Startup Secrets - Game Changing Business Models
Download as PPTX, PDF•9 likes•25,724 views
The document outlines strategies for startups to develop disruptive business models that create competitive advantages and increase value. Key themes include identifying core value, leveraging multipliers in operations, and utilizing innovative technology and market approaches to differentiate offerings. It provides examples from various industries, emphasizing the importance of adaptability and customer co-creation in achieving success.
Startup Secrets - Game Changing Business Models
- 1. Proprietary and ConfidentialProprietary and Confidential START UP SECRETS An insider’s guide to unfair competitive advantage Disruptive Business Models to build Value @underscorevc #startupsecrets startupsecrets.com
- 2. Proprietary and ConfidentialProprietary and Confidential Introductions & Case Examples Established • Google Startup • Acquia • Demandware Not for profit • One Laptop Per Child • Diagnostics For All (on the web) 2Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 3. Proprietary and ConfidentialProprietary and Confidential Agenda 1. Finding a Disruptive Business Model 2. Focusing on CORE differentiation 3. Multiply and Leverage it with innovation 4. Designing for high value Other side of the coin – GTM – next session - Eg Segmentation, Channels etc 3Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 4. Proprietary and ConfidentialProprietary and Confidential What is your model for • Creating • Delivering • Harnessing VALUE? 4 4 Business Model: How do you make money? Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 5. Proprietary and ConfidentialProprietary and Confidential Tonight Let’s get creative and think specifically about startups! 5
- 6. Proprietary and ConfidentialProprietary and Confidential Business Model as a Disruptor Why? • Time to market • Market adoption • Sustainability Connecting the dots for you as a founder … • Spend • Cash efficiency • Your ownership • Valuation 6Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 7. Proprietary and ConfidentialProprietary and Confidential New Market & GTM Disruptive Business Model Disruptive Technolog y Disruptive Business Models to Build Value @underscorevc startupsecrets.com Perfect Startup Storm 7
- 8. Proprietary and ConfidentialProprietary and Confidential How can your Business Model… Change the game? Rewrite the rules? Cause an innovator’s dilemma Be as disruptive as your technology? 9 New Game New playing field New boundaries New rules YOU choose players Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 9. Proprietary and ConfidentialProprietary and Confidential Symantec Antivirus for Mac (SAM) Best seller – Licensed Product Norton Antivirus for PC (NAV) How to change the game Best seller – Subscription Service Ex 1: Symantec – many years ago (!) Disruptive Business Models to Build Value @underscorevc startupsecrets.com 10
- 10. Proprietary and ConfidentialProprietary and Confidential Dramatic! Game changing • Flipped the model on it’s head Competitors caught off guard • Predictable profitable business model Led to solution leadership vs. battle: “Data Security” • Customer need met more effectively • More value extracted • 1.5 product / seat => 2.6x 11 Results? Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 11. Proprietary and ConfidentialProprietary and Confidential Off balance sheet Publisher of US products • Investment in Management, Sales, Marketing, Support, Translation & Localization Acquired back by US corp when profitable • Pooling of interest • Non dilutive • Growing earnings Symantec example Win/Win 12 Ex 2: European Software Publishing Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 12. Proprietary and ConfidentialProprietary and Confidential Win/win/win • Customers = better local product, support, services • Publishers = accelerated, off balance sheet setup of profitable business • Shareholders = 97X return on original investment Non technology disruptive business model • Economies of scale • Pooling of interests (tax) • Time shifting expense -> Accretive outcome 13 Results? Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 13. Proprietary and ConfidentialProprietary and Confidential Shared ownership (Zipcar) Flash sales (Vente Privee) Crowd sourcing (uTest) Lead Gen (Mint.com) Virtual goods/currencies (Tapjoy) Combinations • Acquia - OSS, SaaS • AirBnB - Commission on P2P rentals • Demandware - SaaS, success based rev share • Groupon - broker, revshare • Spotify -adbased, freemium 14 Sample Models Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 14. Proprietary and ConfidentialProprietary and Confidential Process or Product? Software or Services? Open or Proprietary? Content or Data? Freemium or Premium? Subscription or License? 15 Business Model – Sample Questions Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 15. Proprietary and ConfidentialProprietary and Confidential Your Capabilities Of Really Exceptional Value Focus on it!CORE First key question What is your CORE value? Disruptive Business Models to Build Value @underscorevc startupsecrets.com 16
