Lesson: Customer Discovery Primer with Steve Blank

Step #7 Startups Explained: What is a startup?

Let's take a start at business models and customer development but you know before we even begin, one of the first questions I tend to ask is, what is a company? What is it that I'm trying to actually start? Just for the sake this class, I think we ought to just use this definition. A company is a business organization which sells a product or service in exchange for revenue and profit. So explicitly for the purpose of this class, I'm eliminating nonprofits. Let me be clear, you could use the business model canvas and customer development to go through the process for nonprofits, but actually having some goals that are fairly concrete - revenue and profit - allows us to measure whether we're succeeding and failing in very clear ways. And that leads us to the question. What's a startup? You told us what a company is but how does a startup differ? And for me you have know, I spent 20 years doing eight startups and I never could have given you a definition off the top of my head of what a startup is. I always thought a startup is where we have free food. Where there is a great small team or you could bring your dog and whatever, but I never quite understood the purpose of a startup. So I'm going to give you Steve's definition of what it is you're actually doing. A startup is a temporary organization designed to search for a repeatable and scalable business model. Now let's go back and parts the sentence because this is pretty important. Number one is temporary. The goal of a startup is not to be startup. A startup actually aims to become company. Well that's kind of interesting because if you really think about it at least if you're a web mobile startup there is no such thing as a ten year old startup. There's a two year old startup attached to an eight year old failure. A start up is a temporary organization and what are you supposed to be doing? Well, while you think it might be building the product or maybe if your thinking harder it might be get customers, actually no. A startup is actually designed to search for something. Well that's kind of interesting. What is it that I'm supposed to be searching for? Let see. Well number one, you want to search for something that's repeatable and repeatable means the same thing that works on Monday, works on Wednesday, and works on Friday, and works next week, and works the next month. That is, I want to find sales, and marketing, and engineering processes that are repeatable. I also want to find them scalable. What scalable means, I put a dollar in, I get two dollars out, or I put a dollar in and maybe I get ten dollars out. But I better not be loosing money on a continual basis or I'm called an out of business startup. Okay, I know I'm searching for something repeatable and scalable but what is it that I'm searching for? What you're searching for is the business model and that business model search is the basis of the rest of the class. Let's take a look and see how we become a company.