Slides - Session 4

Rich Vs King
1
How to segment the market?
1. Ideate
2. Narrow down options
3. Primary Research
Source: Aulet, B. (2013). Disciplined entrepreneurship: 24 steps to a successful startup. John Wiley &
Sons.pg. 25-26
● Step 2: Narrow down
● Market Segment is one where there is:
● Same Product
● Same Sales Process and Sales Cycle
● Word of Mouth exists (to gain traction)
Sons.pg. 25-26
● Step 2: Narrow down
● Select 6-12 of the most promising market opportunities

based on the following questions:
○ Can the customer pay? If not who will pay?
○ Is the target customer available to your sales force?
○ Does the target customer have a compelling reason to buy?
○ Can you today, with the help of partners, deliver the whole product/service?
○ Can the competition block you from reaching your customers?
○ If you win this segment, can you leverage it to enter additional segments?
○ Is there a conflict between the opportunity and founders’ goals?
Sons.pg. 25-26
1. Ideate
2. Narrow down options
3. Primary Research
Sons.pg. 25-26
● Step 3: Primary research
● Questions to be answered:
○ End User
○ Application
○ Benefits
○ Lead Customers
○ Market Characteristics
○ Partners/Players
○ Size of the market – 100% market penetration leads to how many customers
○ Competition
○ Complementary Assets Required
● Avoid analysis paralysis

● Avoid google and office/desktop research.
Sons.pg. 25-26
Source: Aulet, B. (2013). Disciplined entrepreneurship: 24 steps to a successful startup. John Wiley & Sons.pg. 25-26
Beachhead markets and more
4. Select a beachhead market
5. Detail out the end user
6. Calculate the TAM Size
Sons.pg. 25-26
Create a market that you can dominate
Source: https://medium.com/back-to-the-napkin/video-using-a-beachhead-to-jump-start-your-digital-
transformation-112d9a059a2a accessed on 12/11/2020
Create a market that you can dominate
● Also known as a blue ocean, a beach head market.
● For IDEs, creation of a new market with high market share
and can be used for future expansion.
● Once you have a foothold in the beach head market, you
will have enough resources to enter adjacent markets.
● Don’t be an “us-too” player given your limited resources.
● A target market is a group of potential customers who
share many characteristics and who would all have similar
reasons to buy a particular product.
“Selling to Everyone”
● Although for survival, alternate revenue sources might be
required, the beach head market should itself have the
potential to provide extra normal profits.
● Required for funding.
● Avoid being an also ran.
● Example: “The Audi dealership”.
● The conflict between resource constraints and innovation.
Sons.pg. 25-26
The “China Syndrome”
● Also called “fun with spreadsheets”.
● “The Internet says China has over 1.3 billion people. If they all
have teeth, the market size is 1.3 billion customers. I’ll build a
toothbrush for the Chinese market, and maybe we’ll get 0.1
percent market share in the first year.”
● “If each person buys three toothbrushes a year, we could sell

3.9 million toothbrushes per year, and if we sell them for $1
each, we have $3.9 million in sales the first year, with lots of
room to grow.”
● Take your resources and apply them to a narrow, carefully
defined new market that you can dominate.
Sons.pg. 25-26
Which beachhead market to select?
● Avoid selecting the largest or very large markets, even if
they seem like the “best” segments.
● The first market you attack will be a significant learning

experience for you, so you are better off learning in a
smaller market.
● You can quickly get high exposure among the base of

potential customers.
● Might still need further segmentation.
Sons.pg. 25-26
Sons.pg. 25-26
Detailing the customer
● Differentiate between:
○ End User
○ Decision Making Unit (DMU)
■ Champion
■ Primary Economic Buyer
■ Influencers
● Potential Details:
○ What is their gender, age range, income range, geographic location ?
○ What motivates them ?
○ What do they fear most?
○ Where do they go for vacation? For dinner? Before work?
○ What is the broad reason they are buying the product?
○ What is their story?
Sons.pg. 25-26
Detailing the customer
Sons.pg. 25-26
Sons.pg. 25-26
Calculating the TAM
● Total Addressable Market (TAM) Size is the amount of annual
revenue, expressed in INR/dollars per year, your business
would earn if you achieved 100 percent market share in the
beachhead market.
● How many end users exist that fit your End User Profile using
a bottom-up analysis based on primary market research?
● Complement this with a top-down analysis to confirm your

findings.
● How much revenue each end user is worth per year.

