The 9Mile Innovation Framework© - A Structured Methodology for Building Technology Companies

When we ventured into the startup accelerator business over three years ago (read our story here), we knew we were headed into brand new territory. The startup accelerator business model was pioneered in 2005 by Paul Graham at YCombinator (YC) and then subsequently adopted by many others after high-profile YC successes such as AirBnB, Dropbox, Heroku and others. We were perfectly happy to replicate a proven model, but we also wanted to ensure we continued to learn, iterate, refine, and innovate.  And the only way we knew how was to constantly talk to our customers - i.e., entrepreneurs and investors - and try to deeply understand their challenges and pain points.

These conversations are the genesis of the 9Mile Innovation Framework, our foundational methodology for helping launch and grow startups. Using Steve Blank’s customer development methodology and Alex Osterwalder’s Business Model Canvas (BMC) tool as a starting point, we began to build our own proprietary framework for company creation and growth. While we found the BMC to be a great tool, we also needed a foundational framework that helped us with the following

• - A tool to assess a startup’s progress over time, including a self-assessment tool for entrepreneurs to track their own company’s performance.
• - A high-level model for creating enterprise and B2B startups that are focused on solving real-world problems and on customer traction.
• - Provide us a common language to discuss startup progress, challenges, and solutions with entrepreneurs, mentors, speakers and investors.
• - A clear foundational structure for our entrepreneurship and company-building curriculum.

With the 9Mile Innovation Framework, we have a tangible rubric we can use to gauge the current and future success of the companies graduating from the accelerator. Since 9Mile Labs is only successful if its companies are successful, the framework also serves as a measure of how our own business is progressing. Applying the framework to everything we do, there is no hand waving, subjective arguments, or seat-of-the-pants rationalizing. If something isn’t working, we go back to the drawing board and refine our framework.

Just a side note: we don’t claim that every concept in our Innovation Framework is original. We read books, browse startup-oriented publications, follow prominent bloggers, and speak to many people every day. And when some concepts resonate with us, we incorporate them into our thinking – consciously as well as inadvertently. For example, we read a startup-oriented book called Nail It, Then Scale It and really liked that term and started using it; we heard the term “Hacker, Hustler, Visionary” from somewhere else and promptly borrowed it. All innovation builds upon existing ideas; progress comes when you pick “borrowed” ideas and build on them with original thinking (read “Borrowing Brilliance” by David Kord Murray).

The 9Mile Innovation Framework has nine key strategic steps necessary to build any company from idea-to-execution (Figure 1). We call the first five steps in our framework the “Nail It” stage, so termed because investment in scaling activities such as marketing and sales is useless until a startup has achieved these five basic milestones. No business should spend time and money building a product that no one wants. It’s also important to note, that even though there’s a certain sequential nature to this model, startups of course sometimes hit these milestones in different order. Here’s a brief description of the five steps in the “nail it” phase of our framework:

1. 1. Team: Investors, especially early-stage ones, invest in teams first, then the market and idea. At 9Mile Labs, we look for a complete team comprising three roles - hacker, hustler, and visionary.
2. 2. Pain Point: The business idea for a startup must be rooted in a well-understood pain point for a specific customer segment in a significantly large market.
3. 3. Competitive Differentiation:  Every early-stage startup must have an understanding of, and build strategies for creating sustainable differentiation against competitors.
4. 4. Value Proposition: The value the customer receives from the startup must be significantly higher than the total cost of ownership from using the startup’s solution.
5. 5. Product: The actual product the company builds, first as an MVP, later beta, and then as a complete product, must be based on an in-depth understanding of the customer’s pain point and the value delivered to the customer.

Figure 1: The 9Mile Innovation Framework

Achieving maturity on the “Nail It” steps leads a startup to the “Scale It” part of the framework. The startup has the beginnings of a good business and now needs to take things to the next level. Of course, the “Scale It” part of the framework remains iterative as well, with startup teams learning what works and what doesn’t as they work to build a scalable, repeatable, and profitable business model. Things change, and the entrepreneurs must be ready to go back to square one or pivot if necessary. Here are the four steps in the “Scale It” part of our framework:

6. 6. Go-To-Market: Create clear messaging and positioning statements that resonate with the target customer segment, as well as demand generation strategies to target those customers.
7. 7. Customer Traction: Tactics and strategies employed to achieve and track exponential, proven, sustainable customer growth against non-vanity metrics.
8. 8. Business Model: Bringing together much of the work in prior milestones, the business model must be scalable, repeatable, and profitable.
9. 9. Funding Strategy: Every startup should clearly think about its funding needs and explore options such as customer revenue, strategic, angel, or venture investment.

