Startup

Strategy
PREPARED FOR WEBVISIONS
BY NEAL CABAGE

Author & Speaker

INTRODUCTION

NEAL CABAGE
Digital Product Architect

Product manager and entrepreneur.

Founded ProductCamp.LA and PMA.LA.

Built and sold two startups.

Principal authored, The Smarter Startup.

@NealCabage

[email protected]

The Book
INTRODUCTION

THE SMARTER STARTUP

STRATEGY FOR STARTUPS

The Smarter Startup looks at why some

startups succeed while others fail. By taking a
more strategic approach to entrepreneurship,
founders can improve their own outcomes.
Written by Neal Cabage and Sonya Zhang, PhD,
and published by Pearsons/NewRiders.

SmarterStartup.org
CONCLUSION

www.SmarterStartup.org
We have posted in-depth articles,
diagrams, and downloadable references
and worksheets on our website.
Everything is free to use, so check it out.

Overview
INTRODUCTION

Well establish the challenges that startups face and introduce strategic principles
and frameworks to better understand and reach your startups objectives.

Introduction

Business Models

Problem Statement

Value Creation

Startup Heuristics

Vision Definition

Startup Strategy Framework

INTRODUCTION

The Great Mystery

PROBLEM STATEMENT

WHY DO SOME SUCCEED?

WHY DO SOME NOT?
Weve all met people who worked very
hard to make a business succeed and yet it
failed. Weve also met people who did
seemingly everything wrong and yet they
succeeded. Hard work is a necessary
component but it is not the entire story.

8 in 10
Startups
Fail in the
First 5 yrs

Conventional Wisdom
PROBLEM STATEMENT

Diligence is the mother of good luck.

Benjamin Franklin

Genius is one percent inspiration and

ninety-nine percent perspiration.
Thomas Edison

Conventional Wisdom
PROBLEM STATEMENT

It is True?
Diligence is the mother of good luck.
Benjamin Franklin

Genius is one percent inspiration and

ninety-nine percent perspiration.
Thomas Edison

Conventional Wisdom
PROBLEM STATEMENT

Diligent

NOT ENTIRELY

Success

IS HARD WORK THE ANSWER?

Hard work alone is NOT a reliable

people sometimes fail and negligent
people sometimes succeed.

Failure

predictor of success. Hard working

Negligent

What Is the Whole Story?

PROBLEM STATEMENT

Working hard is analogous to throwing a ball hard. The velocity is an important part of
reaching the target, but you cannot ignore other interactive forces like gravity and drag.

Velocity

(hard work)

Direc:on

Gravity

(customer need)

(:ming)

Drag

(compe::on)

A More Strategic Approach

PROBLEM STATEMENT

Why are some startups more likely to succeed?

Its the economy STRATEGY, stupid!

James Carville
Political Straegist

Startup Heuristics
Startup Strategy
Best Practices

The 6 Heuristic Categories

STARTUP HEURISTICS

THE FUNDAMENTAL CRITERIA

customer

START HERE

team
There are 6 fundamental criteria to

Heuris:cs

consider when developing a startup

concept. Every new idea should be
considered from this starting point.

Startup product
Strategy
compe::on

nancial
:ming

The 18 Rules of Startup Strategy

STARTUP HEURISTICS

Startup Heuristics
Customer

Product

Timing

1. Unmet Need or Desire

4. Customer Focused Solution

7. Recent Innovation Enabler

2. Right Size Market or Segment

5. Low Barriers to Adoption

8. Demand Already Established

3. Reliable Access to Customers

6. Clear Value Proposition

9. No Signs of Commoditization

Competition

Finance

Team

10. Clear Market Inefficiency

13. Low Sunk Costs

16. Subject Matter Expertise

11. Low Barriers to Entry

14. Working Capital Float

17. Functional Competence

12. Differentiable Position

15. Economies of Scale

18. Supplier Partnerships

2014 Cabage & Zhang

Customer Criteria
STARTUP HEURISTICS

WHATS A GOOD CUSTOMER?

