 things. The things that I want you to kind of get out of this is that if you want to do this, how do I recommend it? If you start with a little cool, you work on the tech that you want to, and hopefully you can make some money today, but at least work since then, that's good as well. There are a few simple things that we kind of need to learn, and they are all very simple. There are things that I didn't know that kind of taught, and it's difficult to see if you have any good ideas if you actually have a business idea. Besides, I work for a company, so this is kind of stuff you don't even know. If you don't even start a startup, this stuff you should know about the company that you're ready to see. It's going somewhere and whatnot. Why should you listen to me? Because my vast experience with a single startup isn't even done. I'm just going to share some of the details of what we've done. That becomes exceptional and what we haven't. Hopefully this will be of help. The first thing to know is that ideas for businesses, or any ideas, are really cheap. Instructure is my startup, and we do software for education. I'm going to take the class of the university that's going to train the scientists, that's going to get course content, message your teacher. I think everyone who has used that software at school taught, this is also going to have to do better over the weekend. Am I right? This is not a new idea everyone had, so it's not going to keep secret. And you'll find out that this is a case of business ideas. There's really nothing secret about the idea itself. It's actually the execution of the idea, and you can write people and all the time. How I got started is that I wanted to do a startup. I think you do a startup for two different reasons. One is to change the world. The second one is to make money. Hopefully you can do both of them. I was in grad school, and I took an entrepreneurship class. I was going to study what I was going to do with my life. I was going to go work for a big company. I wanted to work in Ruby. I wanted to do something interesting to change the world. I came to this, I took a course with my co-founder. All of the ideas that we brought to the course, as soon as we learned how to outweigh them, it just got shot out of the sky really easily. The first one that really suits all ideas now is good questions. How big is your market? Essentially, all this is saying is how much money is being spent on what you want to build, and you actually need to find out this number. The number might not exist, but you need to do some type of research to come up with something you can justify and defend. In our case, it was very simple because the main competitors in our market were public companies. They had to guide which how much money they made. It was very simple to say, okay, this person has 50% of the market. They made this much revenue. This is how much people are spending in our market. It was very simple. A lot of the ideas that we had were just too small. There was nothing we could do with them. So it's all the advice of Paul Graham. There's a lot of good advice. One of them we took was he said, if you're a technologist, you know how to code, you know how to build technology, you just think of the suckest offer that you've used, and there's probably a business idea there. Now there's one caveat. You don't remember that you're pretty weird. So a lot of people are like, here's this cool plug-in to, yeah, like developer plug-ins, or you need to think of ideas that are painful to you that you can use that normal people use, too. And then depending on those, you look at the size of the market, and then you can kind of look at the two main tasks that you can take with Starlight. So what I'm about to call a lifestyle business, for them is adventure Starlight. Now I'm a big fan of three-sit-and-signals and a lot of what they're doing and stuff, and essentially a lot of their advice is to say, build a lifestyle business. It's a great business, and you can do really well. And then adventure capitalists are going to say, oh, it's rough. So the difference is, lifestyle business is a business that can make you some amount of money. And it's going to be something that's going to support the lifestyle that you want, you know, the time off, the family, the vacation, you know what I'm talking about. It's got a lifestyle business. Now adventure Starlight is the one that's going to change the world. It's going to take a lot of resources to do that. So the adventure way is a lot more risk, a lot more money to lose a lot of control, but the path could be bigger. It's a bigger potential. So I think against lifestyle businesses, I think they're cool. I just couldn't think of an idea like that. It was cool for a lifestyle business. The moment I came out with it was more in the adventure line. It was one of the, like, you should fail on the side, right? You know, you have a normal big government and I could live in another company. I think it was really cool. If you can't, there's some ideas that that's not suitable for. You need to be full-time with, you know, a team for like a year in order to have a client that's going to do that much to profit. So in order to do that, well, you have to have money to last for a year, which is potentially a higher reward. Okay? So, okay, so what we did is that, okay, so you gotta, whatever your idea is, is you have to find out how big the