We have learned through our own work and through the Startup Genome Project, that startups that leap from idea to scale tend to fail. Like a building with weak foundations, startups need to discover the mechanics of a business model that customers love before attempting to scale it. Big companies do this all the time.
To manage this, we move companies through a lifecycle we call “Success Core”.
Below are some rules-of-thumb we adopt when working in large enterprise to create new growth,
STAGE 1 – IDEA
| Team | Anyone from the company can decide to run an idea stage project. 1 or 2 people |
| Purpose | To develop a prioritised war chest of ideas to move into Stage 2. |
| Funding | Up to $1,000 can be claimed in expenses. |
| Activity | Develop the first hypothesis and get some customer validation. |
| Product | Lean canvas + lessons learned from customer tests. |
| Customer | Must involve at least 1 customer. |
| Time | 2 weeks. Can be part-time. |
| Next | Share at quarterly ‘Dragon’s Den’ sessions and submit to Innovation Council. Assessed for priority queue into next stage. |
EXAMPLE EXIT CRITERIA
- Lean canvas completed.
- Some LIGHT evidence that Problem, Customer, Solution OR Unique Value Proposition assumptions on lean canvas are valid through things like:
- Positive click through from teaser ad campaign
- LOI from customer
- Landing page conversion from interested customers
STAGE 2: PROOF OF PROBLEM
| Team | Customer Development Team – 2 or 3 people full-time and autonomous. |
| Purpose | To validate that customers find specific value in a solution. |
| Funding | About $200K |
| Activity | Detailed customer interviews. Experiments that show the customer taking action. Prototype building. |
| Product | Simple minimum viable product. No technology choices to take longer than 1 day to get started with. No dependencies. |
| Customer | As close as possible to real customer context. Customer likely knows they are in a trial. May only be one customer. |
| Time | About 3 Months |
| Next | Exit > Stage 3 / Proof of Market |
- What is the riskiest hypothesis and can you prove OK?
- What would you need to see to invest your own money?
EXAMPLE EXIT CRITERIA
- Evidence that Problem, Customer, Solution AND Unique Value Proposition assumptions on lean canvas are valid through things like:
- Successful tender from customer study
- Pilot customer using a manual version of the experience with metrics showing problem solved. At least crudely.
- Prototype testing leading to customer signing license deal.
STAGE 3: PROOF OF MARKET
| Team | Customer Development Team – About 5 people full-time and autonomous + other resources as needed to scale the parts of the business that are becoming known |
| Purpose | Strengthen value proposition to be more sticky and work in other use-cases. Search for channels, revenue models. Proven business model by exit. |
| Funding | Up to $3M |
| Activity | Building higher resolution product, testing model with more customer segments. Search for repeatable and scalable sales and marketing mechanics. |
| Product | Full, high resolution product. Still may have manual processes but the customer should not notice. |
| Customer | B2B – Clear path to $100K monthly revenue. Consumer – Clear path to 100,000 users |
| Time | About 12 Months |
| Next | Exit > Stage 4 / Proof of Scale |
EXAMPLE EXIT CRITERIA
- Evidence that ALL parts of lean canvas are valid through things like:
- Path to $100K MRR for B2B solutions
- Path to 100K users for consumer solutions
- Proven, repeatable acquisition channels.
- Known cause and effect for growth,