UNMET NEED OR DESIRE

Unsatisfied Customer Desire

The ideal customer has an unmet need or

desire. The size of this market should
match your ability to compete and ability

RIGHT-SIZE MARKET OR SEGMENT

Need to Segment? Too Niche?

to deliver justify solving the problem.

Validate you can control means of
customer acquisition along the way.

RELIABLE ACCESS TO CUSTOMERS

Diversified Channels? Gatekeepers?

Unmet Need or Desire

CUSTOMER CRITERIA

FOCUS ON HELPING OTHERS

FOCUS ON CREATING VALUE

Mom was right! Focus on helping others and

everything else will fall into place. Find a need
or desire that is not yet sufficiently addressed,
where the customer is so passionate theyd
happily pay for a solution.

This approach is

much more likely to create real value than

copying an existing solution.

Right-Size Market (or segment)

CUSTOMER CRITERIA

Select a market to service that meets your needs and abilities. You must have enough opportunity to warrant
the effort. Be weary of large markets however, if you do not have significant funds and plan to be aggressive.

BIG MARKET STRATEGY

PURSUE LARGE MARKETS

BIG FISH STRATEGY

PURSUE QUIET NICHES

Reliable Access to Customers

CUSTOMER CRITERIA

A sustainable business requires control over customer supply. Dont rely on a single marketing channel (Google
SEO). Government or monopolistic manipulation of markets can also be challenging (Online Gambling).

35000

CHANNEL DEPENDENCE
SINGLE POINT OF FAILURE

30000
25000
20000
15000

MARKET MANIPULATION

GOVERNMENT, MONOPOLIES

10000
5000
0
March

April

May

June

July

Product Criteria
STARTUP HEURISTICS

WHATS A GOOD PRODUCT?

CUSTOMER FOCUSED SOLUTION

Solves Unmet Need or Desire?

A good product will be a direct response to

a customer need or desire. If the value is
well articulated and the customer is

LOW BARRIERS TO ADOPTION

Low Switch Cost, Usability

passionate about your new solution, the

reason to buy will be compelling. Consider
deterrents also are their high switch
costs and is the solution easy to use and
understand?

CLEAR VALUE PROPOSITION

Compelling Reason to Buy

Customer Focused Solution (benefit)

PRODUCT CRITERIA

The purpose of your product is to create value by addressing a specific need or desire. Stay Zen focused.
Dont ambiguate the value created with distracting features that arent aligned with the goal.

ADDRESS NEED OR DESIRE

FOCUS ON CLEAR GOAL

KEEP IT SIMPLE!

DONT AMBIGUATE THE VALUE

Customer Focused Solution (benefit)

PRODUCT CRITERIA

Any intelligent fool can make things bigger and more complex... It takes a
touch of genius - and a lot of courage to move in the opposite direction.

Albert Einstein
Physicist, Professor

Low Barriers to Adoption (cost)

PRODUCT CRITERIA

Even if you create new value, customers may hesitate to adopt your product if theyve already invested
too much in an existing solution that is good enough, or if adopting your solution is too disruptive.

FINANCIAL IMPACT
PRIOR INVESTMENT & NEW COSTS

LEARNING CURVE

INVESTED TIME & NEW COSTS

WORKFLOW INTEGRATION
DOES IT EASILY INTEGRATE?

Clear Value Proposition (value)

PRODUCT CRITERIA

Perceived value must exceed cost. If you can clearly describe your product is benecial and a compelling
case for purchasing it, then you have created sucient value to overcome cost.

IS THE VALUE CLEAR?

VALUE = BENEFIT - COST
Solves My
Problem

People dont want quarterinch drills. They want

Theodore
Levitt

quarter-inch holes.

Learning
Curve
Existing
Investments

cost

Addtl Benefits
(value complex)

Easy Workflow
Integration

benet

Timing Criteria
STARTUP HEURISTICS

WHAT IS GOOD TIMING?

RECENT INNOVATION ENABLER

Was it Possible 2-5 Years Ago?

Every market has a natural lifecycle

driven by innovation and circumstance.
Look for new demand or interest in

DEMAND ALREADY ESTABLISHED

Build It & They Might Not Come!

something that wasnt possible just a

couple years ago.