- 16. Proprietary and ConfidentialProprietary and Confidential Where is your CORE value? Software/other technology Data Content Service, support User network Disruptively monetize it! • To your competitive advantage • Where are others most vulnerable? 17 COR E Cut to the CORE! Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 17. Proprietary and ConfidentialProprietary and Confidential Google Apps vs. Microsoft office • What is the C.O.R.E for each ? Software, Data, Advertising ? Don’t compete head-on • MS Office = enterprise market • Google Apps = consumer market • Free vs $500 license • Simple vs Complicated • 80% solution vs Professional Tool 18 - Ex 1 Apps Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 18. Proprietary and ConfidentialProprietary and Confidential How can you compete with a market leader who has 80% to 90% market share? 1. Don’t compete head-on 2. Innovators Dilemma – go for low end 3. Disruptive technology, business model, or market approach 4. Examples: Gmail, Google Apps, Chrome 19 – Competing with Market Leaders Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 19. Proprietary and ConfidentialProprietary and Confidential Apple vs. Google • What is the C.O.R.E for each ? Hardware, Software, Content ? Others in Ecosystem • Samsung, HTC Alternative approaches • Amazon 20 – Ex 2 - Mobile Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 20. Proprietary and ConfidentialProprietary and Confidential Who is winning? Why? Is technology the difference? Apple, Google, & Microsoft strategies • Always play to your strength • Apple Mac, Google Search, Microsoft Windows 21 Android vs iPhone Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 21. Proprietary and ConfidentialProprietary and Confidential Disrupt the market leader • Apple disrupted carriers and manufacturers Verizon, Sprint, Nokia, Motorola, RIM, Symbian • Android allowed them to fight back Disruptive business model • Android is free • Advertising business model • Search, Maps, Local, Wallet, YouTube 22 Android vs iPhone Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 22. Proprietary and ConfidentialProprietary and Confidential Business Models Matter ! Don Dodge dondodge@google.com Disruptive Business Models to Build Value @underscorevc startupsecrets.com 23
- 23. Proprietary and ConfidentialProprietary and Confidential Creating Value
- 24. Proprietary and ConfidentialProprietary and Confidential Startup Secret: Co-Creating Value Disruptive Business Models to Build Value @underscorevc startupsecrets.com Be Open and Extensible (eg Software APIs) • Enabling external multipliers to your value • Building on yourself • Eating your own cooking • Being your own customer 25
- 25. Proprietary and ConfidentialProprietary and Confidential Be Open and Extensible (eg Software APIs) • Enabling external multipliers to your value • Building on yourself • Eating your own cooking • Being your own customer Open Source • Leverage through community • Make the customer the product manager Scratching their own itch 26 Startup Secret: Co-Creating Value Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 26. Proprietary and ConfidentialProprietary and Confidential Dries Buytaert Founder and project lead Drupal Co-founder and CTO Acquia http://buytaert.net :: @Dries 27Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 27. Proprietary and ConfidentialProprietary and Confidential Meet Dries 12 years ago when he started work on Drupal ... 28 Compiler books Collection of stamps Chess board Assembly books All furniture is from IKEA Student dorm in Antwerp where I started Drupal
- 28. Proprietary and ConfidentialProprietary and Confidential 1 out of 50 websites in the world 10,000+ modules 300,000+ downloads/month 1.5M unique visitors/month FREE 29
- 29. Proprietary and ConfidentialProprietary and Confidential 71 of the world's top 100 universities use Drupal 30
- 30. Proprietary and ConfidentialProprietary and Confidential 1. Freedom to run the program 2. Freedom to study the program 3. Freedom to modify the program 4. Freedom to re-distribute the program 31 Open Source is a software license
- 31. Proprietary and ConfidentialProprietary and Confidential Drupal wins because it is less expensive … yet technically superior! Disruptive Business Models to Build Value @underscorevc startupsecrets.com 32
- 32. Proprietary and ConfidentialProprietary and Confidential Open Source Collaboration 33
- 33. Proprietary and ConfidentialProprietary and Confidential 3,800 people contributed to Drupal 8 Open Source is not just a software license, it is also a development model Disruptive Business Models to Build Value @underscorevc startupsecrets.com 34
