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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.

 

9Mile Innovation Framework graphic

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:

  1. 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.
  2. 7. Customer Traction: Tactics and strategies employed to achieve and track exponential, proven, sustainable customer growth against non-vanity metrics.
  3. 8. Business Model: Bringing together much of the work in prior milestones, the business model must be scalable, repeatable, and profitable.
  4. 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.

9Mile Labs is Three!

It’s hard to believe 9Mile Labs is three years old, but we reached that milestone this month. Supporting driven entrepreneurs as they grow their startups has been a non-stop learning experience full of excitement and challenges. After investing in 48 companies across five cohorts, we’ve learned a lot about building innovative companies from the ground-up, so we decided to share some of our experiences through a series of blog posts. This first post talks about why we started 9Mile Labs and our vision for Seattle’s startup community.

The Puzzle

We owe the genesis of 9Mile Labs to a puzzle. All the data we saw over three years ago indicated Seattle should be a thriving startup hub. On the supply side, we had tons of technical talent, not to mention phenomenal business talent honed for decades at companies such as Amazon, Starbucks, and Boeing.  According to the 2012 Startup Ecosystem report from Startup Genome, Seattle ranked #2 in the availability and quality of technical talent after Silicon Valley. In 2011, there were 2.15 patents per 1,000 people in Washington state, compared to 1.53 in California. On the finance side, this region didn’t just have “old money” from stalwart businesses such as Nordstrom, Boeing, Weyerhaeuser, Paccar, Starbucks, Costco, Alaska and others, it also had many individuals who had accumulated wealth at companies such as Microsoft, Amazon, F5, Parallels, Zillow and Real Networks.

Yet despite having all the “pieces of the puzzle” necessary for a thriving tech startup sector, Seattle ranked low on company creation. In the 2012 Startup Ecosystem report, Seattle ranked 2nd in talent and 7th in funding, but a lowly 19th in startup output among the top 20 global startup ecosystems. Out of a handful of local VC firms, Olympic Venture Partners had had recently shut down.

The Solution

As we talked to dozens of entrepreneurs, investors, and executives, we saw that while all the raw materials existed to turn Seattle into a startup hub, the support infrastructure for early-stage startups was seriously lacking. When entrepreneurs wanted to start a business, they had trouble finding seed funding, credible mentors, and best practice information. This lack of access to resources dissuaded many individuals from taking the first step into entrepreneurship.

We created 9Mile Labs to solve this conundrum. By bringing the best entrepreneurs together with committed mentors, service providers, and angels, 9Mile Labs sought to stimulate company creation – the missing part of the Seattle startup puzzle. Supporting entrepreneurs to launch companies would then jumpstart the entire startup ecosystem in Seattle – leading to more later-stage deals, successful exits, and more money flowing back into serial entrepreneurship.

Just to be clear, there were some excellent organizations supporting Seattle’s entrepreneurs, including WTIA, Techstars, NWEN, Founders’ Institute, and Fledge Incubator. But with Seattle’s great potential, we realized we could do even more to support early-stage startups. That’s why we decided to create a new startup accelerator. The most frequent question we’re asked is: “Do you compete with Techstars?” That question implicitly takes a zero-sum game approach to our ecosystem. We believe that adding our enterprise/B2B skills, experiences and networks to the startup ecosystem increases entrepreneurial activity here, attracts entrepreneurs from outside to our thriving startup community and increases the overall entrepreneurial quotient in the broader ecosystem.

Why Accelerator?

We liked a lot of things about the accelerator model. We knew the investor-entrepreneur flywheel wouldn’t take off until those of us with experience, networks, and vision committed to helping launch the earliest-stage companies. Great ideas can’t become great companies unless entrepreneurs receive access to mentoring, hands-on business support, seed funding, and collaborative workspaces. All the 9Mile Labs founders had been operators, entrepreneurs, and execution guys at B2B tech companies, so we chose to focus on enterprise/B2B startups – because that’s where the bulk of our collective 50+ years of experience lies. Plus, with more than a decade of funding pouring into consumer startups, we saw the time was ripe for B2B investment.

No More Seagulls

Mentorship would be the central component of 9Mile Labs’ business model – that much was clear. We recruited mentors who could really help the entrepreneurs – not just offer offhand advice, but roll up their sleeves and help with everyday operations. We were all too familiar with the “seagull” model of mentorship, where mentors would spend a few hours a month at the accelerator to drop some “pearls of wisdom” to a few entrepreneurs, and then fly away – rarely to engage with the startups ever again. In our minds, mentorship would only be worth something if it was sustained and involved. So we asked our mentors to make a weekly commitment to the startup they would support. Most responded enthusiastically, proving people prefer to provide something of real value, even if it takes more of their time.