Be a fast follower

into a validated emerging market rather

than speculating on new opportunity.

NO SIGNS OF COMMODITZATION
Shrinking Margins. More Products.

Innovation Life Cycle

TIMING CRITERIA

Every market has a natural lifecycle driven by innovation and circumstance. Look for something that
wasnt possible just a couple years ago & ramp up before the market capitulates (supply > demand).
Capitulation

The Squeeze

The Golden Era

Early Movers

Consolidation
Innovation Adoption Curve

Innovators
(2.5 %)

Early adopters Early majority

(13.5 %)
(34 %)

Late majority
(34 %)

Laggards
(16 %)

Innovation Life Cycle

TIMING CRITERIA

Opportunity to enter diminishes as the market matures.

Geoff Moore suggests entering at the

chasm after demand is validated but still early enough to ramp before the market capitulates.
New
E

ntra
n

t Op
por

tun

ity

Ideal point to
enter a market

Chasm

- Geoff Moore

Innovators
(2.5 %)

Early adopters
(13.5 %)

Innovation Adoption Curve

Early majority
(34 %)

Late majority
(34 %)

Laggards
(16 %)

Commoditization of Technology
TIMING CRITERIA

It is difficult to imagine a more perfect commodity than a byte of data.

As information technologys power and ubiquity have grown, its
strategic importance has diminished.

Nicholas Carr
Harvard Business Review, 2003

Commoditized
Technology

$5,000,000
Hosting Commoditized

$500,000
Cloud Services (SaaS/PaaS)
MLS IDX/RETS Feeds,
SendGrid Email, etc

$50,000

What cost $5 million to accomplish

12 years ago can now be done with
less than $5,000. Mark Suster

Open Source Software

$5,000

observed that commoditization and

availability of more building blocks

WordPress Pla=orm,
Real Estate Themes,
RESO & Placester IDX Plugins,

has radically reduced cost and risk

of developing a software product.

A Web/Mobile App

Commonplace

!"#$%&'%()*+%)&

Commodity

&#!$!!!$!!!"

&!!$!!!$!!!"

As cost has fallen, so has the

%#!$!!!$!!!"

competitive barrier to entry.

50x

Competitive positioning is now the

%!!$!!!$!!!"

key strategic issue, not

technological capability for most

#!$!!!$!!!"

consumer Internet products. How

do you cut through the noise?

!"

2000

2002

2004

2006

Data From NetCraft 2013 Web Server Survey

2008

2010

2012

2013

Competition Criteria
STARTUP HEURISTICS

GOOD COMPETITIVE LANDSCAPE?

CLEAR MARKET INEFFICIENCY

Stagnant or Fragmented Market

Avoid being marginalized by excessive

undifferentiated competition. That
drives margin compression, commodi-

LOW BARRIERS TO ENTRY

Easy & Cheap to Compete?

tization and market consolidation. Look

for inefficient markets where theres
still play and find ways to develop a
sustainable competitive advantage.

DIFFERENTIABLE POSITION
Something Special or Different?

Inefficient Market
COMPETITION CRITERIA

NEW MARKET
DEMAND EXCEEDS SUPPLY

When a market is efficient, a single entity captures

all of the value of a market. Look instead for a
market that isnt efficient either because it is new,

FRAGMENTED MARKET

NO CLEAR MARKET LEADER

STAGNANT MARKET

READY FOR DISRUPTION?

stagnant, or splintered (fragmented).

Low Barriers to Entry

COMPETITION CRITERIA

The general who makes many calculations before battle is wise. He who
knows when he can fight and when he cannot will be victorious.

Sun Tzu
War Strategist, Wrote The Art of War

Low Barriers to Entry

COMPETITION CRITERIA

Avoid a fight you cannot win! A market can be much harder to enter if a
competitor already has a mature offering that you must catch up to.

THINGS TO AVOID

Existing Economies of Scale

Existing Mature Product (feature set)
Well-Established Brand (halo)
Price Competition

Differentiable Position
COMPETITION CRITERIA

In order to be a desirable signal that stands out against a background of noise, you need to have a
compelling value to some customers that others do not. There are 3 viable positioning strategies.

