Got a Startup Idea? Don’t Lock Yourself Away

Business Model CanvasTechnical people can have great solutions. But getting wrapped in technology may blind them to customers’ needs, according to Gary Leyden, director at the National Digital Research Centre (NDRC) in Dublin.

“They can lock themselves away and code and code and code,” he said. After all that work, they approach customers for the first time only to find it is not what the market needs. “Then they have no more money.”

A life-long entrepreneur, Leyden (@gary_leyden) is also CEO and co-founder at vrising. He was talking to the Last Tuesday group of entrepreneurs. The NDRC is currently accepting applications for its next accelerator program.

The NDRC’s role is to take on promising startups, focus on commercial validation and “make sure they are fixing a problem in the marketplace,” said Leyden. “This is a new process to a lot of people if they are coming from a tech background.”

The NDRC also hosts talks by successful entrepreneurs and introduces investors to its startups. The center has graduated 30 companies so far, and they have raised around €4 million in investment, Leyden said. It has reached the point where “a lot of angel investors and VCs see us as due diligence for them,” he added.

In all, 15 startups are invited to join, and they work together in a large room in an old Guinness brewery building in Dublin. Companies get up to €20,000 in return for an equity stake averaging six percent, Leyden said. In addition, a designer is embedded with the companies to help them fine tune their sites, product design and user experience.

The NDRC is also the top-ranked Irish accelerator program, according to Kaufmann Fellows. And, along with DCU’s Propellor and Startup Bootcamp Dublin, there are three Irish schemes in the Kaufmann’s European Top 8.

This ranking has attracted international interest, Leyden said, and a Canadian group of entrepreneurs was awarded one of the 15 slots on the last round in the second half of 2011.

Leyden’s advice for startups is to maintain a lean approach. Handing out copies of Maurya and Osterwalder’s Business Model Canvas, Leyden noted that even business planning itself has become lean. (A two-minute video explaining the canvas is below).

Leyden’s handout was similar to the screen shot below taken from Maurya’s Lean Canvas website.  “Gone are the days of a 30-page business plan. It is all on a one-page model,” he said.

Osterwalder's Lean CanvasBox 1. Problems: Finding out what problems need to be solved by potential customers is usually done by the entrepreneur, Leyden said. This is usually done first hand by talking to or observing customers. “If you are fixing something that’s a real strong pain point for them, then you are on to something,” he said.

Box 4. Top 3 Features: These need to be arrived at quickly and put before customers. This will be the minimum viable product, or MVP. Once the MVP is out, entrepreneurs will understand the customer better, Leyden said.

Box 8: Activity or Key Metrics: These describe how the new business will align its actions towards the customer.

Box 3: Unique Value Proposition: This is not a list of features. It describes what your product does and how it meets real needs in the marketplace.

Box 5. Target Customers: This can describe route to market and channels, as well as potential  transaction types such as B2B or B2C.

Box 9. Unfair Advantage: While it would be nice to be able to patent or protect sites, Leyden said “in the digital space, we find IP is a non-issue.” It is hard and expensive to defend. However, advantages can be had by moving first or building up intangible knowledge that is hard to copy, he said.

Box 7. Customer: This describes acquisition costs, distribution costs and type of customer.

Box 6. Financials: This will talk about revenue models, margins, etc.

Because the canvas is on one page, it can also serve as the basis for an elevator pitch, Leyden said. Its other advantage is that it helps the entrepreneur focus on how the elements of his or her business fit together. “There is a flow. It is a great way to get things aligned,” he said.

The color image of the Business Model Canvas was adapted from Osterwalder’s Creative Commons image on Business Model Alchemist.