Startup Lessons from inside an HBS Class

My favorite class at HBS has been Professor Jeffrey Bussgang's Launching Tech Ventures class. It's about exactly what the title suggests: how do you build and launch a successful tech venture? We've dove deep into the business models of 20+ startups and come away with structure we can use when thinking about important decisions a new venture faces early on. Here are lessons I've learned from the class thus far!

1. A simple framework for assessing business model quality centers around the following:

Customer Value Proposition (CVP): What is the problem you are trying to solve for your customer? Is the value proposition strong and clear to them?

Go-to-Market (GTM): How are you going to get your first users / customers? How will users find your product? How do you build your competitive MOAT? Can you achieve a flywheel or network effect?

Business Model / Profit Formula: The metrics matter! What is the Lifetime Value (LTV) of a customer? What is the customer acquisition cost (CAC)? Does your LTV to CAC ratio support your business model strategy and plan for acquiring customers (i.e. Sales vs Product-led Growth)?

Why Now: Why does this business opportunity exist at the present moment? Are you the right team to tackle this idea?

2. Stronger business models do have certain characteristics, such as they:

• Exhibit a flywheel effect, meaning that being successful in one part of the value chain leads to growth in other parts of the value chain, which leads to even more success in the initial part, etc.
• have strong network effects, leading to a competitive moat and high switching costs
• have recurring customers / revenue and are experiencing net negative churn (which means that customers are not leaving the platform and actually bringing on others)
• generate organic demand through a focus on product-led growth, and have less reliance on traditional sales / marketing. (More on product-led growth below!)
• have customers with a high willingness to pay and deep pockets

3. Achieving Product-Market fit (PMF) means you have found a repeatable and scalable business model. But how do you know when you've hit PMF? Here are some metrics that can help signal you have reached PMF:

• the 40% test (coined by Sean Ellis). If your product disappeared and you interviewed all your current users, would > 40% respond in a survey saying they are very disappointed that the product is gone? Or would most users be only slightly disappointed or be able to find other workarounds? The saying is it's better to have 100 people love you than a million people sort of like you, and this is one way to test that.
• is churn < 3% per month? Are we seeing strong engagement metrics? Is our NPS > 30? If a startup is experiencing a 'leaky bucket', it's important to figure out why your customers are leaving before you focus on adding more customers to the top of the funnel.
• Is our LTV to CAC ratio > 3? Is payback of a new customer < 12 months? Understanding these ratios can help understand questions like: a) are we acquiring the right customers? and b) how do we optimally acquire customers?

4. Many businesses evolve from Feature → Product → Platform. To get your initial users, what is the burning problem you are solving? That is typically what the first 'feature' is. From there, as your customers start to trust you, you're able to learn about more pain points your customer has and build even more features to get to the 'product' stage, which becomes an aggregation of problems you can solve for your customer. The final stage is the 'platform' stage which is creating an ecosystem around your product. Those that make it to the 'platform' stage are the category leaders and the companies that stick around for decades. Many companies don't make it to the 'product' stage, and most companies don't make it to the 'platform' stage.

I love thinking about a former company I worked at along this journey, RapidSOS. RapidSOS is an emergency data platform for 911. The 'feature' they started with which drove pretty much all of their initial users (the 911 centers) to adopt was getting location data from Apple and Android phones into the hands of 911 during an emergency. They were able to build off of the success of this 'feature' to build the full RapidSOS 'product' consisting of multiple data sources such as car telematics, home security, and emergency app data. They are currently on the journey to becoming a 'platform' by trying to become the Operating System for 911 - the place where all apps that can help 911 will live. They just announced the RapidSOS Partner Network and have over 20 inaugural partners that will build their features on top of the RapidSOS product, giving 911 easier access to these services!

5. We are living in the era where the shift in focus for adoption of B2B products is more directly on the end user as opposed to the business buyer (i.e. the CIO). To accomodate this era, a Product-led Growth (PLG) strategy is critical to consider. PLG is an "end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion". Companies like Slack, Zoom, and Bubble have all successfully deployed a product-led growth strategy to get to where they are today. So how do you deploy a PLG strategy?

• ensure your product must solve for end user pain (as opposed to the executives pain that may ultimately pay for the product at a later stage). This is critical to start the flywheel of getting users on the platform.
• distribute the product where your users live. For example, an IT tool may be distributed on the AWS Marketplace. For a virtual meeting plug-in, distribute on the Zoom or Slack App marketplaces.
• Make it as easy as possible to get started. Remove the humans from your signup and onboarding process.
• Deliver value before the paywall. Solve for the pain that brought them to you; you want to have them hit that 'aha moment' before they have to pay.

Anyone building a B2B software product should read Blake Bartlett's article on this topic. It's a great frame of reference to keep in mind : https://openviewpartners.com/blog/what-is-product-led-growth/#.YXjp29nMI6E

6. Align your business / career with big Waves that are transforming the world as we know it. Some examples of waves / companies creating and riding those waves:

• Synthetic Bio revolution spearheaded by Gingko Bioworks
• E-Commerce spearheaded by Shopify
• Digital health - the likes of Whoop on personal health and Butterfly Networks on the diagnostics side
• Blockchain spearheaded by Bitcoin and Ethereum.

Beyond the class lessons, I've learned so much from my amazing classmates who are entrepreneurs, VCs, tech nerds, and incredibly friendly people. And not to mention, this class is only a small part of the Entrepreneurship community at Harvard that's focused on learning by doing, and helping people take the leap to Entrepreneurship. While I've been here at school, I've had the chance to work at a Series B startup, a pre-seed startup, and tinker with my own ideas!

Thankful to have this opportunity to learn, and excited to start applying these lessons into my next gig ??