LOW PRICE LEADERSHIP

FOCUS ON VOLUME & COMMODITY

SEGMENTED MARKET

FOCUS ON SPECIFIC CUSTOMER

DIFFERENTIATED PRODUCT
DISRUPTIVE OR INNOVATIVE

Porters Generic Competitive Strategies

HOW ARE YOU DIFFERENT?

WHAT MAKES YOU SPECIAL?

Financial Criteria
STARTUP HEURISTICS

GOOD FINANCIAL PROFILE?

LOW SUNK COSTS

Up Front Capital at Risk?

Look for opportunities to maximize

returns without excess capital risk.
Look for opportunities to start cheap

WORKING CAPITAL FLOAT

Gap Between Payable/Receivables

and to realize higher margins through

focused efforts and economies of scale.
Avoid locking up too much capital.

ECONOMIES OF SCALE
Margins Increase With Volume?

Low Sunk Costs

FINANCIAL CRITERIA

HOW MUCH CAPITAL RISK?

OPPORTUNITY COST

How much up-front capital must you commit to

develop this product or business? Sunk capital
represents risk since you dont know if youll get it
back, as well as opportunity cost since that money
could be committed to other opportunities.

Working
Capital Float

DO YOU NEED A LINE OF CREDIT?

WHATS THE COST & RISK?

Some businesses require large cash

outlay every month and payment can
take 3-4 months to arrive. As a

Accounts
Payable

60 - 120 Day
"Capital
Float"

result the business may need to have

cash or credit to cover the gap of 3-4

Accounts
Receivable

months of operating costs. This is

both a cost (interest) and a risk!

Quantity

s
fit
o
r

Sc

Marginal Cost

le
ab
l
a

Economies
of Scale

Look for opportunities where profits

increase with volume (scale). Supply,
development, and distribution costs all
diminish on a per-unit basis when working
in volume. As a result profit margins and
competitive advantage both increase.

Profits

Team Fit & Fitness Criteria

STARTUP HEURISTICS

WHATS GOOD TEAM FIT?

SUBJECT MATTER EXPERTISE

Deep Knowledge of Market?

Just because an opportunity exists, doesnt

mean your team is likely to succeed. Are
you fit to compete? Does your team have a

FUNCTIONAL COMPETENCE
Technical Skills to Deliver

competitive advantage? Do you possess

deep knowledge, technical skills to deliver,
& access to key partners and resources?

SUPPLIER PARTNERSHIPS
Access to Materials at Good Cost

The Hacker & The Hustler

TEAM-FIT CRITERIA

A team needs deep subject matter expertise and technical skills to design a solution, in order to
succeed. It is difficult for a single person to be efficient at heads up and heads down work.

Subject Matter Expert

The Functional Expert

The Hustler

The Hacker

Knowledge of customer or desire, and

Technical skills to design &

understanding of market dynamics to

develop a well-crafted and

effectively position an offering.

scalable solution.

Supplier Partnerships
TEAM-FIT CRITERIA

Consider the dependencies you may have on external sources of materials, data, and services. Do
you have access to the necessary resources to deliver your product and to price competitively?

Preferred Sourcing

Available Data APIs

Are you able to procure

Are you able to access the data

If planning to manufacture

supplies at competitive prices?

or integration APIs needed to

physical products or software, do

If affiliate mktg, can you get

build your product?

you have a quality vendor you

preferred commissions?

Outsourced Vendors

can rely on?

Startup Scorecard
Real Estate IDX Integrated CRM
Title _____________________________________________________________________

Product

Customer

Customer Focused Solution

Unmet Need or Desire

Right Size Market or Segment

Low Barriers to Adoption

Reliable Customer Channels

Clear Value Proposition

Customer Score

______

Timing

Product Score

______

Competition

Recent Innovation Enabler

Clear Market Inefficiency

Demand Already Established

Low Barriers to Entry

No Signs of Commoditization

Differentiable Position

Timing Score

B-

______

Finance

B+

Competition Score

______

Team
Subject Matter Expertise

Clear Profit Model

Functional Competence

Economies of Scale

Supplier Partnerships

SmarterStartup.org

Evaluate your startup idea across the six

scorecard criteria and be mindful of the attributes

Low Capital Requirement

Finance Score

______

Team Score

Overall Score

Evaluating a
Startup Idea
described in each one.

