 Hello, my name is Steve and I teach the entrepreneurship class here at BNU. My class is a little bit special because unlike a normal class, every single student here forms a team and every team forms a real business. It's based on Lean Launchpad, which was a program developed at Stanford and Berkeley back in about 2012. It's a really cool class. You can make money in my class. In fact, if you make money, you'll actually get a good grade. So my program, I used to teach entrepreneurship back in Kazakhstan in Almaty at KVTU. But before this, I've been all over the world. I lived in Taiwan. I lived in Singapore. I lived in Kazakhstan, Los Angeles, Las Vegas, Chicago. And I've worked all over the world in many different industries. I love to see you in my class and I hope to build your business. So academics. Your contact list was due before class alongside three business model canvases. Please make sure that they are turned in today as I will be giving extra credit based on what you guys did. How does extra credit work? Well, normally Lean Launchpad classes are graded on the work you do outside of class, the stuff you do to build your business. Including customers, contacting partners, the things you do to build a profitable business. However, we also need to adapt Lean Launchpad to BMU and Uzbekistan. So like your other classes, this class will have a midterm and a final. These tests are multiple choice. They cover both lectures and reading I assign on Telegram. If you theoretically get 100% on your midterms and your final, right, factoring your participation, your attendance should get around the C as a grade. The assignments I give you during tutorial are worth substantial extra credit a lot. For example, if you build a profitable business, if you build a real business in real life, well, I will consider that to be a much better test. I consider that to be more realistic. It's kind of like swimming. I can give you a textbook on how to swim, but that book does not help you to actually swim. Entrepreneurship is about doing. If you do poorly on the midterm and final, but you build a great business, you'll still get a good grade. It's worth a lot of extra credit. If you really want to make sure you get an A plus, build a business and do well in the test. All depends. Your grade is completely up to you. You are in control of what grade you have. So on to the lecture. First we're going to cover corporations. Has anyone covered the history of where companies come from? Is this new to you guys? Okay. So in that case, a brief history, the very first company that was ever made was a Dutch East India company formed in 1682. And as long as there have been companies, people have been losing money on them. Isaac Newton, super famous genius, famous mathematician, was also famous for losing millions of dollars on the South Sea bubble in 1720. In the 1850s, the US economy started growing and meeting each other. Local markets because of trains were connected and that grew into an international market. So corporations in the US also grew at the same time. These companies grow, business become more complicated and we need new managers for more difficult problems. People train specifically on how to manage big companies. Like you guys, right, taking a business course. Harvard was the first MBA in 1908. So what's a good business education and what's it for? MBAs traditionally are teaching you about how to manage large and growing companies. For over a hundred years, educators like myself, right, made a big mistake. We used to think of startups as just small, tiny companies. Many things in business class, however, are hard to apply to startups because let's say you want to do accounting, but you have no financials. How do I make an accounting statement if I have no data? You can see this in the traditional business plan. In a traditional business plan, you set out everything that a big corporation does. Corporation has a marketing team, a sales team, a biz dev team, and a lot of business plans for startups list out what they also need to do, but a lot of the stuff doesn't really apply. What is the core difference between a startup and a company, right? This is a very fundamental issue in this class. Essentially, a startup does a search function. The point of a startup is to find a business model that works, right? I have a product, I sell it for more than it costs, it's repeatable, and it's scalable. A company's job is to scale that business model, to take that business model, to repeat it and to optimize it and to grow with it. Large companies can have small companies within a startup, for example, very innovative companies such as Google, such as Apple. They have innovation teams that think of the next product that the company is going to make. So they have startups within the larger company. The problem with business plans, can anyone tell me what the issue might be? What's the problem with business plans and planning five years out into the future? Capital is one, right, exactly. If I have to hire so many people, I need a lot of money. Another big problem is that business plans, when you meet the customer, when you start selling things, your customer is going to be very different from what you expected. I think the customer wants a bicycle with lots of colors, I sell it, and then I find out the customer wanted something completely different. These five-year plans are actually pretty bad, they're pretty inefficient. They cause a lot of problems even within corporations because they give management bad incentives. For example, five-year plans were popular with the USSR, they're popular in China now. The issue with that, of course, is that there's no reliable data on what's going to happen five years from now. So for example, in China, they had a five-year plan on agriculture, middle management had a bad incentive, as in they were hard to the people below them, and they were incentivized to pass bad information up. So the people leading the country didn't know what was going on on the ground. So operating plans and forecasts are good after if you're in a big company, doing businesses that are stable and predictable, but to organize a startup and to organize what kind of facts we need, we need a canvas, which is what you did last week. On each component, you put down a guess. For example, you thought your customers might be students, you thought your channels might be the cafeteria, you thought your partners might be the person who runs the cafeteria or the university. For each section, you put down a guess. Tutorials, however, during a tutorial work, I will tell you to go outside the class and actually contact the customer. Make sure that everyone actually knows what they're doing. Each part of your business canvas is a hypothesis. Hypothesis is just a fancy term for a guess. And like a scientist, you will go out and test your hypothesis and update them until you have a functioning business. So the goal of a startup is to no longer be a startup. I want to be a successful big company to make money. Essentially, you prove your hypothesis, you prove your model, and when you have proven it, then you execute and scale. That's when you need funding. That's when you need scale. So what was the old way of building a startup? Well, the old way was very expensive because I had to do everything a big company did, even though I don't have any customers. This kind of philosophy was called product management. And it was building a product called using waterfall engineering. Have any of you guys heard of these terms before? For