- 34. Proprietary and ConfidentialProprietary and Confidential Open Source Collaboration Community 35
- 35. Proprietary and ConfidentialProprietary and Confidential 36
- 36. Proprietary and ConfidentialProprietary and Confidential Open Source Collaboration Community Innovation 37
- 37. Proprietary and ConfidentialProprietary and Confidential Technically superior 38
- 38. Proprietary and ConfidentialProprietary and Confidential “Creative Destruction” Joseph Schumpeter 39 Joseph Schumpenter, Economist, 1883-1950 Drupal and Open Source is a catalyst for “Creative destruction”- Changes how we develop software - Changes how we build websites - Changes a multi-billion dollar industry - Open Source enables business model innovation - Bonus: allows to do well, and do good Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 39. Proprietary and ConfidentialProprietary and Confidential Delivering & Capturing Value
- 40. Proprietary and ConfidentialProprietary and Confidential Multiply and Leverage your CORE Multipliers: • Increase revenue • Increase reach • Increase coverage Levers: • Reduce time • Reduce costs • Reduce resources CORE Levers Multipliers Startup Secret: Multipliers & Levers Disruptive Business Models to Build Value @underscorevc startupsecrets.com 41
- 41. Proprietary and ConfidentialProprietary and Confidential Multipliers: • Added functionality • Community reach Levers: • Community development • Community marketing CORE Levers Multipliers Disruptive Business Models to Build Value @underscorevc startupsecrets.com Multiply AND Leverages CORE Drupal, Open Source 42
- 42. Proprietary and ConfidentialProprietary and Confidential Multiplier Examples: • Sales & Marketing – Tiered Pricing – Freemium – Channel partners • Product – Slippery products * – “Russian Doll” Packaging * – Technology stacks Lever Examples: • Sales & Marketing – Web – Inside – Inbound – Viral • Product, Support – Offshoring – Outsourcing – Crowdsourcing – Co-creation * – Technology stacks * Covered herein Examples in Software Startup Secret: Multipliers & Levers CORE Levers Multipliers Disruptive Business Models to Build Value @underscorevc startupsecrets.com 43
- 43. Proprietary and ConfidentialProprietary and Confidential Strategies that enable Multipliers and Levers to work together around your CORE are the real winners 44 Get Multipliers & Levers working together! Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 44. Proprietary and ConfidentialProprietary and Confidential Acquia
- 45. Proprietary and ConfidentialProprietary and Confidential • Provider of cloud-based solutions/support for enterprises using the open source product, Drupal • 2000+ customers • 250+ employees • 150% 4 year CAGR • Global operations • Highly predictable and repeatable model • Land and expand strategy 46 PROPRIETARY AND CONFIDENTIAL - do not redistribute Acquia at A Glance Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 46. Proprietary and ConfidentialProprietary and Confidential Acquia Business Model Drupal is FREE It is also Open Source So how do you make money from FREE and Open IP? 1. Create valuable products and services around the CORE of Drupal 2. Use FOSS as multiplier and a lever in R&D, sales and marketing 47 PROPRIETARY AND CONFIDENTIAL - do not redistribute Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 47. Proprietary and ConfidentialProprietary and Confidential Acquia products around Drupal CORE C OMMU N ITY C OMMER C EC ON TEN T Enterprise Site FactoryDrupal Gardens Managed DeploymentsAcquia Cloud Drupal Management SuiteAcquia Network Drupal Training Professional Services Disruptive Business Models to Build Value @underscorevc startupsecrets.com 48
- 48. Proprietary and ConfidentialProprietary and Confidential As a multiplier AND a lever (in R&D, sales, marketing…) 49 Example Multipliers: • Upsell value added products & services • Cloud & SaaS Example Levers: • Target installed base • Expand usage through partners CORE Levers Multipliers Free and Open Source Software (FOSS) Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 49. Proprietary and ConfidentialProprietary and Confidential One more thing… Disruptive Business Models to Build Value @underscorevc startupsecrets.com 54
- 50. Proprietary and ConfidentialProprietary and Confidential Product feeds the business model… • User experience • Supportability • Maintenance, updates (= lifecycle) • Upgrades • Upsells Leads to 2 startup secrets • Russian Dolls & SLIPPERY products 55 Designing for success… Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 51. Proprietary and ConfidentialProprietary and Confidential • Simple • Low to no initial cost • Installs easily • Proves value quickly • Plays well with others • Easy to use • ROI is obvious • Y customers can’t live without it Think of how this improves the Gain/Pain Ratio in our Value Proposition Workshop Gain Pain Friction Free, SLIPPERY products Disruptive Business Models to Build Value @underscorevc startupsecrets.com 56
