Learn, Discover, Iterate, and Execute

Tuesday, December 8th, 2009

Steve Blank tells the tale of the second, more serious, time someone stole his startup idea:

We were starting Epiphany, my last company. I was out and about in Silicon Valley doing what I would now call Customer Discovery trying to understand how marketing departments in large corporations worked. The initial hypothesis for Epiphany (from my much smarter partner Ben) was that as departments in the enterprise (manufacturing, finance, customer support sales) became automated, the marketing department would eventually get its turn.

I remember presenting our ideas for Marketing Automation to one VP of Marketing in a large Silicon Valley company. His enthusiastic response was, “This will revolutionize marketing departments!” He continued: “I’d like to convince my boss so our company can be your first customer.” I should have been suspicious when he said, “I’d like to take a copy of your presentation to show him.” Caught up in the enthusiasm of hearing what a great idea we had, I violated one of my cardinal rules, and left him a hard copy.

Fast forward nine months. After talking to tons of customers and almost as many VC’s, we got Epiphany funded as a company that was going to automate Marketing Departments. After a ton of unreturned phone calls, I had written off the enthusiastic VP of Marketing who wanted to show my slides to his boss and moved on with building our company.

By now we had found a few customers and learned a lot more about the market from them and other prospects. Our business model changed as we realized that to become a large company, we needed to automate more than just a few marketers. As we were out looking for our Series B round, our company had gotten the attention of “name of big VC firm here” who wanted a play in enterprise software.

During the due-diligence process, I sat down with one of the partners who pulled out a set of slides and asked me: ”Have you seen these?” I quickly leafed through them and replied, “Sure they’re our original slides. Why?” He said, “Look again.” They had all my words from a year ago, but hey wait a minute, there’s someone else’s logo on my slides?! What’s going on? He said, “That’s what we’re trying to figure out. These guys just got funded, and they sound a lot like you guys.” Luckily I had the original slides and could prove who came first. Still the fact was a competitor had raised money using our idea and our slide deck.

And who was this competitor? The VP of Marketing who a year earlier had wanted a hard copy of our slides. He was now CEO of a new company in our market.

I felt like I had just been kicked in the stomach.

There’s a happy ending though:

Our competitor was executing on hypotheses we had developed 9 months ago, and their strategy remained static. We on the other hand, had moved on. We had discovered detailed information about what customers really needed and wanted and turned our original hypotheses into facts. We had validated our new assumptions by a set of orders, and we had pivoted on our business model. Our original idea had been nothing more than an untested set of hypotheses. Truth be told, we were no longer the company in those stolen slides.

While the common wisdom said that our success was going to be determined by which company executed better, the common wisdom was wrong. In a startup success isn’t about just execution, it’s how well we could take our original hypothesis and learn, discover, iterate and execute.

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