others?
5. Revenue: Are users spending money or allowing you to monetize in some way? The most important of all is whether you are measuring all of the above and what do they tell you.

• You focus too much on the solution and not on the problem, better still you are really not solving a problem at all. It is not about the idea, it is always about the problem, the bigger, the bolder, the world changing the problem the better are you chances of building a business around that problem. I have written about it.
• Your team sucks. There is no way out of that problem! You just need A players to go win the world. As I always say you cannot make a Donkey run the Kentucky Derby... it would get the sympathy but it will never win! The under dog stories are great but they rarely come true in real life. You better have a strong team that knows what it is doing otherwise you are lost period.
• You have no knowledge of how to market or sell your product. You have this view that if you build it they will come. It is just not going to happen.

You have no idea of how to address any of the above topics but you have a fantastic idea! I say good luck, but I am sure Dave would say something much less nicer.

Related articles

• Silicon Valley 2.0 -- The Lean VC (slideshare.net)
• What Is A Startup (Or A Startup Idea)? (skorks.com)
• Why Startup Founders Need to Talk to Their Customers [VIDEO] (mashable.com)
• Lean Startup - A Principled Approach to New Product Development (edocr.com)
• How Y Combinator and 500 Startups are different (vator.tv)
• 'DON'T Do A Startup, You Will FAIL,' Says Top Startup Investor (businessinsider.com)
• If you haven't seen Dave McClure's 'How to pitch a VC', now's the time [video] (thenextweb.com)