Technology Venture Creation (elec5701) sept12
Date 07.01.2017 Size 17.36 Kb.
Technology Venture Creation (ELEC5701) SEPT12 assert(CPA < LTV) - the most important line of code David Jones http://slideshare.net/djinoz/ @djinoz assert(CPA < LTV) Even if you could build Twitter/Instagram - in Australia you’d never get it funded. Aussie VCs will look at 150+ deals/year but fund 2-5 companies Aussie angel increasing but still conservative and sparse. 2012 Update: Maybe Blackbird is a game-changer Corollary : Aussie startups don’t have luxury of unlimited venture, so frame your “Business Models” from the beginning. (Ye olde) Funding Model for: Web 1.0, Enterprise S/W, Deep IP, Rockstar Founders david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Australia: Not a great track record here Lean but not starving - revenue is a the best deodorant BEWARE: Of Market Changes, Slow Execution, Too Few Customers …a common “underfunded aussie story”. david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Revenue is a deodorant david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Your Product is not your product (Ash Muraya) david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Customer Acquisition & Monetization Product vs Sales Matrix Product needs selling, strong sales piece. This is a sales-driven company. Product sells itself, strong sales piece. This is ideal. Product sells itself, no sales effort. Does not exist. Product needs selling, no sales effort. You have no revenue.
david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Thiel http://blakemasters.tumblr.com/post/22405055017/peter-thiels-cs183-startup-class-9-notes-essay assert(CPA < LTV) david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Thiel http://blakemasters.tumblr.com/post/22405055017/peter-thiels-cs183-startup-class-9-notes-essay The Metrics you need: Customer lifetime value (LTV sometimes CLV) Average revenue per user (per month/year), or ARPU Retention rate (monthly, decay function), or r Churn (the opposite of Retention!) Average customer lifetime, which is 1 / (1-r) Cost per customer acquisition, or CPA Retention cost (customer support, 3rd parties, ops costs) The Basic Math LTV = ARPU x Average Lifetime of a Customer – the Cost to Serve them (COGS) Where ARPU = Average Revenue Per User and Average Lifetime of a Customer = 1/Churn Rate. david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz assert(CPA < LTV) Engines of Growth david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Ries http://www.startuplessonslearned.com/2008/09/three-drivers-of-growth-for-your.html assert(CPA < LTV) Paid Engine of Growth david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Thiel http://blakemasters.tumblr.com/post/22405055017/peter-thiels-cs183-startup-class-9-notes-essay Enterprise spam/virus cloud solution that filters email ARPU: $200 per month Customers on average stay with you for 18 months. Margin after channel partners and operational costs is 50% The LTV is = 200 * 18 * 50% = $1800 You use Google Adwords to acquire users is $500 So you are $1300 ahead But not sticky if Google release free email with filtering (low switch cost) assert(CPA < LTV) Sticky Engine of Growth david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Thiel http://blakemasters.tumblr.com/post/22405055017/peter-thiels-cs183-startup-class-9-notes-essay Same solution, but more sticky by offering “archiving” ARPU: $200 per month Customers on average stay with you for 36 months. Margin after channel partners and operational costs is 50% The LTV is = 200 * 36 * 50% = $3600 You use Google Adwords to acquire users is $500 So you are $3100 ahead assert(CPA < LTV) Retention & Churn LEAKY BUCKET is the enemy of LTV Particularly devastating in Consumer/Social Punters leave before you monetise them Enterprise tends to be stickier because of corporate dynamics. david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz assert(CPA < LTV) LTV’s in startups How can you possibly know LTV at the start? Everything in Dave McClures AARRR (Acquisition, Activation, Retention, Referral Revenue) In consumer measure rates: david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz assert(CPA < LTV) Viral Engine of Growth david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Credit: Thiel http://blakemasters.tumblr.com/post/22405055017/peter-thiels-cs183-startup-class-9-notes-essay Add a Default Footer: “Filtered by Mail Filter X” ARPU: $200 per month Customers on average stay with you for 36 months. Margin after channel partners and operational costs is 50% The LTV is = 200 * 36 * 50% = $3600 You use Google Adwords to acquire users is $100 So you are $3500 ahead OK, not a killer viral engine but you get the idea – just a non-Facebook example ;) Tip of the day: david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Validation Tip of the day: Look them deeply in the eye and ask for money david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Validation Tip of the day: Look them deeply in the eye and ask for money david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Because if you can’t get to product/market fit you will never get to sustained ARPU You will never get initial purchases If you do, the leaky bucket has a big hole. The Business Model drives the Business Plan david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Product Focus: Core UtilityCompany Focus: Right Business ModelThe “right” business model takes iteration. But this BM framework prescribes what activities you SHOULD focus on (the business plan being covered by Ryan Junee) david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz The Business Model Canvas david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz ThreatMetrix early BM (fail) david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Security incident/infection data Big Data aggregation& combine Super Super Large Data Processing Reqs (boil the ocean problem) BotNet Detection will make you more secure White Label OEM in Security Products Ummm? (2-sided market problem) Flat Monthly Fee (peril of OEM) ThreatMetrix 2008-2011 david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Marketing Evangelism Awareness Per Transaction Assessment Super Super Large Data Processing Reqs Realtime SaaS Fraud Protection for eCommerce Upfront Resellers in new Territories Webinars/Demos/Evals Close/Customer Service Summary : Benefits of BM Canvas Won’t stop you being deluded Won’t stop you arguing black==white BUT Surfaces assumptions Structures dependencies Scopes debate Use it to test the logic of a new activity david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Drill-in Example 1 david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Key Partners Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? motivations for partnerships: Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities Drill-in Example 2 david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz Cost Structure What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? is your business more: Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) Value Driven ( focused on value creation, premium value proposition)sample characteristics: Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope Questions? Good News… The local startup community is building: StartupCamp, Startup Weekend, SiliconBeach StartMate, MentorConnect, SeedAccelerator, Fishburners Courses like this…. Lots of global information Aussie “mafia” in Silicon Valley StartupHouse Links into CRV Southern Cross presence Paper MVP vs Hacked MVP david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz The jury is still out but hacked MVP gives more accurate CustDev feedback Focus or Fail If you have limited resources and cash reserves then focus is your most valuable discipline – if your hypothesis wrong at least you “fail fast” david DOT jones AT gmail DOT com | skype://djinoz | Cell:+61 412 683 111 | @djinoz (picture credit: Mick Liubinskas/Pollenizer) Don’t let Perfect be the Enemy of the Good Ye Olde Startup Funding Model (too early to talk about but I know your thinking about it) @djinoz david@dealsta.com.au @djinoz david@dealsta.com.au Share with your friends:
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