- 52. Proprietary and ConfidentialProprietary and Confidential Simple: Update your site from the browser Low to no initial cost: free Installs easy: Windows/Mac installers + SaaS Proves value quickly: Distributions + Start using immediately Plays well with others: Lots of integrations with other platforms Easy to use: Web-based ROI is obvious: Better, faster, cheaper Your customers can’t live without: flexibility and extensibility 57 What makes Drupal SLIPPERY? Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 53. Proprietary and ConfidentialProprietary and Confidential Multi purpose strategy • Packaging • Pricing • Distribution • And more … 58 Startup Secret: Build a Russian Doll! Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 54. Proprietary and ConfidentialProprietary and Confidential Free Incent Disruptive Business Models to Build Value @underscorevc startupsecrets.com 59
- 55. Proprietary and ConfidentialProprietary and Confidential Limited Free Freemium … Disruptive Business Models to Build Value @underscorevc startupsecrets.com 60
- 56. Proprietary and ConfidentialProprietary and Confidential Personal Limited Free OEM Solution… Disruptive Business Models to Build Value @underscorevc startupsecrets.com 61
- 57. Proprietary and ConfidentialProprietary and Confidential Workgroup Personal Limited Free Premium … Disruptive Business Models to Build Value @underscorevc startupsecrets.com 62
- 58. Proprietary and ConfidentialProprietary and Confidential Corporate Workgroup Personal Limited Free Sales enabler … Disruptive Business Models to Build Value @underscorevc startupsecrets.com 63
- 59. Proprietary and ConfidentialProprietary and Confidential Enterprise Corporate Workgroup Personal Limited Free Adoption … Disruptive Business Models to Build Value @underscorevc startupsecrets.com 64
- 60. Proprietary and ConfidentialProprietary and Confidential “Addiction before Adoption” Gives you, your partners & your customers: Digestible starting point Upsell Options Channel Flexibility … and more 65Disruptive Business Models to Build Value @underscorevc startupsecrets.com Startup Secret: Build a Russian Doll!
- 61. Proprietary and ConfidentialProprietary and Confidential Acquire On-board Upsell / Cross Sell “Addiction before Adoption” Acquia example = increasing LTV “Land & Expand” 66 $0 $100 $200 $300 $400 2009 2010 2011 2012(e) LTV Disruptive Business Models to Build Value @underscorevc startupsecrets.com Startup Secret: Build a Russian Doll! See example of 4A’s here
- 62. Proprietary and ConfidentialProprietary and Confidential Create, Deliver & Harness Value Putting it all together Disruptive Business Models to Build Value @underscorevc startupsecrets.com 67
- 63. Proprietary and ConfidentialProprietary and Confidential Lifetime Value of Customer (LTV) Cost of Acquiring Customer (CAC) 69 CORE Levers Multipliers LTV ~3x > CAC Disruptive Business Models to Build Value @underscorevc startupsecrets.com Basic Startup Model
- 64. Proprietary and ConfidentialProprietary and Confidential Repeatable Scalable – with leverage Profitable / Sustainable Predictable Valuable 70Disruptive Business Models to Build Value @underscorevc startupsecrets.com What makes for a GREAT business model?
- 65. Proprietary and ConfidentialProprietary and Confidential Development Target Gross Margin 80% R&D 100%+ 15% Sales & Marketing 10% G&A 45% Profit (Loss) -100% 20% 71 • Example: – Phases of a software company Disruptive Business Models to Build Value @underscorevc startupsecrets.com % of Revenue spent…
- 66. Proprietary and ConfidentialProprietary and Confidential Expenses as % of Revenue 62% 61% 53% 43%48% 29% 21% 19% 43% 50% 45% 44% 19% 14% 11% 11% L/T Model based on profitable subscription based software company 62% 48% 43% 19% 51% 29% 65% 14% 11% 45% 21% 53% 44% 19% 44% 11% 10% 35% 15% 25% Disruptive Business Models to Build Value @underscorevc startupsecrets.com 73
- 67. Proprietary and ConfidentialProprietary and Confidential • Today: – 70% of all bookings are renewable subscriptions – 30% are consulting services (key differentiator) – 85%+ annual renewal rate for non-project work • Long-term Model: – 80% renewable subscriptions – 20% consulting services – 90% annual renewal rate for non-project work Highly Predictable and Repeatable Financial Model Disruptive Business Models to Build Value @underscorevc startupsecrets.com 74
- 68. Proprietary and ConfidentialProprietary and Confidential New Geographies New Partners New Verticals Potential M&A Cross-sell Up-sell New Sites New Products New Customers Existing Customers Result: Disruptive Business Model for Continued Growth Disruptive Business Models to Build Value @underscorevc startupsecrets.com Total Revenue