Give yourself a letter

grade and then an overall score, for the idea. This

provides a structured approach to evaluating the
opportunity and helps to improve objectivity by

A-

______

B
_______

accounting for a full spectrum of important

criteria and reducing blind spots.

Business Model
Archetypes
The 7 Fundamental
Business Personalities

What is a Business Model?

BUSINESS MODEL ARCHETYPES

A business model describes the rationale of

how an organization creates, delivers, and
captures value Well-known business models
can operate as "recipes" for creative managers.

Business Models Everywhere!

BUSINESS MODEL ARCHETYPES

There are many disparate business models that were dened in isola:on but nothing comprehensive
that describes the fundamentally unique paPerns in a single and concise framework that suited our needs.
BRICKS & CLICKS

FREEMIUM

NETWORK EFFECTS

COLLECTIVE

AUCTION / ONLINE AUCTION

PRO OPEN SOURCE

CUT OUT THE MIDDLE MAN

ALL-IN-ONE

PYRAMID SCHEME

DIRECT SALES

LOW-COST BARRIER

RAZOR & BLADES

DISTRIBUTION MODEL

LOYALTY

SERVITIZATION OF PRODUCTS

VALUE ADDED RESELLER

MONOPOLISTIC

SUBSCRIPTION

FREE IN, FREE OUT

MULTI-LEVEL MARKETING

etcetera, etcetera

Trade

prototypes:
ad network
dropship program

prototypes:
e-commerce
lead generation

prototypes:
products market
services market

Brokerage

Marketplace

Business Model
Archetypes
BUSINESS MODEL ARCHETYPES

Ecosystem

Service

Product
prototypes:
software
content

Subscription

prototypes:
service platform
service agency

Describes 7 abstract business model

archetypes (fundamental personalities)
from which every business model is
inherited. Two prototypes (applied
examples) are given for each archetype.

prototypes:
prototypes:
technology platform
media platform

content as a service
software as service

This represents a holistic view of the

possibilities.

What is an Archetype?
BUSINESS MODEL ARCHETYPES

The concept is based on Carl Jungs Personality Archetypes, describing fundamental

personalities and roles that we draw from to develop our own unique personality.

A philosophical idea, referring to pure

forms which embody the fundamental
characteristics of a thing.
Carl Jung
Psychologist

Primary Archetypes
BUSINESS MODEL ARCHETYPES

PRODUCT

TANGIBLE SOLUTION

The Business Model Archetypes framework

takes a step back from specific business
models to say there are 7 abstract archetypes

SERVICE

CUSTOM SOLUTION

TRADE

CONNECT BUYERS & SELLERS

(fundamental personalities) from which every

business inherits. Two prototypes (examples)
are given for each archetype. This represents
a holistic view of the possibilities.

Product Archetype
BUSINESS MODEL ARCHETYPES

Develop a tangible good and sell on a one-time fee

basis (purchase or license). Requires high up-front sunk
capital but is able to leverage economies of scale.

TRADE

PRODUCT
SERVICE

HALLMARKS OF A PRODUCT

Properties:

Online Prototypes:

Up-front Investment

Software Product

Sell for One-time Fee

Content Product

Highly Scalable

Service Archetype
BUSINESS MODEL ARCHETYPES

Intangible work for a client, monetized on a per-use

basis. Low sunk costs but high float cost

TRADE

requirements. Professionals or technicians with

expert knowledge and limited capital prefer it.

PRODUCT

SERVICE

HALLMARKS OF A SERVICE

Properties:

Online Prototypes:

Intangible Value Creation

Low Sunk / High Float Cost

Service Agency
Platform as a Service

Trade Archetype
BUSINESS MODEL ARCHETYPES

Connecting prospective buyers with a product they

seek, making profit on the spread between sell price
and cost of acquisition. Requires moderate capital

TRADE

and good sourcing connections.

