This is a guest post from Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps (and the Founding Faculty Director of the Lester Center for Entrepreneurship at UC Berkeley.)
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The 99%
As the morning fog burns off the California coast, I am working with Steve Blank, preparing for the Lean LaunchPad Faculty Development Program we are running this August at U.C. Berkeley. This is a 3-day program for entrepreneurship faculty from around the world how to teach entrepreneurship via the Lean LaunchPadapproach (business model canvas + customer development) and bring their entrepreneurship curriculums into the 21st century. Over the past couple of years this Lean LaunchPad model has proven immensely effective at Berkeley, Stanford, Columbia and, of course, the National Science Foundations Innovation-Corpsprogram. The data from the classes seem to indicate that we’ve found have a method how to make scalable startups fail less.
While we’re excited by the results, we’ve realized that we’ve been solving the problem for the 1% of new ventures that are technology startups. The reality is that the United States is still a nation of small businesses. 99.7% of the ~6 million companies in the U.S. have less than 500 people and they employ 50% of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.)
While we were figuring out how to be incredibly more efficient in building new technology startups, three out out of 10 new small businesses will fail in 2 years, half fail within 5 years. The tools and techniques available to small businesses on Main Street are the same ones that were being used for the last 75 years.
Therefore, our remaining challenges are how to make them fail less – and how can we make the Lean LaunchPad approach relevant to the rest of the 99% of startups.
Serendipity
A serendipitous answer came to us around noon. His name is Alex Lawrence. Alex, vice provost for Innovation & Economic Development at Weber State University in Utah and completing his first year of teaching entrepreneurship. Alex is a successful serial entrepreneur –with the same drive and energy of many we have known here in Silicon Valley, but different. His nine startups have ranged from franchised fruit juice shops to Lendio a financial services company for small businesses. Alex had been recruited back by his Alma Matter to create an entrepreneurship program. In fact he had just been charged with creating an entrepreneurship minor – five or six courses for students of any major at the University that would help prepare them for the challenge of starting their own businesses.
Alex’s first insight was that the traditional “how to write a business plan” was as obsolete for Main Street as it is for Silicon Valley. So he had adopted Steve’s Lean LaunchPad class and was using The Startup Owner’s Manual as his core text. He had contacted us seeking advice on developing his curriculum, and it just seemed natural to invite him out to the ranch for a deeper dive.
As we dug into learning about Alex’s teaching experience we naturally asked him about the ventures his own students were creating. It was clear Alex was a bit apologetic; photo studios, online retail subscriptions to commodity household and personal hygiene products, etc. Alex explained that in his community building a successful venture that generated nice cash flows – not IPO’s – were the big win. To his students these were not “small businesses”, but ‘their businesses’, their livelihoods and their opportunities to create wealth and independence for themselves and their families.
Mismatch for Main Street
As we walked out to the pond, Alex explained that while he found the teachings of the Lean LaunchPad directly applicable and effective, there was a mismatch for his students in the size of the end goal (a great living versus a billion dollar IPO) and the details of the implementation of the business model (franchise and multilevel marketing versus direct sales, profit sharing versus equity for all, family and SBA loansversus venture capital, etc.)
Sitting by the pond we had a second epiphany: we could easily adjust the Lean LaunchPad class to bring 21st century entrepreneurship techniques to ‘Main Street’. To do this we needed to do is change the end goals and implementation details to match the aspirations and realities that these new small businesses face.
We called this Mainstream Entrepreneurship.
Mainstream Entrepreneurship
Mainstream Entrepreneurship recognizes that with the Lean LaunchPad class we now have a methodology of making small businesses fail less. That accelerating business model search and discovery and using guided customer engagement as a learning process, we could help founders of mainstream businesses just like those starting technology ventures.
For the rest of the afternoon, Steve and I brainstormed with Alex about how he could take his 20 years of entrepreneurial small business experience and use the Business Model Canvas and Customer Development to create a university entrepreneurship curriculum and vocabulary for the mainstream of American Business.
We think we got it figured out.
Alex Lawrence will be one of the presenters at the Lean LaunchPad Educators Program August 22-24th in Berkeley.
Lessons Learned
- Small businesses make up 99.7% of U.S. companies
- “How to write a business plan” is as obsolete for Main Street as it is for Silicon Valley
- Using the Lean LaunchPad (the business model canvas and Customer Development) are the right tools
- Small businesses have different end goals and implementation details
- We can adapt/modify the Lean LaunchPad approach to embrace these goals/details
