Instead of setting your best engineers to work creating the best product, they're busy recruiting and dealing with company growing pains from the get-go. The mythical man-month and scarcity of great people combine to diminish your returns on this hiring. Furthermore, battleships don't turn on a dime, and you may be hiring a lot of irrelevant expertise if you have to pivot later. This is why Stripe took 6 months to hire its first 2 people.
Furthermore, huge funding means investors are looking for a huge returns. A $1b sale is now failure?? My gut says this "go big or go bankrupt" pressure encourages tunnel vision among leadership rather than innovation.
Essential Products was overfunded in late 2015 and is already up for sale. I think Magic Leap and Desktop Metal will end up as similar cautionary tales.
I see good arguments for overfunding if (1) there's huge capital costs for development and high probability of large exit regardless of technology success (e.g. biotech) or (2) you're trying to capture a market with a strong network effect. The second case seems dangerous though, e.g. is Uber's popularity really a moat? What if they had spent their billions on developing a product with a real technological advantage instead of scaling to the world first?
As a huge fan of his book, I'm sad to see Steve Blank largely ignore these ideas in his article.
If you don't take the money, they will go to your competitor, and give it to them instead.
If you're in a space where you can be killed by your competitor selling $1 for 90 cents, that will kill you just as dead.
It doesn't matter if Uber's popularity is a 'real' moat or not, as long as its a moat big enough to drown you.
Sure, a few years later, said competitor will make an announcement on their website about the conclusion of their 'magical journey', but that's not going to matter to you, is it?
Your competitor is getting funded whether you take the money or not. A failure to have planned for this is a de facto plan to drink the cool-aid.
My argument is that even as a vc with unlimited funds, overfunding a startup may be suboptimal. You paradoxically decrease its probability of success by misaligning the startup leadership’s incentives at a crucial pre product-market fit development stage.
His article is for 1% of entrepreneurs. For 99%, lean startups still works. And let's not act like investors spray and pray that they hit a unicorn. Of course it's good for their track record, but it's not like they don't ask questions before investing when you have the track record of Jeff Katzenberg.
There are a lot of MVPs out there to know the Netflix for mobile will work. Lean startup never said that the MVP had to be your own. Read my Medium article, I develop on the subject : https://bit.ly/2CxeT9z
Limiting and controlling growth seems like a difficult and dangerous proposition, particularly in an environment where there are competitors just waiting to perfect the idea and take it to market before you.
A) Maybe the most important is time. You need time in a good environment to actually develop something. Which has become a lot more costly.
B) Large companies are controlling more areas than ever. People often wary of regulation as a barrier, but as time goes by the market participants creates their own barriers. Many areas are just harder to have an impact in than it used to be.
C) And then there is just competition, especially for things like talent.
I guess it isn't the lean startup that is dead so much as the environment for it. You can say the same thing about co-operatives, non-profits, community establishments and a lot of other things that are good ideas (probably more so than ever) but not able to flourish because of other interests.
Why do you think that is? I'm not sure what you're referring to exactly.
>B) Large companies are controlling more areas than ever. People often wary of regulation as a barrier, but as time goes by the market participants creates their own barriers. Many areas are just harder to have an impact in than it used to be.
That one definitely sounds true to me, the complexity of modern software definitely makes it harder to be competitive with big shops. You can be the smartest coder on earth, if you want to write a complex application today (say, video editing software, smartphone interface, a kernel, a web browser etc...) you're looking at man-years of work if you want to start from scratch. And if you don't start from scratch it'll be harder to differentiate yourself from the competition and "disrupt" the status quo.
I'm always amused when I read stories from the 70's and 80's about lone hackers writing a cool hack for a computer or application of the time and managing to sell it for a lot of money. Like this story I remember reading on HN of the hacker who managed to write a task switching application for some Apple computer of the time and managed to sell it to Steve Jobs (I don't remember all the details and I can't find the article at the moment). It was a clever and completely non-portable use of the hardware resources, in the end it was probably a few kilobytes of (very clever) code. It's hard to imagine something like that today.
As software professionals, this is a problem of our own making. Nobody is asking for software to be complex. Users don’t want complexity. Development companies don’t want costly complexity. Software developers don’t even want complexity. Who has sat down at the start of a project and said, “you know, this software needs to be as complex as possible!”
Yet we keep building complex software. Layer after layer of libraries and APIs. Frameworks and more frameworks. Containers. Multiple languages. Front end and back end. Machine learning. Problems that used to be solved on a PC now require a 150 node cluster.
It’s fashionable to throw huge teams, hardware and middleware at problems these days.
There is still opportunity for the lone coder and the lean startup. You need the competence to stop writing all these bullshit layers and code simply.
Sure, there are lots of times where you're better off ignoring these user requests, and where scope creep or bureaucracy or tech debt or just sloppy coding introduce unnecessary complexity. But even if we could always build exactly what users want and always build things cleanly starting from a blank slate, software would still be complex.