- 69. Proprietary and ConfidentialProprietary and Confidential Valuable…
- 70. Proprietary and ConfidentialProprietary and Confidential 2013 Revenue Multiples Median 5.2x Valuations - SaaS Disruptive Business Models to Build Value @underscorevc startupsecrets.com 77
- 71. Proprietary and ConfidentialProprietary and Confidential 2012-2013 Revenue Growth Valuations - SaaS 2013 Revenue Multiples Median 5.2x Disruptive Business Models to Build Value @underscorevc startupsecrets.com 78
- 72. Proprietary and ConfidentialProprietary and Confidential Valuations - SaaS Disruptive Business Models to Build Value @underscorevc startupsecrets.com 79
- 73. Proprietary and ConfidentialProprietary and Confidential Valuations - SaaS Disruptive Business Models to Build Value @underscorevc startupsecrets.com 80
- 74. Proprietary and ConfidentialProprietary and Confidential Retention (Renewal) Disruptive Business Models to Build Value @underscorevc startupsecrets.com 82
- 75. Proprietary and ConfidentialProprietary and Confidential 14 x leverage! Upsell Disruptive Business Models to Build Value @underscorevc startupsecrets.com 83
- 76. Proprietary and ConfidentialProprietary and Confidential Lifetime Value of Customer (LTV) Cost of Acquiring Customer (CAC) 84 CORE Levers Multipliers LTV ~3x > CAC Basic Startup Model Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 77. Proprietary and ConfidentialProprietary and Confidential The Model Refined – Enabling Retention & Upsell Lifecycle Value of Customer (LCV) Cost of Acquiring & Re-Engaging Customer (CARC) 85 CORE Levers Multipliers Re-TrialUp-sell Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 78. Proprietary and ConfidentialProprietary and Confidential Re-engagement Costs Must be included in CARC Example: • Support • Customer Service • Professional Services 86Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 79. Proprietary and ConfidentialProprietary and Confidential Connecting it to Gain/Pain They are two views of the same principle: • Customer view = Gain/Pain • Vendor view = LCV/CARC 87 CORE Levers Multipliers Re-TrialUp-sell Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 80. Proprietary and ConfidentialProprietary and Confidential Start as you plan to finish... 88Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 81. Proprietary and ConfidentialProprietary and Confidential A typical product lifecycle But it doesn’t have to be this way ! 89 See Try Buy Fly Die Long, costly (CAC), slow payback, short lifetime value (LTV) Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 82. Proprietary and ConfidentialProprietary and Confidential Adding Retention and Upsell 90 See Try Buy Fly Die Re-TrialUp-sell Extended Lifecycle Long, costly (CAC), slow payback, EXTENDED lifetime value (LTV) Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 83. Proprietary and ConfidentialProprietary and Confidential Web Self service On demand SaaS Subscription Open source A disruptive & valuable Lifecyle See Try Buy Fly Die Re-TrialUp-sell Extended Lifecycle Re-Trial Up-sell Extended Lifecycle short, low cost (CARC), quick payback, extended lifecycle value (LCV) Disruptive Business Models to Build Value @underscorevc startupsecrets.com 91
- 84. Proprietary and ConfidentialProprietary and Confidential Applied to Software Installed by IT Customized Infrequent upgrades Proprietary License 92 1990+ 2010+ On demand, SaaS Web based Self service Open Source Subscription Web Self service On demand SaaS Subscription Open source Up-sell Extende d Lifecycl e Up-sell Extende d Lifecycl e short, low cost (CAC), quick payback, EXTENDED lifetime value (LTV) Re-Trial …a fundamentally disruptive & more valuable business model Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 85. Proprietary and ConfidentialProprietary and Confidential DEMANDWARE PRE-IPO
- 89. 97
- 91. 99
- 93. 101
- 97. Proprietary and ConfidentialProprietary and Confidential Summary Disruptive Business Model – as significant as Technology Focus on CORE differentiation Multiply and Leverage it with innovation like:- • Co-Creation • Strategic Partners • Russian Doll Packaging • And Friction Free, SLIPPERY products Design for high value using LCV & CARC 106Disruptive Business Models to Build Value @underscorevc startupsecrets.com
- 98. Proprietary and ConfidentialProprietary and Confidential START UP SECRETS An insider’s guide to unfair competitive advantage Hi Disruptive Business Models to build Value #startupsecrets startupsecrets.com Michael J Skok
- 99. Proprietary and ConfidentialProprietary and Confidential T 617.303.0064 @underscorevc 53 State Street, 10th Floor, Boston, MA 02109, USA T 617.303.0064 @underscorevc 53 State Street, 10th Fl Boston, MA 02109