Creating

Startups

Ufuk Batum, Spring Semester, 2020

So what makes for a
successful startup or
a spinoff?
Start with brilliant
individuals...
METU!
…young entrepreneurs
with good education
and some experience…
They are all...
Executives…
All their “operating”
experience built up
some...?
...outstanding
credentials!
One day they have...
A “killer”
product/service idea!
A “killer”
business idea!
They are really
passionate about it!
They are all very smart!

They know how to test their

business idea using...
...market
research
The market research
looks good!

They move forward, and

write a fantastic...?
Great! Based on:
- credentials,
- market research
- business plan

the final piece is secured!

3F or BA or VC Funding!
Funds in hand;
The group get’s started on!
...building their
start-up(s
They make the headlines
of every major...
...and are invited to give...
...keynote talks!
The group and
the start-up
are on a roll!
How likely is this
business to succeed?
Despite the experience,
the market research and
the business plan...
...there might
be a slipping up!!!
Let’s help the group
with 5 major things
they might have forgotten!

29
 No business
plan survives
the first
customer
contact!
Sticking to a planning
document works for a
known future, probably
not for your context!

Plans generally fail in a startu

“It’s the
business
model,
stupid!”
The plan so far was really
to build a company, but
did your plan include a
good Business Model?
 “A business model describes
the rationale of how an organization
identifies, creates, delivers, and
captures MARKET VALUE.”
Here are the 9 building blocks of
a business model:
CUSTOMER SEGMENTS

which customers and users are you serving?

which jobs do they really want to get done?
VALUE PROPOSITIONS

what are you offering them? what is that

getting done for them? do they care?
 CHANNELS

how does each customer segment want to be reached?

through which interaction points?
CUSTOMER RELATIONSHIPS

what relationships are you establishing with each segment?

personal? automated? acquisitive? retentive?
 REVENUE STREAMS

what are customers really willing to pay for? how?

are you generating transactional or recurring revenues?
 KEY RESOURCES

which resources underpin your business model?

which assets are essential?
 KEY ACTIVITIES

which activities do you need to perform well in

your business model? what is crucial?
 KEY PARTNERS

which partners and suppliers leverage your model?

who do you need to rely on?
COST STRUCTURE

what is the resulting cost structure?

which key elements drive your costs?
 key value customer
activities proposition relationships

key customer
partners segments

cost revenue
structure key streams
resources channels
“Hmm, interesting so
what do I make of
that?”
use it as a tool!
sketch out your business model
building
block
 building
block building
building
block block

building
block
 building
block building
block

building
block building
building
building block block
block

building
block

building
building
block
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buildin
building g building
block
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The tool is:
Business Model Canvas
 Take time
to think
through
alternative
possibilities.
The same technology, product or service
can have numerous business models!
Try sketching out alternative
business models by asking
yourself...
transactional vs. product vs. service scale vs. scope
recurring revenues
blue ocean vs. red
niche market vs. ocean
direct sales vs.
mass market indirect sales
personal vs.
capital expenditure vs. automated
open vs. closed
partnership
disruptive vs.
human intensive vs. incremental
acquisition vs. retention system intensive

difficult questions
one customer segment physical vs. virtual tailor-made vs. mass
vs. another production

paid vs. free copyright vs. copyleft fixed vs. variable

costs
distributed vs. in-sourcing vs. out- advertising vs.
centralized sourcing sales
Only make a first choice after prototyping
and thinking through several models...
OK. You’ve got your model,
but you’re not done yet...
Your business
model idea is
just a set of
hypotheses.
A business model might look great on
paper...

building
block

building
buildin block
g block
building
block
block
building
block
buildin
block g

building
building block
block

buildin
block g ... but be
honest that it’s
building build
block blocing
k

buildin
block g
 ... just a set of hypotheses

guess guess
guess
guess guess
guess
guess
guess guess

guess guess guess

...so you need to get out of your
regular business day and...
 test each hypothesis
(e.g. with customers)
This business model testing process is
called Customer Development

customer customer customer company

discovery validation creation building

pivot
two different phases...
 search

customer customer customer company

discovery validation creation building

pivot

execution
and it starts with...
... verifying
every
hypothesis

customer customer customer company

discovery validation creation building

pivot
test your hypotheses

product
market type
competition
test your hypotheses

problem
customer
user
payer
test your hypotheses

channel
 test your hypotheses

demand
creation
problem
channel product
customer
(customer) market type
user
(problem) competition channel
payer

validate business pricing

model model
to accomplish this you will need a special
and agile...
customer
development
team
A team that...
...gets out of the
building!
 ...to test and adapt your model
agile business
model demand
adaptation creation
problem
channel product customer
(customer) market type user
(problem) competition payer
customer
development channel
team

validate business pricing

model model
You need to adapt the
business model until
you can prove it works!

customer customer customer company

discovery validation creation building

pivot
“How do I prove
a business
model works?”
One example of “proving” is
concluding the...
 ...sales of a “minimum viable
feature set!”
This adaptation process is called...
 the pivot

customer customer customer company

discovery validation creation building

pivot

(repeat * until proven)

So do you have any “factual” proof?
Congratulations!
You finished the search
process!
So don’t ever forget...
Don’t build your
company, until
you’ve verified
your Business
Model!
or you’ll risk...
Burning the cash while
searching for a working
business model!
execution is not search
execution follows search
Build when you’ve found
your model!
Only then execute!
 scale your marketing

customer customer customer company

discovery validation creation building

pivot
execution
 and build your org
structures

customer customer customer company

discovery validation creation building

pivot
execution
1 No business plan survives the
first customer contact.

2 It’s the business model, stupid.

3 Take time to think through

alternative possibilities.

4 Your business model idea is

just a set of hypotheses.

5 Don’t build your company,

until you’ve verified your
Business Model.
Good
Luck!
ufuk.batum@gmail.com