The VC cash machine has brought us nothing except short term thinking, get-rich-quick schemes, social manipulation, herd mentality, idol-worship, media corruption and corporate growth.
I look forward to the next tech bubble. I hope they all get wiped out.
Firstly, I will enjoy watching them fail. It will make me happy intrinsically.
If I lose my software engineer job and have to work as a janitor for a while, it would be totally worth it.
Secondly, the subsequent failure of their portfolio companies will free up a huge amount of marketshare in many industries; some of which I will be able to capture with my own side project until I can afford quit my janitor day job.
Oh look at all the overly complicated crap I can put up with. I must be amazing.
Complex systems evolve from simple systems. One reason we keep winding up with new complex systems is because of folks saying "it's too complex, let's start over without all these bullshit layers and code simply", where "bullshit layers" and "simply" are variables set by the prevailing environment.
> It’s fashionable to throw huge teams, hardware and middleware at problems these days.
My theory is that it comes down to :
- Clients and managers thinking that the UX/visual look has something to do with the front-end framework, forgetting that in the end any web app is just HTML, CSS and JS, and frameworks having more to do with maintenance.
- Shops lacking seniors, and young engineers (legitimately) more interested by the tech than solving the business problem in a boring way.
So here we are with the "fashion" that any business app must be done as a SPA "because it needs to look modern". You can see the opportunity.
It really seems like things like PARC was an anomaly. Companies eventually figured that it was just better to "be part of the problem" and make a lot of money like in many other industries.
Users wouldn't tolerate WordStar and Pac-Man today.
I disagree. If you want to make a competitive product to the products made by big shops, then that is true. However true innovation is often making something in a category that is new or not well served.
When Jobs/Wozniak made the Apple 1, they weren't competing with big shops mass producing other desktops, they were competing with the likes of MITS producing build-your-own computer kits.
Also the prevalence of on-demand services and APIs now mean you rarely have to make lots of complex software from the ground up. The secret is to find some value your software can deliver which competitors don't exist for, or don't do well.
If you look at the boom in solopreneurship and side projects it's self-evident to me it's never been easier.
Aside: the reason the 'cool hack' stories don't exist now is that they were often about using limited resources to do things that were seemingly difficult/impossible on the available platforms. So they were still examples of new software delivering value. But now as we are far less resource-constrained, and software as a whole is a lot more mature, these opportunities are a lot more scarce.
There are a lot of stories of people falling into technology entrepreneurship by showing up. I guess you could say that it was less competitive (which it was), but I also think that society was more lenient. We hadn't figured out yet how to charge a lot for everything. If some landlord was 'greedy' you could move to some adjacent area. Today with information spreading so fast everyone knows not only what something is worth but what it could potentially be worth and price accordingly.
Like this story from Max Levchin starting with "I didn't really make any arrangements, so I just crashed on Scott's floor" .
The gaming industry still has room for lone coders to make a difference. Many of the top indi games are/were written by individuals (KSP, Minecraft) or by very small groups (Factorio). Sometimes being able to do something leaner, with less code, means you can win ground against the biggest of big guys (City Skylines over SimCity).
Sure but my point is more general: if I create a new lean web-like protocol and client and it can't display videos, feature interactive content, arbitrary styles etc... How do I drive adoption?
I can convince the suckless folks that "less is more" and that it's "the unix way" but outside of that circle I'm not sure who's going to use my software.
All software seems to be going in the opposite direction. For instance I'm a heavy user of IRC, these days the type of communities you could find on QuakeNet 15 years ago are on Discord, a super heavy webchat client that manages to slow down my beefy desktop computer when run on pre-quantom Firefox. The Discord client is probably several times heavier on resource usage than the Quake game itself!
It might come from a piece of software that solves a problem for some group of people that a browser can't, and then evolving towards the mainstream replacing the role that browsers have right now making them obsolete
It depends. You could say the same to Igor Sysoev when he started to write Nginx, for example.
So, e.g. web browser with all the main Chrome or Firefox functions but working 2x faster on mobile and eating 3x less memory would disrupt the browser market indeed.
Also sometimes we self-impose complexity with our tools. For example I recently displaced a competitor with a full team having a hard time delivering because of the disproportionate complexity of their stack regarding the problem (full SPA for a simple CRUD app), where I could do it as a solo effort costing ten times less.
Complexity. Consumers demand more complex applications. Platforms have more complex requirements.
It means once you've made it there's a barrier to entry that keeps you protected, so you may as well go big or go home.
I pitched a startup idea today to an accelerator judging panel. There were three distinct software components to it, each quite complex in the detail and I had three minutes to cover the lot because they're flooded with candidates even after the first sift throwing 80% away. Yet, comparatively it feels quite simple - no AI or ML involved or highly regulated areas.