potential of it. And depending on how big it is, then you can go these two routes. Now, even though you're going for lifestyle business, well, we went for the venture startup route, but the same things that are valid for a venture startup or the questions that investors will ask, is that you should be asking yourself in the lifestyle business, too. So even if you're not going to have an investor, just pretend that her name is Ashley and pretend in your mind what questions she would ask. All right, so a couple of things is that you need to know, if you're ready now, if you've got a market that's big enough, I'm going to repeat this thing. Rule of thumb, if you're a market, you say that all the money spent in one year is less than a billion dollars, that's a lifestyle business. And that's one that is probably not suitable for a venture startup, because at least these are not going to be interested, because there's not enough payout possible in it. But if you've got an idea of where people are spending more than a billion dollars, you know, like a billion to a billion and a half, which is like, of course what it is, then that's wet on the cusp of a venture startup that's something bigger for us. Okay, so that's kind of the rule of thumb, but if the market is under a billion dollars, that's probably a lifestyle business. So you can still have to really be fine with the lifestyle business. It's just not enough that the outpouring investors do something well for you, too. Okay? So we pick the venture way and then you've got to do your research, right? In our product validation. So you need to know where the competitors, right? Why aren't they at it? What's the pain in here? The pain is an opportunity. And then you need to know if you're building the right solution for the lifestyle you're acting in. So in ours, you know, we were students, it was, you know, it was just terrible when I had the software. We could do better than this little problem and then the advisors will know because students aren't going to buy the software. It's the schools. You have to know what schools need, right? The software needs to go upon it all. You need to know if what you're building is the right thing because it doesn't matter how good your development team is. If you're building a wrong product, you'll never succeed as a company. So, in ours, it was very simple because we were going to sell to universities. And so we needed to validate our product. So what we did is we went to Google. We started finding all of these schools that we could go to where we had like family where we could, you know, just sleep on the couch for free. So we decided, we're going to go on a road trip. That's how we're going to do our product validation. We went to a conference, we were going to do the beginnings. I don't know if you've ever seen this picture before. But that awesome load, that awesome sign is our booth. And then gas was super expensive like it is right now. So we borrowed my brother's Geometro and we headed out on the road and we could like 130 degrees in base and we just spread it and went in and out. But I'm going to show you a little piece of what we did with each of these clients that actually validated what we were building. So we would count, we'd introduce ourselves to this what we're trying to build and we would just full talk and say, we're going to build the next great system and we'd help us design it. Either that or we'd just walk in and pretend that we had an appointment and it worked really well. So we'd say, sure. So then we came in and we'd say, okay, here's these pain points that other schools have expressed about their solution and this product. Now the first time of course we made these up and we just made them sound reasonable and we said there's another school that says they're having this pain. So if you feel that pain too and they say, I feel that pain every day, you know, I hate that. And then we say, what other pain do you feel that's not all? It's terrible. And then we'd go on and say, well I know I'm going to show you some ideas. So before we wrote any code is that we mocked up our application to PowerPoint. So, and the idea is that in a PowerPoint we can get feedback from the people about what they want in the product and it's something more valuable than even code. More valuable than reviews. So I'm going to show you a couple of slides that we used to do this. There's our old logo and all this kind of fun stuff. Okay. So this is what we mocked up in PowerPoint. I say, okay, this is our scenario. I'm going to create a course. It's like here. We'll take you to the screen where I can manage my assignments. You know, if I click here, you know, I get this little box. So a lot of this was actually in the user interface. It was that we nailed what was the essence of the task that they were trying to do. This is how we assemble our shortage. And we just used the user interface to define it. Okay. So are these elements on here? And this was a little bit tough for us. Michael Hunter, his advisor is how I've met these building forces. He said, well, they never, ever give a screenshot to a potential client because instead of telling me what's wrong with the interaction, they'll argue with you about the space to be over here at this rate to be sort of wider or something like that. But I think you lost them in detail. At the same time, we couldn't go to someone saying, well, here's the