This is a very interesting talk on financing startups and as I’m dealing with those issues most recently I’ll share my notes here with you. It may help to jump through the video in a shorter amount of time even though I recommend you to watch it for yourself and take your own notes. All time notes are regarding the first video.

If you haven’t heard of lean startup theory you should read Eric Ries’ book Lean Startup and the recommended book “The four steps to the epiphany”. I’m not going to explain the whole LEAN-lingo.

A side note If I want to learn something fast this is my process of jumping from sources like youtube videos to books and pdfs. Valuable sources and key player are mentioned quite often so you’ll get the big picture first and know what is important. (And make sure you create more than you consume.)

What is LEAN?
Process of learning what customers really want. In the process of building a startup your first goal must be to find “product market fit” and learn fast. Lean also means to use ressources effectively.

Difficult to decide when to pivot. Look and interpret big picture. Decision is part of being a good entrepreneur.

You’re asking questions. But not to many changes at a time.

(00:37) Product market fit = Give your product to customers. Leave it there. Than take it away. If 50% of the users are complaining and would want it back you have product market fit. Monetization at this time is not necessarily requested. When you found product market fit you prepare for scaling up.

(00:45) If you have lots of users that are active but don’t have moetetization you can raise more money. Competition would kill this situation.

There are three kind of Pivots:

  • segment pivot. same product new customer segment
  • segment pivot new problem same product
  • feature pivot (focus on a certain part of the product that people ask for)

Lean is not equal to flexible. Vision of Craigslist always stayed the same while the “how” changed.

  • Customer discovery
  • Customer validation
  • Customer creation
  • Company building

(00:47) Indicator of product market fit = you have a repeatable sales cycle
Product market fit: Users 50% are angry when you take it away. Now is a good situation for funding.

  • Only a few companies get funding.
  • Funding is no goal.
  • Seed, Angel, Friend&Family Funding until customer market fit.

(01:01:30) Which data is important? They reference to Dave MacClure – stats that are important

Mentioned keywords: acquisitions, retention, activation, revenue

Investors what to see interrelationships and fixed contracts. The more professional it is done the better. Establish and fix the relationship between the founders. Founders have to make sure shares are clear.

(01:09:00) What happens if founding partner is leaving the company? You don’t have cash in the beginning if we have no money we need shares to pay good employees.

Bootstrapping with consulting and other services is a good way. But everything to finance you besides is distraction. Stay close to what you want to do. Act in the segment and learn along the way. Consulting was mentioned several times.

From service to product – most companies fail. Mentality is often difficult to change. People of service companies listen to much to customer needs which is difficult in a product company.

Bootstrapping Best Practice

37signals
Pivotabllabs

Convertible Note: Lets say you are in the beginning from idea to profitable company(t0). If you can raise money from a friend lets say $100k. You don’t know the value of your company and not how much shares it is worth. A convertible note can solve the problem. Later when professional investors are involved and estimate the value of the corporation and say how many shares the early investor had at t0. Plus an additional discounted for being early stage in the company.

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