I might go and find a pong clone to play to cheer myself up.
Disruption to me is a power grab and you have to do it with some exuberance or why bother?
I think another way to say this is that the value of time has fallen as the amount of funding available has risen. The prototypical hacker working nights and weekends was a _response_ to the lack of available capital: work harder if you can't hire.
Its like an arms race. Two hackers of equal aptitude start working 120 hours weeks on identical startups targeting similar markets. The one who stops doing that and instead raises a few million to hire a large team and spend lots of marketing dollars is going to win that market (though it may be less profitable).
As more funding chases fewer projects, that point moves earlier and earlier in the process until only a fool would spend 120 hours a week instead of raising money right from the beginning.
I feel startups did this to themselves. It used to be that you'd work for a startup and the equity was supposed to pay off if the startup was acquired or took off. Now, even though a startup may sell for several billion or go public, most employee's equity has been diluted to hell and back, barely making up for the lower salary.
And I don't intend that to be an elitist statement. It is like the difference between playing an instrument and being in a band. You might be better by yourself, but it really the ecosystem that is going to take you to another level in terms of success. I think that sort of ecosystem is harder than ever to access. Especially with the rise in cost of education and housing. It is hard to start a software band these days.
Oh, and the thing about making them move to San Francisco. Not even just the greater Bay Area, which is bad enough, but to the most expensive part of it.
To be fair, Ries stole a lot of nice bits from different schools of thought. There's stuff his books that actually works.
But you would have to be soft in the head to think that his book represented wisdom. In fact, wisdom does not come from a book – it comes from reading a lot of books, making a lot of mistakes, working with a lot of people, building a lot of stuff, and still understanding that this does not necessarily represent something that can be distilled into bullet proof heuristics. There's always unseen and uncounted factors that you will miss.
In contact with large, established organisations this book tends to produce cargo cults. Simplistic management self-help literature combined with institutional mediocrity, stupidity, fear of change, and hard-shelled delusion is a horrible mix.
The good thing is that these cargo cults tend to die after a few years. The bad thing is that anything associated with them then gets tainted.
The Lean Startup was a management fad and it didn't make people any smarter. It just gave them different ceremonies to perform in order to feel good about themselves. And as all fads, it has now passed. It is okay to move around the cabin and think for yourself again.
I would recommend "Functional Stupidity" by Mats Alvesson as a form of inocculation against this type of self-pleasuring heuristic-seeking.
I assume you knew that and just felt like bashing him without adding any nuance to your point. That's a bad habit and you shouldn't do it.
But there is a piece of perspective that is perhaps missing. I've seen him preach to companies that have orders of magnitude more active users and orders of magnitude as much profit as he had revenue. And making people there believe that he somehow knows something about what it takes to make a company successful. To make a successful product.
I've seen companies who had brilliant people who built more business for their company than this guy ever built for himself be told that "why can't you be more like that". Because it is always more attractive for some types of companies to listen to some outside hack than to actually pay attention to unglamorous people with far more potential. It is easier to admire something that comes with a book, ceremonies and eloquent salesmanship. And sadly, it is easier to take what they say seriously.
I've worked on products that had an order of magnitude more users (products you might well have used) and wondered "why am I doing this again?" because at the company I was working, that wasn't really numbers indicative of a successful product.
IMVU is 23 people. It is the equivalent of a mom and pop shop in this context. I'm sure his story is compelling to someone hacking together a product in their spare time and dreaming of doing a startup. But you do need to understand that he has very little to offer to the kinds of companies this cult does real damage to.
Using the numbers you quote (they tend to vary) IMVU has an order of magnitude fewer users than MySpace. MySpace. The graveyard. That's 4 users for every copy of "The Lean Startup" book sold (well, probably fewer since I haven't kept up with his book sales).
IMVU has fewer users than people who've seen Ries talk - live or online.
IMVU is not a notable success.
He is a successful seller of self help books. No doubt about that.
This has been my experience as well with lean in the enterprise SaaS world. We are currently toying with "design sprints" from Google  which is basically a faster version of lean to get to an MVP. I feel that design sprints are tangible and can get a group of people to creatively solve a problem in a short amount of time, however it seems you run into the local maxima hill climbing problem.
Many good methodologies can develop a cult-like following, not just in tech. The “Innovator's Dilemma” was largely that for business schools and MBAs. It doesn’t mean that you cannot apply the ideas postulated, but nothing is a panacea.
Having read it and having dealt with a lot of MBAs in "large businesses in areas under disruption pressure"-settings in the last decade I'm not under the impression that it is a book that had much of an effect.
Then again, the average MBA in big business isn't exactly a reader.
I've worked with several MBAs in big business. They didn't seem illiterate. What prompts this comment/impression?
 FWIW - I prefer them to the average MBA in VC.