sketch on the board and what's the next generation of running management systems that you're going to pay $1,000,000 for. So this was our kind of, you've got to walk around type ropes. This is what we did. And so some people were confused. They thought this was an actual application. So it just, it had to be enough to say, this thing could be real and we'd shake ourselves, of course, we could do it HTML and the same as that. And then, you know, we would make sure that we had the essence. That's what we're trying to get out from there. I don't care about that assignment and the types and whatnot. And so we kind of walked through there to kind of say, seriously, we had something concrete to actually send back stories about. And so we'd say, I saw on my calendar, over there, all the cameras on top of each other. And if you want to reschedule an assignment, you can just, you know, grab it up. This is all slides, one piece. And so I was like, oh, you dragged it up to reschedule an assignment. Okay, I mean, you think that's stupid, right? But you really don't know how much people are suffering because people would almost like stand up and tear up and give us applause. It's because we used to, like, we pick good tools for us, but we're not like normal people. And people actually use terrible, terrible, terrible tools. And something like, as simple as a drag and drop, is, you know, so simple, and it's not gratuitous, it's just intuitive. And it's something that they didn't even know was possible. It's ridiculous. But that's good, because that means that there's an opportunity there. It's so simple. It's a seemingly great idea. You just have to be confident. And so what it is that we, you know, we have that one scenario kind of song. We've got a bunch of, we've got three or eight month slides or what, because it's not that quick, but I'd like to show you. And then from that, then we, I would present and then Brian, member of my co-founder, saw the pictures. He would just curiously type all the notes. So we took the transcripts of everything that we had. So we don't prefer them like, well, I always go back to it. We would go back to find out that we had forgotten something that was actually said during the conversation. And so you keep those transcripts. And our first time we did it, we went down to Bay to guess. It was my sister and we met with a couple of schools. And, you know, no one was like, awesome, we got some good ideas. But, you know, you don't know this and don't know that. And then we came back and we talked to our advisor at the time and we read that our idea is done. And he looked at it and he read it and it was good and bad. And he says, you know, this right here, this is gold. And I remember being surprised at that. And I go, why do we think this is gold? Because we have done the work, you know, exactly what they need and the pain that they're having and you know all this information about no one else in the market knows. And then we just iterated on the clock. We took all that feedback and put it into our PowerPoint slide deck and we did it again. And we just kept doing that where each school, we saw about 17 schools until our design didn't change anymore. That's when we knew that the essence of what we're trying to build was the right thing. Okay? Now, the thing is, is that, you know, is a real love. Okay? Because I think there's a tendency to say, I've also had an idea of something. That's obviously a good idea. And, yeah, you should do that. Okay? That's not hard. Okay? You have to press with the front of it, but it's okay to be mechanic with people. So, I'll show you a few of the exercise that we have in the net. Let's say, would you pay for this? PowerPoint, would you pay for it? How much would you pay for this, right? And then we asked, of course, how would you pay because we're trying to figure out our business model, how would you charge it for it? And so you can ask, would you pay for this? Sure, no or no. I mean, but you know, it's not like, I think that they would buy it, but they just ask it. Because you got it all. Because you're going to spend the next four years of your life and how many hours, you know. And you got it all, and you can't just do it all the way, you have to know the way you're doing it, it's something that they would buy. And it's okay to be bold and just ask. Okay? Then we asked the mother of Paul questions too about how to do the straps for the collie. This is our gut check. This is how we presented ourselves. How are you hearing it? How are you interpreting what we're presenting? How are they describing it? And then also, you know, is this basically a double line just to kind of gauge the excitement or not excitement? Which is also very interesting. Okay? And this actually worked really well. People will be candid. I mean, you don't have to be pushy or crazy like that if you're up front and honest with it, it'll be up front and honest with you back. And then you get the same and good information. So towards the end of our meeting people say, should I go on a trip? And then we get it in there. We've got half that's valuable almost. And, you know, it does the information we need to know. What is this person actually going to do? Is there a product that needs to be directed at? It's actually that we knew that the product that we were building was something that people would buy. We knew that if we built this thing, if we built