example, organizational, like project management, et cetera. So product management, the old fashioned way of launching a new product, was pretty much doing everything at once. I had an idea for a product. I got funding for it. I developed it. I tested it. And then I shipped it to the customer. And at the same time, I get someone else in the company to beat a marketing team, the sales team, and the business development team. I try to do everything at once. This is a big problem because, one, it gets very expensive. And two, what if I do all of this? And the product is not wanted by the customer, all right? At the same time, let's say you're an engineer at the company, all right? And marketing says, oh, I want to sell this product. I make requirements over here. Designers take those requirements and tell you what to build. You build it. You encode it. You verify it. You test it. And then you maintain it to make sure the product still works. Can anyone tell me what the problem with this process might be, especially applied to startups? A lot of companies, big companies, still use this waterfall process. But why is it bad for startups? Not enough capital. Right? Exactly. Not enough capital, right? And again, you don't know how to play the customers. Exactly. You don't know if the customers want the product. So over here, if I think of a product the customers don't want, I spend a lot of money and time building a product that no one needs, especially since this part is really expensive. Now, researchers have found, like at software companies, that 80% to 90% of features sold by software companies is not wanted by the customer. So in other words, 80% to 90% of this part is wasted. So who thinks, like, why do startups fail? Like, what reasons could startups fail? There are a lot of them, but what's the biggest one? Because there is a bigger company. There's a bigger company? That's actually a good cause. In that case, you might have entered with the wrong idea. All right? Any other ideas? Not enough to practice with the product. Not enough practice, experience with the product. That's another good one. But the most common one, the most common reason that startups fail and it seems obvious, is that there's not enough customers, all right? Because on average, the customer will be happy with the product. But even though they're happy with the product, you don't have enough customers to keep the cash coming in. So all of this is great for a large company that already knows what the customer wants and already has a profitable product. But if you're a new company entering a new market, this process doesn't really work. So instead of focusing on the product, we focus on the customer. Now, a lot of big companies are really good at this. Apple is famous for it, right? A lot of other companies are famous for their product design, say Samsung, right? Samsung phones often have faster hardware, faster chips, higher refresh rate screens, right? Or faster modem, et cetera. Apple, however, often focuses on the user experience. They say, what does a user need? How does a user use his camera, right? So you have two very different philosophies, but one generally is much more successful in entering new markets. So in your startup, we'll have two parts for customer development. First, your search. You will talk to a lot of customers, right? You'll discover who they are, and you'll validate them. In other words, you'll find out what is their problem? Do they like your product? And from that information, they'll go back and again and again until you find product market fit. In other words, you find customers who love your product. You change your product to the point where the very exact features you have is the very exact features they want, right? Once you find product market fit, you go to execution. This is when you start making money. Customer creation, you go out, you start making deals, you start selling, right? And company building. That's when you start scaling up your business model. Shop, okay? And then so these are bakery. Bakery, all right. Okay, so online, so a ghost kitchen, so a ghost kitchen. All right, so right now your customer segment is a bit too broad. We need to drill down into your customer segment. Like, are you targeting teenagers who like sport fashion? Teenagers who like casual, casual fashion, okay? Who has more of like, learning habits. Okay. High end. Okay, high end casual fashion, all right. And what will be your channels? How will your product get to your customer? Through social media. Social media, all right. Instagram and through telegram. Okay. We are planning to open a telegram channel. Okay, so you're gonna open a telegram channel. You're gonna target students, like young people who like high fashion casual. Where are you gonna source your materials? Where are you gonna source your business? You mean the, from where we are going to get? We're gonna buy the clothes, yes. From Turkey. From Turkey, okay. From Turkey there is, like, there are some people we know. Okay, great. So you have existing relationships with these suppliers. Okay, great. Now the one key question for your risk is if you don't sell the clothing, can you return the clothing to them? The really cool thing about our drop shipping is that they're going to post only pictures. It's really popular in a spectrum. Like, I don't know how it works in the US. Yeah, yeah. Almost like, 90% of drop shipping markets is working like through all internet. Okay, great. You don't buy them first. Oh, so no inventory. Fantastic. Okay. All right. Is your customer comfortable with waiting one or two weeks? Yes. Customers are used to it. Okay, great. That's fantastic. So like, branded clothes here are very, very expensive. Yeah, I see. It's working like it's in value for half price. Okay, so you're selling branded clothes. All right, fantastic. So it's going to be a lot cheaper and like people will wait only a week. Okay. And but they will get it for, to the same price for cheaper price. So in my last business, I did a ghost kitchen for burgers and our sales were completely online. All right. And so we had to hire social media influencers. Is there any way that you can do the same thing but cheaply? All right. Do you know any social media influencers? Can you reach out to them? All right. So on the contact list, right? I would recommend putting down two or three social media influencers, right? And then you also want people that can get you a lot of customers, right? You also want people, your suppliers, for example, right? You don't just want one supplier. You want more than one. So you're not depending on one. You want social media influencers that have cost-effective advertising, all right? So and you want dropshipping the logistics, right? How will you make sure that when a customer orders, the order will always get there, right? Go to the right person. So it's really cool that there are a lot of channels from the Turkey coming to Uzbekistan and a lot of cargo. Okay. Things that are like working in a really cool way. Okay. You'll pay for a product like per kilogram. Okay. And they have a guarantee that they will deliver it to your given address. Okay. It takes like from three days to one week. Okay. So like it's already used to it. Okay, great. So you really thought this through then? Okay, good. We all of us like, we all order the like poses for ourselves. Okay, perfect. And now we like, we- You want to do it for other people? Yeah. All right, great. So you guys have a pretty straightforward product. You guys just need to scale it up. So I like it a lot actually.