Flavors of Capital Video Series

Access to capital is critical for startups. Below are all of the lecture videos from my course on the flavors of capital.

  1. Flavors of Capital Series
    1. Introduction to the Flavors of Capital

    2. Bootstrapping
    3. Crowdfunding
    4. Friends & Family

    5. Small grants & competitions
    6. Large Grants
    7. Debt

    8. Equity

Customer Archetypes, some rules & samples

We all know that, most of the time when communicating, storytelling is better than dry facts & figures.   And, stories backed up by facts and figures are better still!   Steve Blank‘s Lean Launchpad popularized the idea of using “customer archetypes” to convert dry demographic descriptions of customers into living, breathing people the audience can understand.

Archetypes should follow a few simple rules:

  • Customers are always humans and never entities.  Entities (companies, nonprofits, government agencies, etc) do not make decisions, specific human(s) who work/volunteer there make decisions.  That means you have to care about what will get that person promoted or fired.
  • Archetypes are 1-person samples (real or fictitious) of the “typical” customer.   If your typical customer is a 60 year-old Japanese grandmother, make sure your archetype is a 60-year-old Japanese Grandma!
  • Archetypes are narratives, not recitations of demographic/photographic data.
  • Only describe details that are relevant for your venture’s value proposition.  If your solution doesn’t address their need for beer, don’t talk about how they love to drink :).

Example 1:

Boring demographic version:  English-speaking visually impaired people with internet access at home.

Archetype:

Jane Rook is a retired army nurse who was blinded during her service in the Vietnam war.  She lives on a small, fixed income provided by her government disability payments.  She uses her home computer to email, Facebook, and Skype her children, grandchildren, and friends.  She loves to play cards with her friends from church.  However, as her blindness prevents her from driving transportation is very difficult to arrange.  Add the social embarrassment she often feels when playing with brailled cards or when accidentally knocking over things at a new person’s home and she often stays home, alone and isolated.

Example 2

Boring demographic version:  18-24 year-old college students with annual incomes of $20-40,000 per year from middle & upper class families.

Archetype:

Blair Smith is a senior psychology major at UMass with a full course load working to maintain her B average while working 20 hours a week as a waitress, and frantically looking for a “real” job for when she graduates in a few months.  She has what feels like a mountain of student debt to worry about, as well as a dorm room overflowing with four years of acquired junk.  She has no storage space close by and couldn’t afford to pay for it even if it were available.

Example 3

Boring demographic version:  25-45 year old married women, with children, with average annual household incomes of >$50,000.

Archetype:

Liu Whan is pregnant with her and her husband Juan’s first child and has realized that their one bedroom apartment isn’t going to cut it.  They would like to find a home in which to raise their family.  Liu is a tenure-track junior professor of psychology at the local woman’s college and Juan is a firefighter.  They have just relocated to the area and have little knowledge of it and no family or friends nearby to lean on for advice.

If you have any archetypes you would enjoy sharing, please post a comment.  Thanks!

I want to see a dead seagull on every slide

Years ago I read Seth Godin’s Really Bad Powerpoint, which is short but powerfully helpful.  One suggestion that particularly stood out for me:

Make slides that reinforce your words, not repeat them. Create slides that demonstrate, with emotional proof, that what you’re saying is true not just accurate.

 

Talking about pollution in Houston? Instead of giving me four bullet points of EPA data, why not show them this instead:

Deadbirdmo

Read me the stats but show me a photo of a bunch of dead birds, some smog and even a diseased lung? This is cheating! It’s unfair! It works.

To help my students remember this powerful lesson I tell them “I want to see a ‘dead seagull’ on every slide.”  They don’t forget.  They reduce number of words, replace with images that powerfully communicate the emotion behind their speech…

Read the whole thing: Seth Godin’s Really Bad Powerpoint.

Donuts vs Fruit: asking for actions, not intentions, during customer development

Donuts    vs    fruit plate

A woman from a pastry startup walks into an office full of potential customers to conduct customer development interviews.  She asks everyone “You told me you often need snacks in the middle of the day.  What would be better, if I brought a plate of donuts or a plate of fruit?” Most people tell her they would prefer fruit because it is healthier.  On her way out she leaves a plate of each behind as a thank-you gift.  She comes back the next day and discovers there are no donuts left, but lots of rotting fruit! What did she learn?

A novice would think they learned that customers lie so there is no point in asking them.  A pro realizes the importance of how you ask the question.  It is very hard for people to know what they might/would do with any accuracy.  If instead you ask what people have done, or give them a situation to make a real choice, then you get much more usable information.

Note that you have two ways to apply this great lesson:

  1. Before you have a prototype you can ask people what they have done in similar situations in the past.
  2. Once you have a Minimum Viable Product (MVP), give people a choice between your option and the alternative.

Take away:

When conducting customer development interviews ask what people have done, not what they would/might do.

Hat Tip to the man who taught me this concept and the entertaining way to remember it: the great Eddie Binder.

Metrics That Matter

What are the Metrics That Matter for your venture? No… not the vanity metrics that so many of us were taught to pay attention to.  What are the metrics that actually show you if your venture is on the right track?

I watch my students struggle with this a great deal.  I’d like to offer some patterns that can serve as a starting point to anyone considering these questions.

  1. Cost to acquire/get a customer helps you evaluate different channels for their relative value, shows you when your website is doing a terrible job of converting visitors into contacts, steers you towards labor-efficient/scalable techniques, etc.
    Somesubmetrics:

    1. Sales & marketing costs: out-of-pocket + labor (assume a market-rate labor cost so you do not underestimate labor-intensive marketing channels)
    2. # hits to your website, # of cold calls
    3. % that convert to contact you, % that meet with you
    4. % that purchase
  2. Cost to keep/retain a customer helps you spot when you are using unsustainable customer service / product delivery procedures.
    Somesubmetrics:

    1. Cost of customer service team, returns, refunds, etc.
    2. # of customers
  3. Lifetime value of a customer helps you think about customer retention and how to grow revenue from existing customers by keeping them longer or by solving other problems for them via new products.
    1. % of customers who renew
    2. Revenue per customer

These three metrics, while not all-inclusive, are a fantastic starting point.

 

What a Customers Who’s “Hair is On Fire” Looks Like

Steve Blank‘s Customer Development methodology emphasizes that startups need to seek “earlyvangelists,” potential customers who’s “hair is on fire.”  Great image!  Makes sense when you hear it!  Then you try to find such customers and… their hair is not literally on fire so you struggle to apply the concept!

Here is a definition that my students find helpful (adapted from Steve Blank’s work):

A Customer’s “Hair is on fire” when they are in so much pain that they are already spending time and/or money on some hodgepodge solution that you are superior to?  

Tag Lines Should Emphasize Benefits, not Features

Tag lines – they should follow the same rules as elsewhere in your presentation.  “Don’t tell me about your lawn fertilizer, tell me about my lawn.

Bad tagline: “All inPlay – Multiplayer online video games for the visually impaired and their friends & family.” – This emphasizes FEATURES.  Why do we care that these are multiplayer online games?

Good one: “All inPlay – Allowing the visually impaired to play and interact with their friends and family unhandicapped and as equals.” – This emphasizes the benefits making it clear to anyone why this company is valuable.