it, we'd buy it. If it existed today. That's where I'm explaining that it's not a real app, you know, that we actually haven't built it yet. This is before we were able to do it. Right? And so, at that point, you know, you've got to get to that point. So these are all pushy steps. You've got to find out are you actually going to build the right product? Are you going to make use of what's happening with it? So, okay, so let's say that we're defining our market and let's say it's big enough. Define some pain in the market. So if anybody, if they talk about pain, like, oh yeah, that's such a bother and it takes me like two weeks. You know, anything that they mention about pain or something that stops, then your alert should go off and say that's a potential product or business idea and if I solve something, they need that. And then let's say that we've already gone and validated and thought, are you that? And the answer is absolutely not. We need to do a business model. Now, the business model is, what you're trying to do is that you need to make a machine. Business is a machine of itself. So in addition to its software, you got to, you know, the business has to say, okay, we have this customer, we have a way of getting him and we can make money from it. We've got to make a machine. There's a bunch of different types of machines. If you're a monkey, you can make the best machine, which is the Instructure Con. I showed it to, we have this at our office now. We have a designer connection built Instructure Con. And my wife said, I don't want to be the other, you're a weird slide, because this proves it. Okay. All right, so, the business model is a machine. And you have to create it, like, virtually before you actually put it into the mind. Okay? And so I'm going to do that is, you're going to pull out a step, and then you're going to do a ton of different models. You're going to have this wicked spreadsheet that includes everything, okay? You're going to have the salaries in it, how much they cost, like, office space, how much they're phone costs, and you're going to have, you know, how much does it cost us to deliver our service and bandwidth and servers? And then you're going to say, okay, well, we need two developers in March, and then another three in December. All right, you have to map all that out, and see how this goes, and how we look for our customers. Okay, so this business model is catered specifically to what you're thinking, right? So, one, it could be like, we actually have to talk to every customer. But maybe another business that it would be, it's a freemium model, so I'm going to do some advertising, because we're going to use it for free, so you can model how many people can we get to sign up for free, and what percentage of those we're going to convert. And then you model that out, and you're actually putting the conversion rate in this big, batch spreadsheet. So I put in a picture of a spreadsheet. This is a super, super simple one that I just googled up real quick. This one is just that one employee, and the other one employee, too, and assumes that that click through rate is stopped. So you make this huge spreadsheet. This is where you have your brother model to a business school, and he has an MBA, and you don't know what he's used before or anything. This is what he'd feel for you. So... So, you know, you're going to have eight catalogs of your spreadsheet, and it takes hours to dig into this, and then you're going to, the best thing to do is sign up for the free new model, and you're going to be able to identify all the different knobs that make your company go. So if you're in a free new model, the obvious amount you're going to have is what percentage of people coming to my site that are going to sign up for the free new, and how many of those are going to convert. So that's, like, a little knob, so you just put it right there in your spreadsheet, and you have all your graphs, and then as you tweak those numbers, you can see how it affects it. And so, at this point, I'm going to report by revenue and gross margins and operating margins, you know, just the simple things. And you can see, can I make that model as I need to make it reasonable, but it has to go to make money. And if you can't get that to make money, then don't do the company. That's the kind of key there. If you can't make a work on spreadsheet, it ain't going to work. And so, if you can make it work with reasonable assumptions in it, that's the key. So, so this is the part, this is actually the crucial piece. So, I was never once asked by any investment analyst or any investor for a business plan ever. What they wanted to know was they were going to meet and give a little presentation of who we are, what market are we in, what's the pin in the market, and how are we going to solve it. This is how we know and here's our model that says that we can make money. And that's it. And then if they want to go further, this is the only thing they want to look at. Is your model. Send over your financial model. Send over to that spreadsheet. Now, I think that our spreadsheet on these slides, even though they've been more useful for you guys, because your business model is your business. And so, if someone had a business model, they can do new business. And so, that's actually the essence of your car company, is your financial business model. So, you don't just give it to anybody. Right? Okay, so, and