Multiplying the two numbers results in the TAM.
Sons.pg. 25-26
Calculating the TAM
● Be as conservative as possible.
● Should be defensible.
● Bottom up : “counting noses”

● Top down : starts with secondary data, market analysis
report, industry reports.
● Both should be complimentary.
● If estimated value of TAM is:

○ < $ 5million per year: not a big enough beach head market (unless you can capture quickly or
gross margin high)
○ > $20-100 million per year: good target
○ >$1 billion: incorrect analysis
Sons.pg. 25-26
Profiling the persona and more
7. Profile the persona
8. Full Life Cycle Use Case/Customer

Journey Map
9. Make a product brochure.
Sons.pg. 25-26
Profile the Persona
● If I had only one end user to represent our End User Profile, who
would it be?
● Provides clarity and additional detail to the End User Profile for the
founders, employees and other stakeholders.
Source: Aulet, B.
(2013). Disciplined
entrepreneurship: 24 steps to a
successful startup. John Wiley &
Sons.pg. 73
Profile the Persona
● Definitive most
representative
customer from your
beach head market.
● List the Persona’s

Purchasing Criteria in
Prioritized Order.
● Plus a fact sheet.

Source: Aulet, B.
(2013). Disciplined
Sons.pg. 73
Profile the Persona
Source: Aulet, B.
(2013). Disciplined
Sons.pg. 73

Journey Map
9. Make a product brochure
Sons.pg. 25-26
Full life cycle use case
1. How end users will determine they have a need and/or opportunity to do something different.
2. How they will find out about your product?
3. How they will analyze your product?
4. How they will acquire your product?
5. How they will install your product?
6. How they will use your product?
7. How they will determine the value gained from your product?
8. How they will pay for your product.
9. How they will receive support for your product.
10. How they will buy more product and/or spread awareness (hopefully positive) about your product.
Sons.

Journey Map
9. Make a product brochure
Sons.pg. 25-26
Business Model
10. Business Model
Sons.pg. 25-26
Lean Canvas
.
Business Model Canvas
.
Lean Canvas
.
Summary of Business Model Questions
Source:Eisenmann, T. R., Ries, E., & Dillard, S. (2012). Hypothesis-driven entrepreneurship: The
lean startup. Harvard Business School Entrepreneurial Management Case, (812-095).
Summary of Business Model Questions
Source:Eisenmann, T. R., Ries, E., & Dillard, S. (2012). Hypothesis-driven entrepreneurship: The
lean startup. Harvard Business School Entrepreneurial Management Case, (812-095).
How to prepare tests?
● Qi Framework
Source: Kromer, T. (2019). The question index for real startups. Journal of Business Venturing Insights, 11(C), 1-1.
● Qi Framework
Source: Kromer, T. (2019). The question index for real startups. Journal of Business Venturing Insights, 11(C), 1-1.
● Qi Framework
Source: Kromer, T. (2019). The

question index for real
startups. Journal of Business
Venturing Insights, 11(C), 1-1.
Pricing Framework
11. Pricing Framework
Sons.pg. 25-26
Basic Pricing Concepts
1. Cost shouldn’t be the most important factor: Focus on Value
2. Use the DMU to understand key pricing determinants
3. Understand the pricing of the alternative products
4. Different types of customers pay different prices.
5. Be flexible for early testers and “Lighthouse Customers”
6. Its always easier to drop the price rather than raise them.
Sons.pg. 73
LTV
12. Lifetime Value of an acquired
customer
Sons.pg. 25-26
Key Inputs
1. One time revenue stream, if any.
2. Recurring revenue stream, if any.
3. Additional revenue opportunities
4. Gross Margin for each of your revenue streams
5. Retention rate for recurring revenue stream
6. Life of product for one time revenue stream.
7. Next Product Purchase Rate for one time revenue stream.
8. Cost of Capital.
Sons.pg. 73
Key Inputs
● LTV is the Net Present Value of your profits per customer from
year 0 through year 5.
● Assume profits only for 5 years for new ventures (as after 5 years
cost of capital becomes too high)
● Assume high cost of capital (30-50%)
● LTV is about profit not revenue
Sons.pg. 73
LTV Example
Sons
LTV Example
Source: Aulet, B. (2013). Disciplined entrepreneurship: 24 steps to a successful startup. John Wiley & Sons
Cost of Customer Acquisition
13. COCA
Sons.pg. 25-26
13. COCA
Sons.pg. 73
Minimum Viable Product
14. MVP
Sons.pg. 25-26
14. Minimum Viable Product (MVP)
Source: Blank, S.
(2013). Why the lean
start-up changes
everything. Harvard
business
review, 91(5), 63-72.
14. Minimum Viable Business Product (MVBP)
Source: Aulet, B.
(2013). Disciplined
entrepreneurship: 24
steps to a successful
startup. John Wiley &
Sons. Pg. 236
Preparing a business pitch
Dr. Saurav Snehvrat
Entrepreneurship and New Ventures (ENV)
Pitching
● Heuristic: 20 minutes/10 main slides (20/10 rule)
● Pitching to investors, customers or key employees
● Should grab their attention and spark their interest in