But I read about your comment and reconsidering my plan
Anyway can you recommend me some alternatives behind eric ries's way to develop a startup? Thank you
Don't be deterred from applying advices that have helped thousands of companies because of an unsubstantiated rant by some guy on HN. His comments (assuming poster is male, apologies if I'm mistaken) are light in arguments and sound more like personal attacks directed specifically at Eric Ries, they don't really address the value of the Lean Startup methodology. The language is strong and bullish in an attempt to sound smart and to rally people to some point. What that point is is left to the reader to figure out.
X is not as successful as Y, therefore X cannot give advice to Y. What kind of logic is that? Counter examples abound, Nick Bollettieri never played tennis professionally but is one of the most acclaimed coaches in the sport. Closer to home, Patrick McKenzie had built a bingo card creator (profitable, while admittedly not an earth shattering success if you go by unicorn standards) when he started giving valuable advices to people and companies "orders of magnitude" more successful.
Also, pinning IMVU, a well established company, against other "orders of magnitude" more popular, more affluent, and also well established companies is not only a fallacious metric for success, but it's not even relevant to discredit the book or the methodology, since we're not even talking about startups anymore. IMVU is 14 years old, it has long outgrown the advices in the book. Most founders know that one of the first biggest challenges for a startup is to survive and grow (fast) the first year, then the next 3, then the following 5. Over the course of those objectives you'll make mistakes. Methodologies such as "Lean Startup" are meant to provide you with some tools and guidelines to navigate those shallow waters and to prevent you from knocking yourself out of the game permanently. If you're looking for real metrics to evaluate its worth as a guideline, survival rate or financial loss of startups would be more apt indicators. What's the survival rate of startups following patterns laid out by the Lean Startup (or some derivative adaptation, since there are many now) vs survival rate of startups doing things pre-Lean-Startup style?
"Orders of magnitude" are not indicative of success, objectives are. If your goal is to generate $10k of monthly passive income because you want more lifestyle autonomy, I think reaching those numbers qualifies.
As for your question, I think my main criticism regarding the Lean Startup is that much time is spent telling you to "talk to customers", but very little on teaching you how to actually do it. Therefore, I believe that investing some time to learn a proper approach to leads generation, cold outreach, and sales as it's done in the context of a startup would unlock a major achievement in your pursuit of growth (and success).
The spotlight only shines on "Startup X raises millions in new round".
Side projects are the new Lean startup.
From the article: "Still, unless your startup has access to large pools of capital or have a brand name like Katzenberg, Lean still makes sense."
Side projects, solo entrepreneurship are not mutually exclusive and can actually be complementary. Lean is a methodology to validate demand for a product. Solo entrepreneurs can and do benefit greatly from employing it.
When actually, most probaly are not. But this is almost impossible to measure as who can survey everyone with a side project.
Solo entrepreneurs, side-projects, 'lifestyle businesses', ISVs, and other small businesses in tech don't really fit into that category. Although while many of them still call themselves startups (which is fine) the distinction is quite clear.
Lean Startups has fundamental business advice that is good for any company. But Steve's analysis here is clearly targeted as a specific group of traditional high-growth startups which angels/VCs invest in, from which the original idea for Lean was spawned and designed for (and later found wider applications outside of startups - for better or worse).
Startups are specifically organizations that are trying to grow very big, or that are looking to try a new business model. The reason the spotlight shines on them is because starting something new is interesting (from a "news" perspective, at least). Getting big is interesting. Starting a new restaurant - not really interesting, except for people who live in that area.
I think you have been tricked by YC and other VCs to accept this definition of 'built from the start for hyper-growth'. That's how they get their share of young promising companies.
To me and most people I know, a startup is a project or company in the growth phase.
I don't think that's true? Which unicorns are not companies that were pursuing high-growth, or that were trying to build a unique product<>business model?
> I think you have been tricked by YC and other VCs to accept this definition of 'built from the start for hyper-growth'.
I haven't been tricked into anything. We are commenting on an article written by Steve Blank, one of the "founders" of the lean startup movement. His definition of a startup is "a startup is an organization formed to search for a repeatable and scalable business model." 
Of course this is all just semantics, so feel free to use the word in a different way. Where I disagree with you is this:
> To me and most people I know, a startup is a project or company in the growth phase.
I simply don't think that's true. I think most people would not consider e.g. a new law office to be a startup, definitely not in the context of talking about things like the "lean startup" movement.
That's why I love Steve Blank's definition - I think it does what every good definition does - it gives more understanding. It helps give a simple answer to "when does a company stop being a 'startup' and become a regular company". The answer is - when it has found a scalable business model, and is now executing on that.
For the record, I'm a big fan of bootstrapping, I ran a successful bootstrapped development agency in the past (which was acquired), and am now back to running a (bootstrapped) consultancy. I just don't think that people would include my company when thinking of startups - and that's fine! Entrepreneurship takes many forms.
