So in the last lecture, you remember the business model canvas, all the 9 components of a startup.

By now, you're intimately familiar with the business model canvass.

Now we finally come to the last part of the business model canvas.

So in our last lectures we talked about value proposition, customer segments, distribution channels, customer relationships get, keeping and growing customers.

Who are your key partners and suppliers?

They need to understand the external environment and they need to come in.

I can't emphasize enough that the business model canvas is just a start.

The next is channels.

More than likely we'll make money from royalties and commercial licensing, etc.

In customer relationships all the get keep grow metrics, some of which we talked about, some of which you'll discover, what were the customer acquistion costs?

You're all familiar with the business model canvas.

So archetypes really helped us understand our customers, they value prop, the revenue and some of our pricing tactics.

That is they were beginning with a series of hypothesis about their customer archetype.

So one of the interesting equations for every startup is that

That was the customer acquisition cost, CAC, here.

Now, what s interesting is if you remember value proposition describes not only the features but also the pains and gains that they see, that they ve actually craved for the customer and that the goal is to figure out what the MVP is.

So again you could start either with customer segments or you could start with a product and value prop itself, it really doesn t matter.

That is what pain are you solving, what gain are you creating, and more importantly, who are your customers?

They provide value for money.

We provide value for money.

I'll provide value for money.

And that can't be repeated enough.

What are all the pieces? Well let's take a look.

Well, remember this was to acquire a customer.

How do you actually make money from your product and service being sold to customer segments?

Again, your CAC declines. The idea is what can you do to make this very efficient?

And by the way, we're going to ask later for who are you building it and what exactly does it solve for those people?

Notice by the way, while they were working on value proposition, they also had some hypothesis about the customer segments.

Just as a reminder, what the teams will be starting with in Week 1 is filling out the business model canvas and getting out of the building and testing their hypotheses about the value proposition, customer segments, and channel.

So, if we take a look at the Jersey² team was worrying about, it's what most start ups worry about on day 1, is does my value prop match my customer segment, and do I have product market fit?

One of the most important metrics to think about now that we have an end to end funnel is something called lifetime value and a lifetime value LTV is not your lifetime but your customer's lifetime.

You could charge twice the current rate for what I provide, and your customers would pay it.

In fact, every major household name is allowing you to interact with their products on a daily basis all the way from Smart Cars to Prada to Ray Ban, for example.

They run something called the loyalty programs.

And product market fit just simply says what is the match between what you are building and what customers need and want, and who are those customers.

What's the sum of all the revenue from day 1 purchase, so you're keeping them through all the grow activities you're undertaking.

And this start up is on the road to actually building something that customers might want.

Seems intuitively obvious but what you want to make sure is the amount of money you're collecting over here is bigger than the customer acquisition cost to remember the amount of money you're spending from here to here.

Lifetime value is the customer lifetime value from beginning to end, and just as a note, remember customer acquisition costs acquired over here, needs to be less than customer lifetime value.

And in value proposition, the goal of this is to find out that minimum viable product.

If you have world's most perfect business model, investors would love to see this number much bigger than this number and so what you want to look for is a well balanced model that takes into account how much you need to acquire customers but how much ultimately you'll extract from them over the lifetime.

You use those yellow stickies to put up all your hypotheses and you probably don't have many facts yet but you can make some pretty good guesses about what's a value prop, where the customers are, what your channel is and what your pricing is, but what more can they do is really interesting.

So today, while we're talking about value proposition, value proposition works hand in hand with who your customers are, which we'll be talking about in the next lecture.

So as we said, understanding these 3 components of value proposition work together with understanding the 3 components of customer segments.

Notice they were beginning with a series of hypotheses about their customer archetype.