Creating the 9Mile Innovation Framework grew out of our conviction that, while raising money is a very important activity for a startup, a much more important success metric is customer traction. However, amid headlines about unicorns and multimillion-dollar funding rounds, startups sometimes start thinking of funding as the ultimate objective, as opposed to a means to building a successful business.

Following this broad introduction to the 9Mile Innovation Framework, in the next post, we’ll dive into the specifics of each milestone introduced above. First up, the team. Tune into our next post to find out how we evaluate successful teams.

9Mile Labs is a leading Enterprise / B2B high-tech accelerator based in Seattle. 9Mile Labs celebrates the graduation of its fifth cohort on Mar 3, 9:30am; register as our guest with promo code “GOLD” at http://m9.9MileLabs.com! 

The accelerator is currently accepting applications for the upcoming program (beginning in July, 2016) at http://apply.9MileLabs.com.

Come meet our 9 Exceptional B2B Technology Startups on Nov 20

What is a startup accelerator and how can it help launch a technology idea into a market-ready business? Who is developing some of the best B2B and cloud-services technologies in the Pacific Northwest? Why is our region one of the best in the country for cloud and B2B startups? Our latest Milestone9 event will answer these questions, and introduce the 9 companies graduating from our program. Join us Thursday, November 20, from 2:00-6:00 p.m. at the Washington State Convention Center by registering at http://m9.9MileLabs.com. The Pacific Northwest is home to some of the top enterprise and cloud services companies in the world, and should be a beacon to any enterprise startup. Concur is one such remarkable success story, and we’re excited to have its co-founder, COO and Chairman Rajeev Singh keynote the event. He’ll help welcome hundreds of business leaders, entrepreneurs, investors, mentors, friends and family for great content, discussions, networking and demonstrations of some of the hottest technologies launching today!

This marks the third successful cohort of companies from the 9Mile Labs program and we can’t wait to help launch them into the community. And if you’re entrepreneurs interested in joining a B2B startup accelerator, our next program kicks off in January 2015 – application deadline December 4. Whether launching a startup out of college, from of an established career, or developing an idea on the side, entrepreneurs can apply to our program at any time here.

Register soon and we’ll see you there!

Why Did We Partner With PARC...And What Is The Big Deal?

Earlier today (Wed, Apr 2), we shared an announcement about an exciting partnership with PARC. Press releases offer limited room for elaboration, so we thought we'd share our perspective in a blog post. So here goes. If you’re an entrepreneur, you know the odds are stacked against you…1:10 by most anecdotal accounts. If you are working on an idea, chances are, someone else in some other part of the world is working on the same or an adjacent idea. And if you were to assume that the other team is at least as smart and as driven as you are, they’re likely to pivot and iterate until both of you arrive at similar product/market concepts.

Having established the above, your challenge is to execute flawlessly and incredibly fast. How exactly do you do that? We believe that’s where startup accelerators are amazingly efficient. Surrounding entrepreneurs with seasoned mentors, an intense focus on customer development, the ability of the partners themselves to support the companies, providing stage-appropriate resources, and creating urgency with a fixed-length program help startups minimize mistakes and operate efficiently.

Back to PARC

Before we go too far, for the uninitiated, here’s a subset of the pioneering technologies PARC has invented since its founding in 1970 – mouse, Ethernet, laser printing, graphical user interface, object-oriented programming, WYSIYG text editor etc. etc. This short YouTube video contains an interview with Steve Jobs and his reaction at seeing the mouse on his visit to PARC in 1979. The short of it is, PARC is focused on “out there” research in many areas, including ubiquitous computing, big data, content-centric networking, contextual intelligence, design and digital manufacturing and many others. Convinced about the coolness quotient yet?

PARC is now very focused on bringing its groundbreaking innovations to the startup community. After a long and intense due diligence process with startup-focused organizations across the world, PARC made a decision that 9Mile Labs would be one of the organizations they would partner with. The PARC team liked the 9Mile Labs focus on B2B companies, they enjoyed the continuity of deep mentor engagement during the program and they liked how the 9Mile Labs team is committed to a community-focused approach to supporting entrepreneurs. Finally, the PARC team felt that the structured curriculum and engagement built upon a strong foundation of the 9Mile Success Framework (more on that in another blog post) offered a great mechanism for programmatic engagement with the startups.

In fact, the interaction between PARC and 9Mile Labs was so positive early on that despite no formal agreement, PARC visited 9Mile Labs during the first program in 2013, spoke to a subset of the companies here and decided to support Comr.se, one of the very promising Cohort I companies. Over the past few months, PARC has dramatically accelerated development of Comr.se’s data analytics infrastructure with PARC’s outsourced data foundry services.  The engagement compresses Comr.se’s development and go-to-market timeframes by 12-18 months at a fraction of the traditional cost, thereby providing them with an amazing competitive advantage.