English being what it is, it is fine for "lean startup" to have a different definition of startup from the word "startup", confusing as that may be.
Apple? HP? Pretty much every Silicon Valley company that started with one or two guys in in a garage?
The definitions of "startup" and "unicorn" seem to be forever evolving. But at one time, both Apple and HP would qualify.
I mean, Steve Blank's definition as semi-quoted by me included "or were trying to build a unique product <> business model". I think it's safe to say that Apple was trying to build a unique product <> business model, as was HP.
In any case, a new law firm is a new company. So were Apple and Facebook. I think it makes sense to differentiate between them, and Steve Blank's definition seems to be the best to me (it focuses on what actually makes all the difference - the amount of foreknowledge you have on the market fit of your product).
> The definitions of "startup" and "unicorn" seem to be forever evolving.
Unicorn is actually a pretty well-defined term in this context. And it's really new, too, something like 5-8 years old if I remember correctly. A private company with a valuation of more than 1 billion dollars..
You seem to be saying that there are a lot of businesses, which will never be startups.
While that's true, they seem to be saying that being a startup is not an immutable trait of a company, but rather a phase, and that any side project or solo business could enter the startup phase at any time.
Sure, most people wouldn't consider a law office to be a startup. Most people also wouldn't consider a consultancy like 37Signals a startup. Most people wouldn't consider a novel URL-ranking algorithm like Google's a startup, or any number of other projects or businesses that didn't begin as startups.
That's not to say that a restaurant is likely to turn into a bootstrapped startup or anything. I think their main point was that not all startups started out with intentions of high growth. Your initial response was that "Solo entrepreneurs are not starting a startup, not as I (and most people) understand the term." To that, I think what they are saying is, "they could be."
You could then argue that startups which aren't yet startups are outside the scope of the OP's original statement that, "For every Startup raising $X million in funding there are probably a thousand solo entrepreneurs bootstrapping their way into profitability." Because, when they do become a startup, then they'll be raising money just like everyone else.
However, even that rebuttal would ignore all the startups that became startups aimed at high growth driven by profitability instead of raising millions at the outset. 
Honestly, I think the reason funded startups get more media coverage than bootstrapped startups comes down to simple numbers. There is a large but finite amount of demand for news on successful startups. There aren't enough successful acquisitions, IPOs, or openly successful companies to fill the demand, so we have to dip into indicators of future success, such as funding, to satisfy the demand for news on interesting new businesses. However, as many startups as there are getting funding, there are even more side projects and small businesses being started. Most aren't successful yet, and if they are, they're too busy being successful to proactively reach out to the media with an interesting story.
In other words, I think funding rounds are just an easy source/filter for journalists to publish on, and which require little effort editorializing to be considered interesting by the masses.
I mostly agree with you, but I don't really agree with this idea. I mean, theoretically, yes, it's true - but I still think it makes sense to differentiate between a new restaurant, and someone trying to create a new technology product/company with billion dollar potential.
And this is what investors are looking for, too, which is why only this kind of startup gets VC money.
Yes, for most people I know, a "startup" is just new word for a new company, or even new pizzeria or barbershop. For entrepreneur I know, startup is "built from the start for hyper-growth", as he explained it for me.
Solo entrepreneurs absolutely start things besides coffee shops, restaurants, garages, etc. There is nothing inherent in the definition of "startup" that precludes solo founders. Especially when you think in terms of "you're solo until you aren't". Just like "you're bootstrapped, until you aren't".
Taking on co-founders, raising external capital, etc., are all things you do when you get to the point that they are necessary.
I may have given the mistaken impression that I was bumping on the solo founders bit, but that has nothing to do with it - I just reused the phrase.
> A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.
Aside from stating what PG means when he uses the term (which is important!), that part of the essay has no real weight.
I agree that somebody making another burger joint or corner store is an entrepreneur, but is not doing a startup. But that doesn't mean that solo entrepreneurs can't do something new. It doesn't have to be big, just exploratory.
“Big” money is relative to the costs of getting the business started.
But fair enough, exclude the coffee shops, restaurants if you like.
But you're still left with a lot of people building something they hope gets bigger. That fits your definition.
Like you said, this is just arguing semantics. That's why I like Steve Blank's definition, which is not about growth (see my other comment on this thread for more).
I would say that "hoping it gets bigger" is not enough - every business owner hopes their business gets bigger. Most of them don't realistically hope it will become the next Amazon, nor do they strive to make that happen, and so many ideas/lessons from the startup world don't really apply to them (while others do still apply, of course).
I'm interested, which wouldn't apply? I mean just a couple of examples.
Other things are more domain-specific - I know lots of lessons in my own field (professional services), some of which apply equally to startups, some of which don't at all.
There's this great presentation by Don Reinertsen "Second Generation Lean Product Development Flow": https://www.youtube.com/watch?v=L6v6W7jkwok&index=55&list=LL...
