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Start-up companies > Unit 4 - Business model development & validation > Flashcards

Unit 4 - Business model development & validation Flashcards

1
Q

Minimum Viable Product (It is a:)

A

Version of a new product which allows the team to collect the maximum amount of validated learning about customers with the least effort

  • It needs the critical features for your test to yield meaningful results
  • Rule 20/80: Only put 20% of the features that 80% of customers will use

• We are building something to measure actual customer behaviour (something clients are buying) instead of sending surveys or trusting our intuitions

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2
Q

Minimum Viable Product (Is Not:)

A
  • Concept test (assesses technical feasibility: could the product be developed?)
  • Prototype (determines how to develop the product: design, shape, materials…)
  • Proven product with all the functionalities that the market wants
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3
Q

Minimum Viable Product - why is it useful?

A
  1. Start the create-measure-learn cycle with maximum speed and minimum budget
  2. Check basic business hypotheses (channels, costs, sales process…) and know how to pivot if necessary
  3. Teach key partners and budget
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4
Q

Minimum Viable Product - Goals

A
  1. Focus on customer’s needs
  2. Quickly reach the market
  3. Get information from the market
  4. Reduce risks when developing the model
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5
Q

Minimum Viable Product - How to create it

SMOKE TEST MVP

A

Creating an illusion that you have a great product without having finished it. Implies marketing a product and collecting orders before having a finished product

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6
Q

Minimum Viable Product - How to create it

CONCIERGE MVP

A

Developing a manual and labor intensive method to test an automated process.

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7
Q

Minimum Viable Product - How to create it

SPLIT TEST OR A/B TEST MVP

A

Methodology that allows to test two versions of the same variable to see which one is more effective

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8
Q

Minimum Viable Product - How to create it

CROWDFUNDING TEST MVP

A

Elaborate a campaign to crowdfund the idea before spending major time and money building the idea

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9
Q

Stages of entrepreneurial process - from idea to company

A
  1. Value proposition: development & validation
  2. Business model: growth & return
  3. Business plan
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10
Q

Metrics or KPI by phases

A
  1. Development and validation
    Objectives: To discover and to validate customers
    Keys: Activation and retention (traction)
  2. Growth and return
    Objectives: To generate demand
    Keys: Acquisition, referral and return (Growth hacking)
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11
Q

Traction metrics

A
  • Activation rate/conversion rate
  • Rotation/ Recurrence/ Engagement rate
  • Churn rate
  • Cash burn rate
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12
Q

Activation rate

A
  • It gives information on the ability to convert interested in potential customers
  • Activation needs to be defined (From those people who have seen my add, flyer, visited my web site… how many have reacted)

“activated” audience / acquired audience

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13
Q

Conversion rate

A

Ability to monetize the business model (By turning interested in customers)

Number conversions / Total visitors

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14
Q

Engagement rate

A
  • Audience that has a high “interest” (measured by time dedicated, visits to the web…).
  • % of customers or users that are engaged
  • This ratio is important for Facebook, Instagram and other social networks

“engaged” audience / activated audience
Total engagement/total followers

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15
Q

Retention rate

A

% of users or customers that still use the product in period t

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16
Q

Recurrence rate

A

Number of actions (eg.purchases) of users/customers in the period t of relation with the firm

17
Q

Churn rate

A
  • Rate of customers who stop buying our products or services for a particular period of time t
  • Shows the speed at which we lose customers
  • The difference between activation rate and churn rate shows the growth of the business (In number of customers)

Lost audience in t / Initial audience

18
Q

Cash burn rate

A
  • % of monthly consumption of funds in ordinary activity of the firm
  • It is usually negative
  • Will be positive at the moment when cash breakeven point is reached
  • Allows to calculate cash runaway or the remaining life period if there is no income

(Cash at t - cash at t-1) / Cash at t

19
Q

Phases of funding

A
  1. Pre-seed capital
  2. Seed capital
  3. Early stage
  4. Later stage
20
Q

Pre-seed capital

A
  • The project is an idea, perhaps with a prototype, and with part time workers
  • The goal is to develop the MVP and to launch it into the market
  • Is the financing phase with the greatest risk and uncertainty, it is difficult to obtain funding
  • Usual solution: Bootstraping (revenues from each sale) and auto finance FFF
21
Q

INVESTORS PROFILES PRE SEED PHASE:

A
  • Founder (savings)
  • Friends and Family (3Fs or just F&F)
  • Accelerators (For some projects)
  • Business Angels (rare during this phase)
22
Q

Accelerators

A

”Training, coaching and investment programs during pre seed phase for small firms with several founders”

23
Q

Business Angel

A

”Individual investor providing capital and expertise to a start-up company in pre seed or seed phase”

24
Q

Seed capital

A
  • The business model is almost validated, but breakeven point is not reached
  • The goal is to pivot in order to obtain a good product/market fit
  • With the product in the market traction metrics can be obtained as well as pivoting plans that may allow to obtain funds
25
Q

INVESTORS PROFILES SEED PHASE:

A
  • Business Angels
  • Syndicated investors
  • Crowdfunding
  • Venture capital firm (rare during this phase)
26
Q

Syndicated investors

A

“A business angel spots an interesting firm and offers more people to invest in exchange for a commission”

27
Q

Types of crowdfunding

A
  1. Reward crowdfunding
  2. Equity crowdfunding
  3. Crowdlending
  4. Donations
28
Q

Reward crowdfunding:

A

the sponsor receives something in exchange for his contribution (eg. pre-sale of the product, special access…)

29
Q

Equity crowdfunding:

A

offers participation in the company for the funds

30
Q

Crowdlending:

A

requires return of contribution and interest

31
Q

Donations:

A

nothing is offered to sponsors in return (for social entrepreneurship)

Start-up companies (6 decks)

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