A new way to teach entrepreneurship

For the past three months, we’ve run an experiment in teaching entrepreneurship.

In January, we introduced a new graduate course at Stanford called the Lean LaunchPad. It was designed to bring together many of the new approaches to building a successful startup – customer development, agile development, business model generation and pivots.

We thought it would be interesting to share the week-by-week progress of how the class actually turned out. This post is part one.

We were positing that 20 years of teaching “how to write a business plan” might be obsolete. Startups, are not about executing a plan where the product, customers, channel are known. Startups are in fact only temporary organizations, organized to search–not execute–for a scalable and repeatable business model.

We were going to toss teaching the business plan aside and try to teach engineering students a completely new approach to start companies – one which combines customer development, agile development, business models and pivots. (The slides here describe the details of the class.)

Get out of the building and test the business model

While we were going to teach theory and frameworks, these students were going to get a hands-on experience in how to start a new company. Over the quarter, teams of students would put the theory to work, using these tools to get out of the building and talk to customer/partners, etc. to get hard-earned information. (The purpose of getting out of the building is not to verify a financial model but to hypothesize and verify the entire business model. It’s a subtle shift but a big idea with tremendous changes in the end result.)

Team Autonomow: Weeding Robot Prototype on a Farm

We were going to teach entrepreneurship like you teach artists – combining theory – with intensive hands-on practice. And we were assuming that this approach would work for any type of startup – hardware, medical devices, etc. – not just web-based startups.

If we were right, we’d see the results in their final presentations – after 8 weeks of class the information/learning density in the those presentations should be really high. In fact they would be dramatically different than any other teaching method.

But we could be wrong.

While I had managed to persuade two great VC’s to teach the class with me (Jon Feiber and Ann Miura-ko), what if I was wasting their time? And worse, what if I was going to squander the time of my students?

I put on my best game face and watched the seats fill up in the classroom.

Mentors

A few weeks before the Stanford class began, the teaching team went through their Rolodexes and invited entrepreneurs and VCs to volunteer as coaches/mentors for the class’s teams. (Privately I feared we might have more mentors than students.) An hour before this first class, we gathered these 30 impressive mentors to brief them and answer questions they might have after reading the mentor guide which outlined the course goals and mentor responsibilities.

As the official start time of the first class drew near, I began to wonder if we had the wrong classroom. The room had filled up with close to a 100 students who wanted to get in. When I realized they were all for our class, I could start to relax. OK, somehow we got them interested. Let's see if we can keep them. And better, lets see if we can teach them something new.

The first class

The Lean LaunchPad class was scheduled to meet for three hours once a week. Given Stanford’s 10 week quarters, we planned for eight weeks of lecture and the last two weeks for team final presentations. Our time in class would be relatively straightforward. Every week, each team would give a 10-minute presentation summarizing the “lessons learned” from getting out of the building. When all the teams were finished the teaching team lectured on one of the 9 parts of the business modeldiagram. The first class was an introduction to the concepts of business model design and customer development.

The most interesting part of the class would happen outside the classroom when each team spent 50-80 hours a week testing their business model hypotheses by talking to customers and partners and (in the case of web-based businesses) building their product.

Selection, mixer and speed dating

After the first class, our  teaching team met over pizza and read each of the 100 or so student applications. Two-thirds of the interested students were from the engineering school; the other third were from the business school. And the engineers were not just computer science majors, but in electrical, mechanical, aerospace, environmental, civil and chemical engineering. Some came to the class with an idea for a startup burning brightly in their heads.  Some of those applied as teams. Others came as individuals, most with no specific idea at all.

We wanted to make sure that every student who took the class had at a minimum declared a passion and commitment to startups. (We’ll see later that saying it isn’t the same as doing it.) We tried to weed out those that were unsure why they were there as well as those trying to build yet another fad of the week web site. We made clear that this class wasn’t an incubator. Our goal was to provide students with a methodology and set of tools that would last a lifetime – not to fund their first round. That night we posted the list of the students who were accepted into the class.

The next day, the teaching team held a mandatory “speed-dating” event with the newly formed teams. Each team gave each professor a three-minute elevator pitch for their idea, and we let them know if it was good enough for the class. A few we thought were non-starters were sold by teams passionate enough to convince us to let them go forward with their ideas. (The irony is that one of the key tenets of this class is that startups end up as profitable companies only after they learn, discover, iterate and Pivot past their initial idea.) I enjoyed hearing the religious zeal of some of these early pitches.