Which is a perfectly valid way to fix some of the worst offenses of the original Lean movement, which were to throw out the baby with the bathwater by focusing on only doing things that had low option value and low risk. Sort of the opposite of what you need to do in a startup, which is to do something genuinely new and creating value while taking calculated risks.
Don does a great job of providing some nice economic rationalizations of how deal with things that are risky but valuable, planning and estimating these things, etc. He also makes a great argument for shipping value fast, which is to maximize the economic life span of your product and prioritize getting revenue earlier vs. getting revenue later with a potentially better product. Many tech startups get sucked into building the perfect thing and missing their window of opportunity for both raising funding and monetizing their product.
Unless of course your startup is not about the tech, in which case definitely avoid taking risks on the tech front and focus on shipping a product fast. If you are building a market place, the last thing you want to do is reinventing how those work. You instead want to focus on whatever the hell it is you are selling. Lean was always popular with those type of startups. I tend to think of them as no-tech startups. You get a bunch of MBAs, marketing and other non techies and then bring in the full stack hipsters to copy paste a bunch of crappy js files together to fake it until you can afford to hire a proper team.
That's not what the Lean Startup says.
Lean is about reducing risk but that doesn't box one into only doing low risk/value activity
As opposed to obsessing over managing risk and keeping things lean, without properly investing in the hypothesis to really test them out. Which means in practice a bunch of small half-hearted plays that get abandoned too early - or were inherently a minor incremental value proposition that wasn't valuable enough to build a sustainable business around.
Is a kanban board useful? Immensely. Is it useful if you don't know what it represents? Nope. But it's highly visible so people adopt it. They may get some value, but only limited, if they fail to comprehend it. Or, worse, they get negative value because it becomes a set-in-stone "process" "(We can only handle 4 of X at a time! Scrap everything over that." "Wait, why was it 4?" "Oh, because we had half the staff before. I guess we can actually handle 6 now."). If that question isn't asked, it's fixed in time and the organization isn't a learning organization, it's actually dying but hasn't realized it yet.
On Mixergy, I interview founders who try to make their bones or get attention for their messages by disagreeing with the Lean approach.
Eric doesn’t debate, correct or engage with them. So they get to make statements without anyone credible taking them on.
Listen to my latest interview it’s Rand Fishkin and you’ll see what I mean. He’s not anti-Lean, but he’s disagreeing with it his book to make get attention for his message. With a bit of pushback from me, he admits as much.
Each one of these mini-attacks from accomplished entrepreneurs hurts Lean’s credibility.
Only Eric has the credibility and social grace to disagree and explain in a way that builds up The Lean Startup.
I’d love to see him step into the conversation more. He and pg defined how to run a successful startup more than any two people I know.
We need to hear more from both of them.
The Agile movement got huge in part because a lot of its proponents could make good money promoting it. E.g., the MLM scheme that is Scrum certification. Or the many consultants, some good and some bad, who made bank teaching it to people. (I did that for a while.) This was also the death of what I think of as "real Agile" because the great bulk of consulting money on offer was selling watered-down Scrum to giant companies who wanted the feeling of change without hard work or actual change.
But there's no money in startup consulting. Startups don't have much money, and startup founders a) think they know things better than everybody else, and b) think they can ignore most of what matters to other businesses. (I'm a former startup founder, so that's not knocking anybody; it's just what's required by circumstance.) I know people who have started great startup-focused consulting businesses, and they've all gone elsewhere because it's impossible to make a living doing it.
From what I know of Ries's consulting it was at places like GE . GE is definitely not a startup, but really wanted to be innovative and presumably paid him a bundle. And now he's moved on to the Long Term Stock Exchange.  This all strikes me as reasonable. He did his bit and set the ideas free into the world. Although I'd love it if he spent more time promoting the Lean Startup approach, I totally get why he's focused on doing what he wants, not what I want.
As an aside, for those still interested in discussing the topic, Lean Startup Circle still exists and still has an active mailing list. I'd love to see more people there: https://groups.google.com/forum/#!forum/lean-startup-circle
I get that concern. But the Agile movement didn't trademark anything and came to regret it as the word got more and more watered down. All things considered, I prefer this outcome; at least the term still has meaning. If I had to pick next time, though, it would be making the trademark but building up enough of a community to carry the flame and then handing over the trademark.
I like Eric, but I think your comment is very true and it's too bad.
I don't blame Eric Ries for staying out of this fray, there's little to be gained by battling the tidal wave diluting the core idea.
The Diluted Insight Effect?
1. The Lean Startup isn’t dead.
2. For most organizations, Lean is now essential to deliver innovation at speed, and the Innovation Pipeline is more relevant than ever.
3. But when capital is readily available at scale, it makes more sense to go big, fast, and make mistakes than it does to search for product/market fit.