then, I guess some other points up here. I had some misconceptions about investors as well when I started. I kind of had the feeling that an investor was this totally rich dude and you had to, like, make a tent and come in, and just give you the money. I hope this business doesn't work out. And I don't know why I thought that. Do you know what I was thinking that way? So, it's not true at all. Okay? Specifically, venture capitalists, they go out to other really rich people, like universities, and huge funds, and they raise money from them. And so, like, a good size venture fund is like they'll say, we're going to raise a billion dollars. So, if there are all these other investors, these institutional investors, then you give me a billion dollars and they have to invest it into small companies. And then those companies are going to grow and go public and make money. And that's how they give, they make back to the people that they're making money for. Okay? So, actually, an investor or a venture capitalist, it is their job to actually invest money in companies. And they're actively looking for good companies to put money in. So, it's not like, you know, you're not, you're doing them a favor. It's not, you know, they have to be usually they're actually looking to get to the best point of good companies. And so, and that's true of other investors as well. I mean, you can angel investors, you know, wealth individuals, they want to put some money, the term of the use of that, I'm going to put my money to work. Right? Because I was going to sit down, let's get a good return off of it. Because if you're starting to successful, then you're going to make a lot of money. And so, that's kind of, and so, this is how you prove it to them, is how you're going to put their money to work. It's going to be in your model. So, you give me this much money, that's going to allow me to hire three people and a PR guy and according to my model, my inversion rate, if any of you are close to that, then you're going to make this much money by next year. That's what the national law should tell you. The other question is like, well, how much money should you raise? That's actually from your national law too, is how much does it tell you to need to raise? You just run it to say, I have the money right now, and you should go with the negative. And you say, how far do you go to the negative if you're close to making money? And that's the exact amount that you're going to actually need to raise. So actually, I'm going to give you an offer about that. Okay, so, there's a couple of funding options. So, this is a good point too. The top one there is closing credits. Don't be really careful with this, okay? So I don't suggest that anyone drop. You can start out by moving out a ton of loans. You have to know that what you're doing is actually going to pay off. And if you haven't done all the work and know the market better than anyone else, and you haven't modeled that, you can stay in a ton of debt, you do not get a loan. But if you do, then there's something like some small amount of stroke. And of course, there's an alloy. You talk about angles, and you go to the VC ramp. Or if there's even a grant from the government that you can get, they might encourage you to do some more. Or you can do whatever you want. You can actually use the revenue to go off. So, I want to take some questions. Let's ask the ministry of structure. So, essentially, let's have some ideas. I'm going to get some questions. What do you guys want to talk about? Please. Number two, I've been through, well, actually, a three-year start-up. Okay. And there's the objection of, okay, so give me your references. I'll talk to you. You'll buy yourself one. That's number one. Number two is, okay, you projected three years, you know, 6,000 man-hours. And that ends up being, as usual, 25,000, 30,000 man-hours. So, how do you deal? Okay, so the first one you said how do you deal with was with a customer. I did customer and they wanted three references. So, what we know about that is that you build a kick-butt product. That's how you deal with that. You're going to find someone who's going to say, if I get off your product, it's going to save me this much money and it's going to save me this much time and this much headache. And all this pain in my experience is going to go away and you'll find someone that doesn't matter if you have a reference. At least in the product. And that's the only way that I know how to deal with it. Okay? Yeah, but you've got to find them. Because those are the early adopters. And if you don't get those, then you won't get any adopters. And so, that's a good thing to discuss. If you can't get someone to do that, then you're not solving enough pain and your product is to focus enough. And the second part was development is always, you know, taking the number of the product Okay, so the idea was that your estimates are completely way off in your development. Okay? I think that's, you know, it goes back to the development of the product. It's like, you know, get the minimum liable product. We actually put that as part of our kids. So we actually looked this up. These are our ideas. Here's a huge fact feature list. And we'd say, but we can't do that at first. And so we take them away like, this is what we think if we can do within the next six months three months, is that good enough for you to buy? And