learning more.
Pitch Deck
● Slide 0: Title Slide/Logo/Brand
● Slide 1: Executive Summary
● Slide 2: Market Positioning/Problem Description
● Slide 3: Product Positioning
● Slide 4: Business Network (“Ecosystem”) Positioning
● Slide 5: Competition or Substitutes
● Slide 6: Benefits
● Slide 7: Operations
● Slide 8: Financials
● Slide 9: Risks
● Slide 10: Implementation, Status and Traction, Financing
● Slide 11: Closing, the Ask
● Additional: Sources and Bibliography, Appendix
Slide 0: Title Slide
● Can include your company name/logo/brand, your name,
your team members, Key partners’ names, contact
information
● Can also go Spartan and focus on the message.
● Let your audience know the time of presentation and the
time set aside for questions at the end.
● Refer listeners to more details regarding founders and the
presenter in the appendix
Slide 1: Executive Summary
● High level summary of the problem or the opportunity you
want to exploit.
● Describe your customers and high level description of the
solution.
● Why are you the ideal group to solve the problem?
● Any important trends and disruptions that are relevant.
● What are you looking for from the audience: capital,
employees, partnering etc.
● Keep it concise and clear.
Slide 2: Market Positioning/Problem Description
● Describe the market and the problem.
● Size of the TAM and its growth rate.
● Specific market segments and their growth rate.
● Beachhead market.
● Strategy for adoption and generating interest
● End User, DMU.
● How your market position will evolve over time?
Slide 3: Product Positioning
● Explain the solution.
● How will it alleviate the pain in the market or meet a
compelling need?
● How long will your window of opportunity remain open?
● High level description of new technologies/features that
differentiate your product.
● Keep technical jargon for the business plan or a white
paper in appendix.
Slide 4: Business network (“Ecosystem”) Positioning
● Show a diagram of the business network or ecosystem.

● Include key customers, suppliers, partners and other
players.
● Explain the role you will play in the ecosystem.
● Discuss key relationships that you already have in the
industry or
● How do you plan to get the connections/partners.
● Keep it at a high level with references to appendix.
Slide 5: Competition or Substitutes
● Every product has a competitor or a substitute.

● If required, use a product market positioning matrix.
● Competitor strength, weaknesses.
● Refer to appendix for additional details.
Slide 5: Competition or Substitutes
Source: https://hbr.org/2007/11/mapping-your-competitive-position accessed on 22/5/2021

Slide 6: Benefits
● Describe the benefits you will deliver

● Who will receive them and when?
● Exactly what will you sell and to whom (Key revenue drivers
and value proposition)
● Is the customer the same as the consumer?
● Assumptions about your revenue model.
Slide 7: Operations
● Key capabilities and resources for now.
● Key capabilities and resources for the next 3-5 years for
growth.
● Progress so far in acquiring the resources and developing

the capabilities.
● How do you plan to acquire them in the future?

Slide 8: Financials
● High level cash flow projections.

● Key assumptions behind cash flow forecasts.
● Best case/Worst case scenarios.
● Early pitch: your understanding of financial risks is
conveyed.
● Investor pitch: more sophisticated and will need more
details.
Slide 9: Risks and their mitigation
● Investment Risk
● Operation Risk (ex. hiring, retention, supplier conformance)
● Strategic Risk (ex. market uncertainty, technology, industry,
regulation)
● How will you manage or mitigate the risks?
Slide 10: Implementation, status and traction, financing
● Identify key milestones.