"All this is driven by corporate funds, sovereign funds and even VC funds with capital pools of tens of billions of dollars dwarfing any of the dollars in the first Dot Com bubble – and all looking for the next Tesla, Uber, Airbnb, or Alibaba."
Yes, but this is the other reality of today, from Calculated Risk:
"CR Note: Currently the target range for the federal funds rate is 1.75% to 2%. With inflation running close to 2% by most measures, the real Fed Funds rate is still negative."
In other words, investors still can't find enough investment opportunities that they find attractive, so they are still willing to give huge amounts of money to the government for free. Some of this can possibly be attributed to the Great Stagnation, the slowdown in innovation, growth, productivity and technology which began in 1973. Some of this can certainly be attributed to rising pools of savings all over the world. But it remains a fact that there are not enough software startups (nor enough manufacturing startups, nor enough legal startups, nor enough medical startups, nor enough of any kind of startup) to absorb enough capital to bring the world's capital markets back to "normal", if we can agree that "normal" means most investors expect to make at least a small profit on their investments, including their bond investments.
We'd be better off taxing these folks who can't find anything to invest in and redistributing the funds to the worst-off. The economic activity would inevitably be captured by these same ineffectual investors but at least the material situation of the poorest among us would be slightly better.
The rich of the past built the modern world. Today’s rich seem to just sit on their wealth while inflation and missed opportunity erode all the value away.
Edit: Seems I hurt the feelings of Silicon Valley brogrammers selling their Uber for Dog Grooming with Blockchain AI startups lol.
I mean, power to the people that have invested, but this looks like an investment graveyard.
If I want windsurfing, snowboarding or skateboarding tips the quality can be excellent.
There are some great SEO channels and stuff for CSS Grid.
Even with my son, we can get short lectures on the stuff he is studying at school.
Sort of like Facebook, Dropbox, Salesforce, Instagram, Google, etc. None of them were first. Being first is dangerous.
A lot of people thought Google buying YouTube for $1.6b was crazy, even though the space wasn't saturated.
To me, Lean startup is not about money. It's about building the most efficient process of finding product/market fit. Once you've found something that really works, then it's time to look for big money and scale up. In most cases, what you need in the beginning is $50K-500K which can come from savings/FFF/consulting/seed round.
Too much money in the world now. A result of the decade of near-zero interest rates.
The price of admission of product market fit is a great product and a great team. Hard to do these things on a budget, especially as the space of "cheap" startups that can be built with a few 100k becomes more crowded.
I can think of only 3 reasons (not mutually exclusive) why it happened:
1. They had too much money which made their PMF search process inefficient.
2. They had to educate themselves about the market from scratch. Which means that the original idea was a wrong/uneducated guess.
3. They didn't find product/market fit. The same team had to restart with another idea (possibly several times) and it took them much less time than several years to find PMF.
Unless you create the market to fit the product. Which could be what Katzenberg, for example, is trying to do: create a new fad and cash in on it.
Don't knock it. It's helped launch many an Instagram influencer's career, I bet it's gotten a few startups off the ground as well.
- Growth metrics (MoM, YoY)
- Following, absolute metrics
- How these metrics compare to others in your vertical
- Business thesis
- Total market size (needs to be gigantic)
- Strength of vision, ability to execute
- Ability to convince others of said vision
- Ability to attract, recruit and retain talent (investors, employees)
- Many more magical and unspoken factors that influence an investor's perception of you, individually
There are many, many different ways to optimize any specific signal here but realistically you're going to have to throw half of 'em away. With the exception being you can't really budge on market size or you're not VC-fundable. Some of the factors can be leveraged off of one another to improve the other. (Strength of vision -> ability to recruit, etc.)
$100k for 20% is a nightmarish Shark Tank deal for a lifestyle business that's generating sustainable revenue. As another poster mentioned, you're looking at $5k - $50k checks in the Angel stage. If you're on to something, with a product in market a reasonable hypothesis as to how it becomes a $B company, you're looking at starting to raise on SAFEs at a ~$4M Cap. At least, AFAIK, that's pretty standard absolute lower bound out of an accelerator or incubator (which will give you some credibility -- I might optimize towards that path first). Meaning you're assuming pre-money capitalization at a priced round of $4M or greater. You can go lower if investors really want to deal chase or it'll get the right person in. So, if you raise $500k on SAFEs and pull in $1M in total investment for a seed round at a $4M pre-money valuation (+$500k from a MicroVC or small VC check), you get diluted 20% in exchange for $1M (post-money of $5M).
Edit: should mention, YC's standard deal is $120k for 7% . Other accelerators are more aggressive on the capital they provide / equity they ask for in exchange. I've skipped a step here and assumed you've been through an accelerator to raise at a $4M+ Cap, though it's not absolutely necessary to have gone through one -- but the accelerator deals are more in line with what you're asking about.