HALLMARKS OF TRADE

SERVICE

PRODUCT

Properties:

Online Prototypes:

Connect Buyers/Sellers

Ecommerce

Sourcing is key

Lead Generation

Profit from Arbitrage

What is an Archetype?
BUSINESS MODEL ARCHETYPES

The meeting of two personalities

(archetypes) is like the contact of
two chemical substances; if there is any
reaction, both are transformed.
Carl Jung
Psychologist

Secondary Archetypes
BUSINESS MODEL ARCHETYPES

BROKERAGE

CONNECT BUYERS & SELLERS

MARKETPLACE

TANGIBLE SOLUTION

Secondary Archetypes are created by

combining the primary archetypes, similar to
how new colors are derived by combining 2or
more colors.

In this way, all archetype

possibilities are accounted for, starting with a

SUBSCRIPTION

CUSTOM SOLUTION

ECOSYSTEM

CONNECT BUYERS & SELLERS

model of three simple types of businesses.

Brokerage Archetype
BUSINESS MODEL ARCHETYPES

BROKERAGE

Sourcing on behalf of a client for a retainer or pertransaction fee. The client then profits from any
arbitrage spread rather than the sourcing partner.

HALLMARKS OF A BROKERAGE

SERVICE

TRADE

Properties:

Prototypes:

Trading for Clients

Real Estate Broker

Paid by retainer not arbitrage

Ad Network

Marketplace Archetype
BUSINESS MODEL ARCHETYPES

MARKETPLACE

Create a platform that facilitates trade, rather than

actually trading. This is a network effects business
that depends heavily on bringing together sufficient
demand and supply.

TRADE

HALLMARKS OF A MARKETPLACE

PRODUCT

Properties:

Online Prototypes:

Network Effects

Products Marketplace

Build Trade Platform

Services Marketplace

Subscription Archetype
BUSINESS MODEL ARCHETYPES

SUBSCRIPTION

Building, maintaining, and supporting ongoing use

of a product, rather than a one-time sell. Customers
pay a monthly subscription service and benefit from
continued improvements.

SERVICE

HALLMARKS OF A SUBSCRIPTION

PRODUCT

Properties:

Online Prototypes:

Monthly Billing

Software as Service

Freemium Pricing

Content as Service

Ongoing Updates

Ecosystem Archetype
BUSINESS MODEL ARCHETYPES

ECOSYSTEM

A mature market leader may expand as a result of

success. They develop a marketplace and/or
community for customers and/or service/support
vendors to offer augmented solutions.

TRADE

PRODUCT
HALLMARKS OF AN ECOSYSTEM

SERVICE

Properties:

Online Prototypes:

User Community

Tech Platform

ISV or Dev Community

Media Platform

Enhanced Product Marketplace

Trade

prototypes:
ad network
dropship program

prototypes:
e-commerce
lead generation

prototypes:
products market
services market

Brokerage

Marketplace

Business Model
Archetypes
BUSINESS MODEL ARCHETYPES

Ecosystem

Service

Product
prototypes:
software
content

Subscription

prototypes:
service platform
service agency

Primary archetypes Review:

Trade, Product, Service

Secondary archetypes Review:

Product + Trade = Marketplace
Service + Trade = Brokerage
Product + Service = Subscription

prototypes:
prototypes:
technology platform
media platform

content as a service
software as service

Product + Service + Trade = Ecosystem

Value Creation
Its Not What
You Think!

Creating Value
VALUE CREATION

Why would someone pay $4 for a cup of coffee from Starbucks when they can brew
it at home for $0.50 per cup? Clearly theres more to this story

If I went to a group of consumers and

asked them if I should sell a $4 cup of
coffee, what would they have told me?
Howard Schultz
CEO, Starbucks

Selling a Commodity
VALUE CREATION

If you sell the same commodity at two different prices, which one will the customer
choose? So why would you waste money going to Starbucks?
Maxwell House

Starbucks

Cup of
Coffee

Cup of
Coffee

Cost: $0.50

Cost: $4.00

Sell the Benefits NOT the Commodity

VALUE CREATION

Starbucks has successfully created a complex of value around a simple commodity.

Comparing the coffee out of context misses the core of their value proposition.
Starbucks

Value!
$0.50!

