MadClass - Business Model Canvas - Customers

Jeffrey Glazer
February 19, 2015

At the Clinic we believe strongly in principles of Lean Startup. A regular "homework" assigment for our clients (and students!) is to watch Steve Blank's Udacity Videos on lean startup and the Business Model Canvas. We encourage our clients to know and use the Business Model Canvas, and we bring in speakers in each semester to teach our students about using it effectively. As I mentioned in the last post, it was in this context that this project even got started in the first place - as a student Business Model Canvas team project.

 

As I'm looking to figure out what MadClass is all about, I thought it might be useful to return to the Business Model Canvas for answers. 

 

Sometimes we can get too deep into a project that we can't see the forest for the trees, or in this case, we couldn't see the forest for the veins on the leaves of the trees. I was reminded of this as I started going through Alex Osterwalder's awesome new book Value Proposition Design. Even in its first pages, I was reminded that I needed to take a step (or 10) back from the project and look at this in a more methodical way. And, of course, the Business Model Canvas, and the Value Proposition Canvas.

 

So, while I will spare the details, for now, of going through this (what will I write about next week?), I wanted to at least get on paper that it makes sense to me to start at this critical place on the Business Model Canvas - Value Proposition and the Customer. Specifically, I wanted to focus on the Customer first. 

 

My hypothesis as it relates to the core technology of the MadClass project is: there are organizations that have as a significant pain point the evaluation of nascent entrepreneurs for their services.

 

So, to figure out what the product fit for these organizations is, I thought it made sense to figure out, first, who these potential customers are. I've identified at least 6 basic customer classes that fit into roughly two somewhat overlapping categories. 

 

Category One: Service Providers - these are people that provide services to nascent entrepreneurs, it includes the following customer classifications:

 

  • Educational and Training Services - organizations such as the Small Business Development Center and WWBIC that provide basic training for budding entrepreneurs on various aspects of starting and running a business. The classes are usually tailored to the attendees skill/knowledge level, so having a way to assess that level would be useful in making recommendations for classes
  • Lawyers, Accountants, and other business services - believe it or not, lawyers don't take every client that just happens to walk through the door (at least the good ones don't); service providers have to evaluate potential clients not only for whether they can (or will be able to) pay, but whether the client fits with the kind of person that the provider wants to serve
  • Accelerators/Incubators: See, below, but wanted to identify them as also falling into the Service Provider category

 

Category Two: Funders

 

  • Accelerators/Incubators: Particularly seed and early-stage accelerators and incubators are looking for good team fit and making predictions on who they believe are the best candidates for each class; to some extent this is a funding decision where the incubator/accelerator takes an equity position in the participating company
  • Angel/Venture/Private Equity Funds: Again, for early stage investing, the decision to invest is often based more on "soft" factors such as team personality, experience, and preparation than on hard data because the hard data simply doesn't exist yet; the company doesn't have the track record of operating to be able to make any sort of accurate financial predictions
  • Banks and other Lenders: while not typically used very much in early stage companies, many banks are starting to see this space as area of growth for the business lending practices; I would include in this class of customers the organizations (governmental and private) that underwrite or guarantee small business/new venture loans like the Small Business Administration.

 

As you can imagine, I have some homework to do: talk to these potential customers and get some data about whether my hypothesis applies to them. Osterwalder's book, Value Proposition Design, provides a framework for this, so maybe I'll keep reading and see what questions I should ask.