And This Is Why It’s a Big Deal!

The collaboration between PARC and 9Mile Labs creates unique combinations of disruptive technologies and startups that has not occurred at scale previously. PARC serves to accelerate startups in 3 distinct ways. First, PARC can efficiently offer the broad and deep base of technical expertise with PARC researchers and technologists to help startups in the form of technical mentoring. Second, PARC can draw upon its vast stable of existing technologies and IP that can provide startups a great head-start, as in the case of Comr.se. Third, PARC provides a world-class infrastructure for rapid prototyping - specifically their foundry services for software and cloud technology startups - that obviates the need for startups to expend their scarce time and resources building this infrastructure.

Now let’s combine all of the above with the fact that the focus of PARC’s research and client interactions is innately and historically enterprise and B2B. Hopefully, it begins to become apparent why the collaboration between PARC and 9Mile Labs ought to be great news for budding B2B entrepreneurs.

To be sure, not all startups will be either ready, able or suitable to engage with PARC. But for many startups, this support could spell the difference between success and failure. And that, quite simply, is what we’re trying to do at 9Mile Labs. We want to systematically reduce risks and improve the odds that startups face as they build their businesses.

How is a B2B startup different from a B2C startup (Part 1)?

We get asked about this all the time. Why and how is a B2B startup so different from a B2C company? While there are many differences, what stands out is the way in which B2B companies do marketing and sales to acquire customers. There’s no intent to imply that one is harder or simpler than the other, they’re just different. Let’s walk through a couple of examples to think through this.

B2C Example

Imagine the last time you purchased a $0.99 app. It probably took a herculean effort for the app developer to reach you through SEO, SEM, Facebook, TV/radio advertising, app review in a publication, app store, or one of the other myriad options. But once you discovered the app, read the description and browsed some reviews, you were able to make the decision about your purchase.

B2B Example

Now let’s examine a scenario where Acme Medical - a 20,000-person medical devices company - is ready to replace their existing open source CRM system with a new solution. NexGen CRM is a startup building the next generation CRM system. This potentially annual $200k+ deal could completely change the Series B funding conversations for NexGen. Here's what happens in this sales cycle

Awareness: Someone at Acme, most likely an IT manager (say Jill), is assigned responsibility for the search. This is not trivial; Jill’s neck (and the CIO’s) is on the line if Acme picks the wrong product. To create a comprehensive consideration list, Jill casts a wide net including performing web searches, consulting with her industry peers, attending trade shows and reading industry publications. NexGen wants to show up where Jill is looking for her solution.

Education: Acme needs to ensure that it provides adequate stage-appropriate and role-specific assets to educate Jill. These include white papers, data sheets, explainer videos, customer testimonials, case studies, live webinars and competitive information to ensure that Jill doesn’t just understand NexGen’s product, she also understands why it’s better than the competition.

Consideration: Once Jill downloads a white paper or attends a live webinar, she enters the sales funnel for NexGen. She invites the NexGen sales team for a show-and-tell with IT. Before the face-to-face meeting happens, the NexGen sales lead asks Jill to answer few questions about her environment over the phone or over email so they can prepare for the critical first meeting.

When the NexGen sales team shows up, it includes the NexGen CEO (it’s a big freakin’ deal), a sales lead and a sales engineer (likely a developer) who can answer Jill’s initial questions about integration with her current tools, usability, data migration, deployment timeframes and pricing.

Engagement: Once Jill is satisfied with the first meeting, she must now invite other Acme stakeholders from sales operations, marketing, possibly finance and other departments to a follow-on meeting. The NexGen sales team must also start reaching out to the Acme stakeholders.

A general guideline is that a direct sales engagement must run at 3 levels – technical, business and executive. In addition, you also need to cultivate a champion who is espousing your cause inside Acme and forewarning about impending objections and roadblocks.

The sales lead must understand the motives and objectives of the influencers and decision-makers in this purchase process. This involves researching the organization, understanding the power centers, figuring out budgetary priorities, and understanding the key strategic initiatives at Acme.

Purchase: While this stage may seem like a no-brainer after everything that’s happened prior, it is not so. Decisions get overturned because the CEO of Acme happened to be college buddies with the CEO of a NexGen competitor, Acme may have a poor quarter, or macroeconomic conditions may change…the list goes on.

But What About…

Couple of things to call out here. First, we discussed the example of a direct sale with a large deal size that can take 6-12 months, sometimes longer if you’re dealing with a government agency. While the level of engagement and sales cycle will depend on the deal size, it is useful to understand all the levers you can turn in order to achieve desired outcomes.