Maxwell House
Cup of
Coffee

Value!
$12.00!

Benefits Complex
Premium
Coffee

Entertainment
(desert/break)

Value $1.00

Value $5.00

Ease &
Convenience

Productivity
(lounge, wifi)

Value $1.00

Value $5.00

perceived value

primary

function

The Value
Creation Plane
Innovation
(create new value)

Monetization
(capture existing value)

Entertainment
(emotional desire)

VALUE CREATION

Take a systematic approach to

identifying all the possible
opportunities. You will identify a
startup idea for every business model
archetype, for each business vertical
you are considering

Productivity
(logical need)

Shift the
Business Function

primary

perceived value

Starbucks

function

Starbucks
Lounge
(free Wifi, etc)

"cheap
caffiene"

Innovation
(create new value)

Monetization
(capture existing value)

Entertainment
(emotional desire)

VALUE CREATION

Starbucks repositioned their offering

by creating a value complex around
the coffee commodity. Were paying
$4 for the entire experience, and the
commodity is only a component of it.
They innovated the value and made it
a more fulfilling experience.

Productivity
(logical need)

perceived value

primary

Apple

function

LinkedIn

Shift the
Perceived Value

Innovation
(create new value)

Monetization
(capture existing value)

Entertainment
(emotional desire)

VALUE CREATION

Apple took a commoditizing

technology and added an emotional
connection through design and
inspiration. LinkedIn found a
productive application for social
networking. They differentiated their
products in a way that added value.

Productivity
(logical need)

Shift the
Business Function

primary

perceived value

Netflix
Innovation
(create new value)

Monetization
(capture existing value)

Entertainment
(emotional desire)

function

Google

VALUE CREATION

Netflix has shifted from monetization of

products to innovating their own
content. Google has done the same by
integrating enhanced content into their
search results (maps, flight search, etc).
They stay ahead of competition through
continued innovation.

Productivity
(logical need)

Vision
Definition
Begin With a
Clear Hypothesis

Clarity of Vision
VISION DEFINITION

A concise statement about a complex topic requires an investment of time and the
clarity of thought. That critical analysis can reveal weaknesses in a plan, before you
begin developing it. Its time to do this for your new startup.

I didn't have time to write a short

letter, so I wrote a long one instead.
Mark Twain
Author

Defining a
Startup Vision
VISION DEFINITION

Provide a concise answer to

each question on the worksheet.
Keep them as short as possible.
Then compose a 3-4 sentence
elevator pitch that includes as
many of the key answers as
possible. Then youll be ready to
talk to prospects!

Real Estate IDX WordPress Themes

Successful Real Estate agents,

earning $100k / year
1. Phone sales & webinars
2. Conferences

May 9

Customer
Start with a concise description of the
customer segment and how youll
reach them (channels).

Real Estate IDX WordPress Themes

May 9

Value Creation
Successful Real Estate agents,
earning $100k / year
1. Phone sales & webinars
2. Conferences

IDX System to capture &

nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design

Clarify the value you are

creating for that customer.
(Value = benefit-cost)

Real Estate IDX WordPress Themes

May 9

Product
Successful Real Estate agents,
What
earning $100k / year

System to
capture &youre
is the IDX
manifest
solution
nurture online leads
proposing that will convey new value
to your
1. Own customer?
don't Rent (your website)
1. Phone sales & webinars

2. Conferences

2. Beautiful original design

Marketing Automation CRM

Software Product

Real Estate IDX WordPress Themes

Successful Real Estate agents,

earning $100k / year
1. Phone sales & webinars
2. Conferences

WordPress Theme *Product*

(not SaaS) for the DIY agent
Tech disruption. First mover
(the Spark API for IDX)

May 9

IDX System to capture &

nurture online leads

Competition

1. Own don't Rent (your website)

2. Beautiful original design

Whats your competitive position

that will enable you to provide a
better or more authentic solution?