The teams

By the beginning of second session the students had become nine teams with an amazing array of business ideas. Here is a brief summary of each.

Agora is an affordable “one-stop shop” for cloud computing needs. Intended for cloud infrastructure service providers, enterprises with spare capacity in their private clouds, startups, companies doing image and video processing, and others. Agora’s selling points are its ability to reduce users’ IT infrastructure cost and enhance revenue for service providers.

Autonomow is an autonomous large-scale mowing intended to be a money-saving tool for use on athletic fields, golf courses, municipal parks, and along highways and waterways. The product would leverage GPS and laser-based technologies and could be used on existing mower or farm equipment or built into new units.

BlinkTraffic will empower mobile users in developing markets (Jakarta, Sao Paolo, Delhi, etc.) to make informed travel decisions by providing them with real-time traffic conditions. By aggregating user-generated speed and location data, Blink will provide instantaneously generated traffic-enabled maps, optimal routing, estimated time-to-arrival and predictive itinerary services to personal and corporate users.

D.C. Veritas is making a low cost, residential wind turbine. The goal is to sell a renewable source of energy at an affordable price for backyard installation. The key assumptions are: offering not just a product, but a complete service (installation, rebates, and financing when necessary,) reduce the manufacturing cost of current wind turbines, provide home owners with a cool and sustainable symbol (achieving “Prius” status.)

JointBuy is an online platform that allows buyers to purchase products or services at a cheaper price by giving sellers opportunities to sell them in bulk. Unlike Groupon which offers one product deal per day chosen based on the customer’s location. JointBuy allows buyers to start a new deal on any available product and share the idea with others through existing social networking sites. It also allows sellers to place bids according to the size of the deal.   

MammOptics is developing an instrument that can be used for noninvasive breast cancer screening. It uses optical spectroscopy to analyze the physiological content of cells and report back abnormalities. It will be an improvement over mammography by detecting abnormal cells in an early stage, is radiation-free, and is 2-5 times less expensive than mammographs. We will sell the product directly to hospitals and private doctors.

Personal Libraries is a personal reference management system streamlinig the processes for discovering, organizing and citing researchers’ industry readings. The idea came from seeing the difficulty biomed researchers have had in citing the materials used in experiments. The Personal Libraries business model is built on the belief that researchers are overloaded with wasted energy and inefficiency and would welcome a product that eliminates the tedious tasks associated with their work.

PowerBlocks makes a line of modular lighting. Imagine a floor lamp split into a few components (the base, a mid-section, the top light piece). What would you do if wanted to make that lamp taller or shorter? Or change the top light from a torch-style to an LED-lamp? Or add a power plug in the middle? Or a USB port? Or a speaker? “PowerBlocks” modular lighting is “floor-lamp meets Legos” but much more high-end. Customers can choose components to create the exact product that fit their needs.

Voci.us is an ad-supported, web-based comment platform for daily news content. Real-time conversations and dynamic curation of news stories empowers people to expand their social networks and personal expertise about topics important to them. This addresses three problems vexing the news industry: inadequate online community engagement, poor topical search capacity on news sites, and scarcity of targeted online advertising niches.

While I was happy with how the class began, the million dollar question was still on the table – is teaching entrepreneurship with business model design and customer development better than having the students write business plans? Would we have to wait 8 more weeks until their final presentation to tell? Would we signs of success early?  Or was the business model/customer development framework just smoke, mirror and B.S.?

The adventure begins
We’re going to follow the adventures of a few of the teams week by week as they progressed through the class, (and we’ll share the teams weekly “lessons learned,” as well as our class lecture slides.

The goal for the teams for next week were:

• Write down their hypotheses for each of the 9 parts of the business model.
• Come up with ways to test:
  • what are each of the 9 business model hypotheses?
  • is their business worth pursuing (market size)
• Come up with what constitutes a pass/fail signal for the test (e.g. at what point would you say that your hypotheses wasn’t even close to correct)?
• Start their blog/wiki/journal for the class

Next Post: The Business Model and Customer Discovery Hypotheses – Class 2