Second, we haven’t even touched upon the channel sales model. In general, it is challenging for startups to execute a successful channel strategy. As a startup, you need to generate the demand yourself so the channel can fulfill it. Unless the channel partners see a clear and direct path to revenue, they’ll be happy to sign agreements but won’t do much with it. By definition, early on, a majority of your sales will end up being direct sales.

So Let’s Summarize the Differences

Sales Cycle: Yes, sales cycles are longer in B2B. Also, in B2C, marketing equals sales for the most part. In B2B, marketing is only the leading edge of a potentially longer sales cycle.

Purchasing Decision: In B2C, the purchasing decision is shorter and may be impulse and emotionally driven. Not so in a B2B situation where the purchasing decision must align with budgets, strategic priorities, technological platforms and many other considerations

Deal Size: Deal sizes are typically larger in B2B than B2C, which leads to higher level of due diligence. Of course, B2C businesses deal in much larger number of users than their B2B counterparts.

Switching Costs: One reason the due diligence is longer is that switching costs are much higher in a B2B environment vs a B2C setup. Integration with existing tools, training costs, data migration and deployment costs lead to a cautious and deliberate decision-making process.

Customer Segmentation: In B2C marketing, your messaging is focused on a persona, say females between 18 and 35 years old. In B2B, you must first understand and then target both generic segments (such as Technology Decision Makers, Business Decision Makers and others) and vertical- or domain-specific roles, such as the EDI Analyst within a healthcare insurance organization. One other thought, when you’re selling in B2B, you’re selling to experts; not so in a B2C sale.

Education & Awareness-building: Because of the need for targeting experts within many different roles in a business, the messaging contained within the marketing assets needs to be stage-appropriate and tailored to the roles you’re pitching to. Hence the need for specialized assets such as white papers, technical documentation, data sheets, case studies, ROI documentation and others in a B2B sales cycle.

Revenue vs. Traffic: Here’s another generalization. In B2C, you can run a business for a long time as long as you’re growing traffic, downloads and active users. In B2B, you cannot afford to be generous for too long for one simple reason – business users don’t attach value to freebies. If an organization believes that your product solves a real problem, they will willingly pay for it (probably a discount will help with the decision) and then will likely assign a resource (or part of a resource) to extract value from their purchase. If no one is accountable to make your product successful, it will likely sit on the shelf.

I'd love to hear your thoughts and feedback on this post.

Sell it Before You Build It.

If you want to have paying customers, and increase your chances of funding you must, “Sell it before you build it.” That was the title of my recent talk at 9Milelabs, a Seattle-based accelerator that provides mentors and other resources to startup companies looking to get off the ground. The key message of the talk was this: by interviewing 100s of prospects in your proposed market, you can segment the target market, identify must-have versus nice-to-have features, and secure buyers for your product before you’ve written a single line of code.

This process is called “Market Validation.” We adopted market validation while building GoToMeeting, AppFolio, and now SecureDocs, a virtual data room used for both startup fundraising and mature companies going through M&A or IPO.

Most people think of GoToMeeting as the 800 pound gorilla of web meeting solutions. When we launched GoToMeeting, success was a long shot. There were 100+ other collaboration solutions already on the market from companies like Webex, Microsoft, IBM, and Lotus. As a new entrant, the small guy, market validation provided a roadmap on how to compete with the big guys.

Here are some specific examples of how GoToMeeting benefitted from market validation: By segmenting a specific part of the market (SMB), we were able to do away with 80% of product “requirements,” the majority of which were only applicable to enterprise companies. Instead of planning based on what we thought we knew about the web-collaboration space, we actually talked to hundreds of people- all potential customers- and in the end decreased the work we needed to do by months. SMBs didn’t care about 87 different features. They only cared about 3 things: Ease of use, price point, and sharing their screens as quickly as possible. Instead of 87 features, we focused on a download that was 200K or less, a UI with an oversized play button, and an all-you-can-meet pricing strategy. We also validated the business model to make sure that the proposed price point would allow us to acquire customers both online and through sales.

By spending the time up front, we avoided wasting time building a product the market didn’t want and we had customers willing to pay for the product when it was done. Take these lessons and apply them to your business. Get out there and validate!

For added incentive, consider this: early-stage companies with paying customers are much more unique and attractive to VCs, who review hundreds of “promising” companies every year. Sell it before you build it and you are much more likely to be rewarded in your business and fundraising efforts!

About the author:

Albert Oaten is a serial entrepreneur, investor, and VP of Market Development at SecureDocs, Inc., a partner of 9Mile Labs, offering free virtual data rooms to all 9Mile Lab companies raising their first round of funding.