Marketing Automation CRM

Software Product

Real Estate IDX WordPress Themes

Successful Real Estate agents,

earning $100k / year
1. Phone sales & webinars
2. Conferences

WordPress Theme *Product*

(not SaaS) for the DIY agent

May 9

IDX System to capture &

nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design

Marketing Automation CRM

Team
Software Product
What are
your teams credentials?
Whats the reason youll prevail over
competition in offering a
compelling solution?

1. Me (product/tech)
2. John (BizDev/Sales)

Tech disruption. First mover

1. Spark Platorm API

(the Spark API for IDX)

2. Access to all MLS IDX Feeds

Real Estate IDX WordPress Themes

Successful Real Estate agents,

earning $100k / year
1. Phone sales & webinars
2. Conferences

IDX System to capture &

nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design

Finance

What is the financial cost of developing

the proposed solution? Consider the
cost against potential
gains.
1. Me (product/tech)
WordPress Theme *Product*
(not SaaS) for the DIY agent

2. John (BizDev/Sales)

Tech disruption. First mover

1. Spark Platorm API

(the Spark API for IDX)

2. Access to all MLS IDX Feeds

May 9

Marketing Automation CRM

Software Product

$50,000 to build core product

$50,000 line of credit

Real Estate IDX WordPress Themes

Successful Real Estate agents,

earning $100k / year
1. Phone sales & webinars

IDX System to capture &

nurture online leads
1. Own don't Rent (your website)
2. Beautiful original design

Elevator Pitch

2. Conferences

May 9

Marketing Automation CRM

Software Product

Finally, develop a 3-4 sentence description of your proposed startup

that concisely articulates the important points youve developed
earlier
this worksheet.1. This
is the 30 second pitch you
can use to
Me (product/tech)
WordPress
Theme on
*Product*
$50,000 to build core product
2.
John
(BizDev/Sales)
(not SaaS) for
the to
DIYinvestors
agent
talk
and client prospects about your new startup.
Tech disruption. First mover

1. Spark Platorm API

(the Spark API for IDX)

2. Access to all MLS IDX Feeds

$50,000 line of credit

IDX Website/CRM software for serious RE agents to capture & nurture online leads and
grow their business. Built on Wordpress so they can"own the system, not rent". First-mover advantage by
integratingthe Spark IDX API which makes it possible.

Validate
Your
Hypothesis

Lean Feedback Loop

HYPOTHESIS VALIDATION

Ideas
LEAN METHODOLOGY
FINDING PRODUCT-MARKET FIT

Build
The Lean build, learn, measure
feedback look is fantastic for

Learn

optimizing a product concept, once a

customer or hypothesis is defined.

Product

Data
Measure

Test Early, Test Often

HYPOTHESIS VALIDATION

Validate Your Hypothesis

PROSPECT INTERVIEWS
Do They Like the Idea? Feedback?

With a well-articulated vision

ready, you can begin sharing the
concept with investors and customer

TEST MARKETING
Do Vaporware Campaigns Convert?

prospects. If the idea is well received,

advance to vapor-ware test campaigns
and finally to building the MVP.

MINIMAL VIABLE PRODUCT

Users Engaging & Using Product?

Hypothesize, Dont Guess

HYPOTHESIS VALIDATION

START WITH A HYPOTHESIS

DONT JUST GUESS

But dont just guess. Start with a wellformed hypothesis to maximize odds of
finding product-market fit and to avoid the
number of pivots along the way.

PIVOT AS
PROCESS

The Book
SMARTER STARTUP

THE SMARTER STARTUP

STRATEGY FOR STARTUPS

The Smarter Startup looks at why some

startups succeed while others fail. By taking a
more strategic approach to entrepreneurship,
founders can improve their own outcomes.
Written by Neal Cabage and Sonya Zhang,
PhD, and published by Pearsons/NewRiders.

Created By
SMARTER STARTUP

NEAL CABAGE
Digital Product Architect

Product manager and entrepreneur.

Founded ProductCamp.LA and PMA.LA.
Built and sold two startups.
Co-author, The Smarter Startup.
@NealCabage

[email protected]

SmarterStartup.org
SMARTER STARTUP

www.SmarterStartup.org
The framework, including the part
described here, are posted on the
website, along with downloadable
worksheets and reference material.
Everything is free to use, so enjoy!.