A Structured Methodology for Helping Startups

Great advice isn’t worth much to entrepreneurs unless they have a roadmap to get from idea to execution. Another of our major commitments was to develop a structured methodology around how we would select and support startups. While all the 9Mile Labs co-founders had started and grown companies before, we wanted to make sure to “institutionalize” our collective knowledge into a step-by-step plan to help entrepreneurs. We thus created the 9Mile Labs Innovation Framework, a set of best practices we follow to select companies, structure our curriculum, and perform ongoing assessment of our companies’ progress. Like any business model, the Innovation Framework will evolve over time as we try new things and learn from our experiences.

Focus on Building Enduring Businesses

The final and probably the most important commitment we made was to create an accelerator that didn’t just spit new companies out in the world, but measured their successes and continued to support them for the long haul, even after they “flew the nest.” The commonly accepted measure of startup success is an exit. But in a world where exits can take 5-10 years, we knew we had to measure more immediate metrics to ensure our startups were on the right track. Thus, while we track proxies for success such as post-accelerator funding and book value, we focus relentlessly on the most important metric for building an enduring business — customer traction.

Building an enterprise company is a long-term game, because building great software means nothing if you can’t acquire, keep, and upsell customers. We focus 100% on helping our startups nail customer acquisition and exponential growth, because without a large and growing customer base, a business will never be successful – no matter how much buzz they generate or funding they receive. Plus, if startups can acquire lots of customers quickly – and then continue to delight them through ongoing innovation – they can fund growth through actual revenues. Investment fads wax and wane, startup trends come and go, unicorns turn into unicorpses, but customer growth and revenue never go out of fashion.

The last three years have been a blast. We’ve had some great wins, we’ve been humbled, we’ve received criticisms, and we’ve heard accolades. But most of all, we’ve learned new lessons about what it takes to support entrepreneurship on a day-to-day basis. Our hope is to share those learnings with a larger and larger crop of early-stage startups, helping to build a great startup ecosystem commensurate with Seattle’s unique talents, strengths and potential.

9Mile Labs is a leading Enterprise / B2B high-tech accelerator based in Seattle. 9Mile Labs is currently accepting applications for its upcoming program (beginning in July, 2016) at http://apply.9MileLabs.com.

A Conversation with Steve Blank

Alliance of Angels Workshop: A Conversation with Steve Blank (@sgblank)

July 22 @ 5:30 pm – 7:00 pm | Free

Follow us @9milelabs

The Lean Startup is everywhere — being used by thousands of companies, taught in 100s of schools and adopted by the U.S. government to commercialize science.

Join author and educator Steve Blank, father of the Lean Startup movement, in conversation with Sandy Sharma, co-founder and partner at 9Mile Labs, as he explains
+ What the Lean Startup is
+ How and why it’s being used by companies, universities and federal research agencies
+ What’s next for the movement

3 Reasons Customer Traction is the Most Important Metric For Your Startup

9Mile Labs is hosting Milestone9, our Demo Day on Thursday, May 14, 9:30AM at Showbox SoDo. To attend one of the most exciting startup events in Seattle, register at http://m9.9MileLabs.com with promo code STARTUPS.

You know you have a winning idea. Yet, everyone wants to know about customer traction. Why is it that you can’t get through one investor or mentor conversation without this cropping up? Why does it matter?

1) Personal Affirmation. You, the entrepreneur, conceived the idea, it keeps you awake at night, you jump out of bed in the morning to work on it, you have deep conviction around it and are passionate about seeing it succeed. However, here’s the rub. Just because you think or believe it’s a good idea does not mean it actually is a viable business. And you can build the best product in the world, but if no one wants it, it remains a science project.

Finding customers who will try your product, pay for it and tell others about it is a good way to prove to yourself that your idea has legs and can potentially turn into more than a hobby.

2) Communicating Momentum to Investors. You probably need investment to see your idea through to fruition. Now let’s get this straight, there are only two experts on your product, you and your potential customers. Most experienced investors are very good at asking you incisive questions to elicit valuable information about the viability of your business. Sometimes, it may even appear that the investor is only interested in tripping the entrepreneur up or show off their own smarts. I would argue that this is not typically true; investors are merely attempting to be responsible stewards of their personal or their fund investors’ wealth.

However, the best way to shortcut all of these long-drawn and sometimes painful conversations with investors is to show them customer traction. You’ll notice that once you show customer acquisition, product usage and customer growth, the line of questioning changes from the viability of the idea to scaling, team-building and even investment terms.

3) Benchmark your business. You started your business with a number of assumptions such as customer problem, product features, pricing, sales cycle, SEO, SEM, social media marketing costs, cost of customer acquisition, lifetime value of customer etc. Regardless of your personal conviction about these assumptions, most of them are —at least initially — wrong. By continuously validating these assumptions with customers, you gain a deeper level of insight which allow you to make course corrections on product roadmap or business strategy.

Your customer traction demonstrates that you’re testing and validating your assumptions, it gives you a working hypothesis around what works and reassures investors that you’re learning as you go along

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!