The 21 NSF teams had been out of the classroom for just 15 hours as they filed back in with their business model canvas presentations. Their assignment appeared (to them) to be deceptively simple:
- Write down their initial hypotheses for the 9 components of their company's business model (who are the customers? what's the product? what distribution channel? etc.)
- Come up with ways to test each of the 9 business model canvas hypotheses
- Decide what constitutes a pass/fail signal for the test. At what point would you say that your hypotheses wasn't even close to correct?
- Consider if their business is worth pursuing? (Give us an estimate of market size)
- Start their team's blog/wiki/journal to record their progress for the class
Each week every team presented a 5-minute summary of what they had done and what they learned that week. As each team presented, the teaching team would ask questions and give suggestions (at times direct, blunt and pointed) for things the students missed or might want to consider next week.
While the last sentence is short, it's one of the key elements that made the class effective. Between the three of us on the teaching team there was 75 years of entrepreneurial experience. (The 2 VC's between them probably have seen 1000s of presentations.) While there's no guarantee our comments were correct or we had any unique insight, we did have enough data for pattern recognition.
The instructors sat in the back of the room and used a shared Google spreadsheet for grading. We graded the teams on a scale of 1 to 10 and each of us left detailed comments the other teaching team members could share and comment on. Week after week it gave us a pretty detailed record of the progress and trajectory of each team.
(As great as the presentations may be, sitting through 21 of them in a row was exhausting. After this first cohort, the NSF will be putting 25 teams at a time in a class. We intend to break the group into three parallel presentation sections.)
All teams kept a blog -- almost like a diary -- to record everything they did outside the building. This let the teaching team keep tabs on their progress and offer advice in-between class sessions.
Getting the teams to blog required constant "encouragement," but it was invaluable. First, as we had a window into each teams engagement with customers, it eliminated most of the surprises when they came into class to present. Second, the blog helped us see if they were gaining insight from their customer discovery. Insight is what enables entrepreneurs to iterate and pivot their business model. The goal wasn't just to talk to lots of people -- the goal was to learn from them. Finally, their blogs gave us and them a permanent record of who they talked to. Over time this contextual contact list will be turned into a shared contact database for all future NSF teams.
The 21 Teams Present
The first team up was Arka Lighting. We liked these guys, but for a while no one on the teaching team could figure out what their core technology was. We knew they wanted to make LED lights that had better performance because they would dissipate less heat. Finally when we understood that their core technology was heat pipes, it wasn't clear why that made them a better LED supplier. Were they selling to end users? OEMs? Manufacturers? We suggested that perhaps they had jumped to too many assumptions.
Next up was SenSevere -- solid-state hydrogen and hydrocarbon sensors for use in severe environments. They were going to start with the $81M Chlorine market where they already had a partner. It seemed like a tiny business. Did they just want to become a licenser of technology? Were their other severe environments that their sensors fit into? Did customers just want the sensors or a more complete sensing solution?
Graphene Frontiers was next. Graphene is incredibly cool. It's touted as the new "wonder material" and its inventors won the 2010 Nobel Prize in Physics. The team wanted to make wafer-scale Graphene films. And do it at ambient pressure. But their proposed products seemed like research lab selling other research labs low volume products. It seemed liked technology in search of a business. Reading the Graphene Frontiers blog for the first week, we realized that in a burst of enthusiasm they set up a Google AdWords campaign to drive traffic to their site!
Ground Flour Pharma was going to take Fluorine-18 and make a new generation of fluorodeoxyglucose (FDG) radiotracers for Positron emission tomography scanners. But it wasn't clear who benefits enough to make this a business. If they need FDA trials is it worth the money needed for approval? Is this just a technology license or is it a company?
C6 Systems had a great set of photos with things on fire in the woods. It seemed like they were going to burn downed trees to do what? Make charcoal? It looked like fun but is this a hobby or a scalable business? Is their any patentable intellectual property? What was their value chain? Their blog showed a good head-start on talking to customers.
Photocatalyst made nanogrids that became miniaturized self-supported mats, similar to fishing nets, that float on water and rapidly decompose crude oil using sunlight. The result is that pollutants are turned into water, carbon dioxide and other biodegradable organics for environmental remediation. Their slides sounded like a technical presentation of nanocatalyst features but their blog showed that they had been actively talking to customers in the last two days.
After the teams presented it was the turn of the teaching team. We presented our second lecture, this time on "value proposition."
For tomorrow, the teams had 15-hours to get out of the building and talk to 10-15 customers and test their value proposition.
While most of the teams got on the phone or into their cars, a couple of others complained, "You didn't tell us we were supposed to use our spare time to talk to customers. We thought this was just spare time."
At first, I thought they were joking. Spare time? I don't think you understand the key principle in a startup -- there is no such thing as spare time. The clock is running and you're burning cash.
Steve Blank's blog: www.steveblank.com.