they'd say, no, I need that feature. I need that feature. You're going to be like, okay, if there's $100, how would we allocate that process to teachers? And if I wish we should actually do it before which was the half of an hour. So that's how we kind of did it. You get the minimum liable product and you iterate that crazy. Because you see in a pattern in how far in the future the investors wanted to see in a return on investment before they were going to get a pattern of how long investors wanted to see how far out in the future before they would see in a return on their investments. Okay, so how far out of the future would we need to ramp up for the investors to make the amount of money? Well, before they were interested. Before they were interested, okay. For an adventure person, is that you need to hit about $40 million in revenue for a year with about $45 million. $45 million. Because that magic number is $40 million a year is when you can have a successful accurate. And IPO is where public and buyer shares can stop and that's when everyone can get their money out including investors. So if you can't be showing somewhere between $8 to $12 million a quarter within the four or five years then that is not interesting for an adventure guy. They'd rather take more risk to get more payout. Can you talk about from the start-ups that I've done I've seen, you know, where you ask people flat out would you pay for this product and I find people will almost always tell you yes but that's not the case in my experience. I've had products where people will tell me yes and then they don't and other cases where literally people told me no we did it anyway and they still bought it. Okay, so the question was in his experience where they would ask point out if someone would buy the product that they built it and they would say yes but then they wouldn't buy the product and then you'd have the opposite of two where they'd say no but then they'd actually need the product. You know, I don't know if that's the specific instance I guess but I can tell you with some of the faults that we had that were kind of difficult to mitigate was in our specific case is that person who was telling us to buy it or not was not the actual person who would make the decision. So they'd say yes but then they had no power to make the decision so their answer really doesn't matter. So you've got to make sure you're asking the right people. So that's one thing that we did. I don't know if that helps anything. Yeah, I mean did you see that where it didn't noise? Did you have people that said no or was it pretty universal but well, part of it is that the best case scenario is that you actually do a pre-sale, right? Yeah. I mean that would be the best case but a lot of times that's not possible it wasn't possible for us either but the thing you're after is that with someone reasonable in their position that you're trying to market to and make a product for would they buy it? Because in the end, like other people that we met with no one bought our product yet I think a good person would have it not all but it's a lot of people in and it's a lot for them to do. Alright. Is your mockup looked real nice? Did you have a designer or something to put that together to use this particular tool for this? Okay the question was is their mockups look half decent and do we have a designer do that? Our designer was Brian Whitmer in PowerPoint. Builder actually does PowerPoint squares. My other question is you were approaching kind of corporations or small businesses where they have like one skilled person like a doctor or dentist or plumber or whatever or something like that. Would you bring in several at a time or would you talk to each one on one and how would you approach them differently from going to big universities? Okay so the question was we went to universities so they're big entities what if you go to small businesses and it's just like one of you guys how do you do that? Do you bring them in? Do you go there? I don't know. It just depends on your specific case. You just need to know are you getting the data that you need out of it? Are you getting the data of what the pain points are on that mark? Are you learning how they spend their money? You just need to get the data one way or the other. Okay Andrew said it was pretty tough. What is the problem? Do other things have almost a mechanic's sermon that can actually really become a bigger product? I couldn't hear you on the microphone. So there's a bunch of resources online I'm not sure. So what Andrew is saying is that when you get to the point where you need to raise money then there are some great resources online venture hacks, Angel List a couple of those that people that are more experienced can help you navigate through it. Yeah, there's some sermon to pitch that. There are some things that kind of help with that but the key part is that you can't be chatty and you can't when you go to raise money you've got to be focused. You've got to say this is what we're doing this is what we're going to kick about and I've got the model recruited and the data done and then you can make a lot of mistakes and still be okay. When you get that to that point people take you seriously and they actually help you out. And so there's a lot of resources as soon as you get that. So I'm way over so sorry let's talk later. Thanks guys. Let's go make some cool startups. Let's do it.