● Current status and time to next milestone
● Resources required and current status.
● Total investment required, staging of funding, how will the
funding be used.
Slide 10: Implementation, status and traction, financing
● Traction: tools available for ex. https://leanstack.com/ci/academy/cohorts/ci-academy-

basic/canvases/7014.26/traction_ roadmap/chart?cycle_ type=months
Slide 11: Closing slide (“the ask”)
● Return to your opening slide or some variation of it.

● Summarize the business case.
● What would you like from the audience
● Still premature to state exact terms of investment.
● Open up for questions and answers.
Elevator Pitch
● 30-60 seconds.
● Who you are, what do you do, and what the customers will
get out of it?
● Provide an example of why your product or service is
valuable
● Include the contact by ending with a question.
Videos
1. https://www.youtube.com/watch?v=S4nCY0H4598
2.
https://www.ted.com/talks/david_s_rose_how_to_pitch_to_
a_vc?language=en
Case- Classtivity: Payal’s Pirouette
● The first pivot, from the search engine, called Classtivity, to the monthly
packs, known as Passport, seemed like an obvious choice. Can your group
think of experiments and/or MVP tests that the team might have conducted
that would have saved them 18 months of work building the search engine?
Source: https://www.linkedin.com/in/payalkadakia accessed on

12th July 2021
https://www.youtube.com/watch?v=ve7zaZIw3B4 accessed on
1/5/2023
● The first pivot, from the search engine, called Classtivity, to the monthly
packs, known as Passport, seemed like an obvious choice. Can your
group think of experiments and/or MVP tests that the team might have
conducted that would have saved them 18 months of work building the
search engine?
○ Significant press
○ Praise from investors
○ Late 2012, 10,000 unique visitors each month
○ Actual customer traction weak. A total of 50 classes by the end of 2012 ($750 in revenue).
○ Techstars (accelerator) and other third parties provide positive feedback.
○ Hype can create pressure to scale prematurely.

● How would you test the search engine?
● How would you test the search engine?
○ Instead of perfecting the search engine, they could have had a rudimentary MVP
○ Surveys as MVPs
○ Focus Groups
○ Test both sides of the market
○ Listen to the customers

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Rich Vs King

2. Narrow down options

● Market Segment is one where there is:

● Select 6-12 of the most promising market opportunities

2. Narrow down options

● Avoid analysis paralysis

5. Detail out the end user

6. Calculate the TAM Size

● Required for funding.

● Avoid being an also ran.

● Example: “The Audi dealership”.

● The conflict between resource constraints and innovation.

● “If each person buys three toothbrushes a year, we could sell

● The first market you attack will be a significant learning

● You can quickly get high exposure among the base of

● Might still need further segmentation.

5. Detail out the end user

6. Calculate the TAM Size

5. Detail out the end user

6. Calculate the TAM Size

● Complement this with a top-down analysis to confirm your

● How much revenue each end user is worth per year.

● Bottom up : “counting noses”

● If estimated value of TAM is:

8. Full Life Cycle Use Case/Customer

9. Make a product brochure.

● List the Persona’s

● Plus a fact sheet.

8. Full Life Cycle Use Case/Customer

9. Make a product brochure

2. How they will find out about your product?

3. How they will analyze your product?

4. How they will acquire your product?

5. How they will install your product?

6. How they will use your product?

8. How they will pay for your product.

9. How they will receive support for your product.

8. Full Life Cycle Use Case/Customer

9. Make a product brochure

Source: Kromer, T. (2019). The

2. Use the DMU to understand key pricing determinants

3. Understand the pricing of the alternative products

4. Different types of customers pay different prices.

5. Be flexible for early testers and “Lighthouse Customers”

2. Recurring revenue stream, if any.

3. Additional revenue opportunities

4. Gross Margin for each of your revenue streams

5. Retention rate for recurring revenue stream

6. Life of product for one time revenue stream.

7. Next Product Purchase Rate for one time revenue stream.

● Assume high cost of capital (30-50%)

● LTV is about profit not revenue

● Pitching to investors, customers or key employees

● Should grab their attention and spark their interest in

● Show a diagram of the business network or ecosystem.

● Every product has a competitor or a substitute.

Source: https://hbr.org/2007/11/mapping-your-competitive-position accessed on 22/5/2021

● Describe the benefits you will deliver

● Key capabilities and resources for now.

● Progress so far in acquiring the resources and developing

● How do you plan to acquire them in the future?

● High level cash flow projections.

● Identify key milestones.