[MUSIC] Okay, welcome back. To wrap up module two and make sure the lessons sink in, I want to do a couple of things and take just a few minutes to do that. First I wannna talk about focus, a key element in most successful startups. But it's especially important in match maker models. And I want to talk about the importance of solving a problem or should I say resolving intense customer pain in the venture you hope to start. I also want to tee up some useful reading for you, some optional articles and a couple of crucial parts of the customer funded business in chapter three. Finally, I'm going to give you this model's assignment so you can begin putting one of the five customer funded models, matchmaker models, to work. Are you ready? Here we go. First I want you to notice how narrowly focused all but one of these matchmaker businesses you've heard about in the interviews were at the outset. Budgetplaces.com, for example, only one and two-star hotels, only Barcelona, targeting only budget travelers. Very narrow. Dog vacay, only New York, only dogs no cats, no parakeets nothing else. Flat club, only flats only students at the outset. We've not talked about Air B&B here, but it targeted only conference goers in San Francisco at the beginning. The one violator is Profounder, the failure story, which wanted to build from the outset a business that would work in all 50 states, each of which had different security laws. Huge mistake. I'll wager that if they'd started only with California and used that as turf on which to learn, they'd still be here today. But sadly they aren't. Eventually you can grow bigger, as all these companies did. Here's the key lesson. Start with an extremely narrow focus, and you'll be on your way. Next, let's talk about the notion of customer pain. As the famous venture capital investor, Vinod Khosla says, nobody will pay you to solve a nonproblem. No problem, no business. It's that simple, he says. Now sure, not every business does that. Starbucks for example, re-invented the coffee shop. But it's pretty hard to argue that customers 35 years ago had a problem buying a cup of coffee. Of course they didn't, but if you can find someone with a compelling and painful, and urgent problem and you've got a solution to that problem, they're far more likely to want to help you get started than if you're just one more me too business selling what everybody else sells. When Steve Jobs from Apple, for example, turned the company from a low, single digit, market share player in the PC industry, into a vibrant music business with the iPod, and the iTunes, and then more, he solved a very compelling problem. What was the problem? The composers, the artists and the music companies weren't getting paid. Why? Because some people, none of you I'm sure, were stealing the music on Napster and other sites like that. Solve a big problem, and the upside is huge and the going will be much easier. So Airbnb for example put money into San Francisco homeowners' pockets. They were hosting convention goers during a crushing recession. And they gave budget-minded convention goers that were facing sold out hotels a place to stay, solving problems on both sides. So if you're starting a matchmaker business, find a vertical in which both the buyers and the sellers have compelling problems or pain, and you'll grow a lot faster. And you'll do it with your customers' cash. Next if you're thinking about starting a match maker business, I suggest you read two articles. They're optional, you don't have to do it. Whose links we're going to show here on the course website. There's lots of very practical advice in both of them. And if you're reading along with us in the Customer-Funded Business, I suggest you re-read the Profounder story, despite having heard it from me a bit earlier. It's a very important cautionary tale. I also want to call your attention to the last portion of the chapter, titled, What Angel Investors Will Want To Know and Will Ask. Every chapter in the book, except for the first and the last, has a section like that, as well as a checklist that summarizes those lessons. It's a list of questions you're likely to be asked once you've proven your customer funded business model with demonstrated customer traction. At that point, you might say, well, maybe I could use some investment to ramp up my growth, who knows. Afterall, by then, you will have proven that your business actually works. So, if that's the case, you'd better have answers to these questions or you're going to struggle to raise the investment capital you seek. You might also want to read Chapter Four, on pay in advance models, which is what we're going to cover in the next module. Before moving on to your preparation for that module however, there's something I suggest you do whether you're taking this course on a certificate basis or not. Here's the deal. I'm going to give you a short list of matchmaker businesses on the website. What I'd like you to do is the following. For at least five of those businesses, either find a buyer you know who has done a transaction with that business, and find a seller as well. Better still, find two or three such buyers, and two or three sellers as well. Then ask all of them on a scale of one to three, how compelling was the problem that led them to do that transaction. Was it not at all compelling? That's a 1. Or no real problem. Was it moderately compelling? Or was it, I simply had no other choice, it was extremely compelling, that's the only place I could get it. Then do the same thing with the seller who did a transaction with that business. Ask them on a scale of 1 to 3 how compelling their problem was that lead them to do that transaction. Not at all compelling, that's a one, moderately compelling, number two, or I had no other place to get it, number three. Now, if you can't find somebody whose been a customer or a supplier to some of these businesses, then imagine yourself in those roles and answer those questions as if you were the customer. Then add up the two scores, the buyer score and the seller score, for each business so you get a number that in total, will be between two and six. Those figures will tell you the extent to which that business solves meaningful customer problems on both sides of the transaction. If you're reading along, you could score the examples in the book, too. Having done all of that, now write yourself a half-page analysis and your prediction about that business's likelihood of long-term success based on these scores. If you're taking this course on a certificate basis, submit your work in the normal manner. Now this little assignment is not scientific and it's a very small sample of course. But what I intend to do here is to get your thinking into problem solving mode. Okay, so following my final remarks here, there's going to be a slide with a couple of questions on which I think you might want to reflect, and that will close module two. So there you have it, two modules now under your belt. In module three, we're going to take an in depth look at pay in advance models. Companies like Dell, which started in the dormitory room of a 19 year old freshman at the University of Texas. So if a college freshman named Michael Dell can get people to pay him in advance, before even producing or delivering the computer, maybe you can too. And we'll have a bunch of stories, we'll have some more interviews including a couple of interviews with leading VC investors. The pay-in-advance model is the most straightforward of the five models, and I know you'll enjoy learning how to put it to use and the surprising settings in which it can be used. But meanwhile, before we get there, my colleague Tiffany is going to keep things lively on the discussion board. She'll keep all of you learning from one another as well as from me. Now I'm sure some of you already have experienced building pay-in-advance models. Maybe you've gotten some money from a customer to build what you want to build. So what have you learned that will tee up your peers for Module 3? So, let's swap those stories and learn from each other. So when that's all done, I look forward to seeing you in Module 3. Ciao. [MUSIC]