I'm not sure how a 100K-for-20% situation could happen. Maybe a friend or family member acting as an angel. Any VC that trusts the team would invest more and/or tolerate higher valuations.
When you have no proof at all that your concept can actually become a profitable business, no commercial investors will touch it. It's far too risky compared to their many other options. The only people who get investment in such an extremely high risk scenario are those who happen to have rich friends and family. These investors will take a punt on them just because they like them personally and they can afford to lose the money, which is overwhelmingly likely.
Definitely worth looking at both approaches objectively.
1. Lean Approach: Stay lean, build MVPs, find PMF, then go big.
2. Big bang approach: Have conviction in your idea, use capital to launch big from get go.
Given capital is not a constraint, the next most important thing is time i.e. which approach would help us build a thriving business fastest.
Big bangs take up extra time/energy in ancillary tasks like hiring, PR and so on. Pivots take time, even to communicate internally. Lean let's you operate the whole thing as a series of cheap experiments to validate your assumptions. Pivots are natural and cheap.
Big bang would be beneficial over lean only when your first set of assumptions were on the mark and the company required almost no major pivots. That's rare, maybe Katzenberg can pull it off.
Even if you have raised $2 billion, shouldn't you know if people want short form content?
Actually, isn't it more important to know if people want it if you have a lot of money you spend?
Can't you still launch an MVP quickly, and iterate up and then pour on the rocket fuel?
This idea that scarce capital is what made lean startup important seems contrary to the original premise of the lean startup.
This has already been proven with Youtube.
The bigger question is whether there is a ~$100 billion market for a Netflix style service selling 10min videos, which justify a $1-2 billion investment. And whether this company can recruit the talent in a sustainable business model, where they can produce enough good content to keep users happy.
Even if there is a $100 million dollar business here, that would be a failure scenario for this startup right out of the gate. As it won't return the investor money anytime soon.
But Hollywood has remained skeptical in the year since he announced his venture. Several executives have argued that there is little evidence to support the notion that viewers are craving short programming. And beyond the initial hype, Mr. Katzenberg has been short on specifics.
Higher production values will distinguish NewTV’s programming from the majority of video shorts that gain traction on YouTube, Mr. Katzenberg said. And he trusts that viewers will appreciate the difference.
Lean is about experimentally approaching hypothesis about business models. Then scaling up when you find something that works. Short videos targeting mobile isn't new. If I allowed him too, my son would watch dumb youtube videos all day on my phone. This is a gamble that consumers might want better quality content. Not a huge gamble :\
The capital is there, there’s a very good chance you’re going to fail anyway, you might as well fail while eating something other than ramen.
A piece of an adequate analysis: https://hackernoon.com/the-rise-and-fall-of-yplan-is-the-mos...
As more entrepreneurs enter the space, competition will only become more fierce. Even selling the tools to the gold rush has become commoditized with the choices available.
It depends. If you're a developer then it's just your time.
The older you get the more expensive this becomes.
I wish there was a way to short a startup...
Osterwalder's business model canvas lives on in its original form and variations of it. Use it to organize important ideas on paper.
Get "out of the office" early in the process and speak with prospective customers.
Create a product that does the minimum required to achieve your goals.
How could these ideas possibly be dead? Maybe "Lean Startup" as a turn-key solution to entrepreneurship has died and it has become more difficult for the Ries and Blank to monetize. However, they promoted many valuable ideas and practices that live on.
There are two main thoughts from this that occurred to me:
1. There are very few Katzenbergs out there, so him personally raising that money is not surprising. If Spielberg or Lucas wanted to create a short form video company I am certain that they would be able to raise similar amounts. I am not him; therefore the lean rules still apply to me
2. the times that I have had enough money to buy my way out of problems has not yielded the best results. In my 30 years of doing this the clever answers have always come when my resources have been restricted, with often the best results from the most constriction. Extra money can bring bad results sometimes, the beauty is in the restraints.
TL;DR You are not Katzenberg. Neither am I.
Good points. Good post.
A company that is restricted on cash and "lean" is more inclined to be risk-averse and calculated in their business model decisions because they have to 'do more with less'. Whereas a company pumped full of cash has a greater 'trial and error' risk-tolerance because their goal is to overpower a target market to become the dominant player as quickly as possible. Investors still want to see a pleasing return either way.
A small company can't afford to spend a lot of resources on data integrity and protection, encryption and retention best practices, keeping up with laws like the GDPR, and they're that much closer to going bankrupt and having the data they've collected become part of asset liquidation and auction. It seems like these days, the discerning consumer ought to put more trust in a larger company's offerings in a given space than a smaller company, and even be wary of a smaller company that's offering something truly novel if that novelty isn't worth the price of private data being at-risk.
Regarding the main point of the article: I always liked the idea of lean and sometimes bootstrapped startups. The current trend of mega financing perhaps comes from all of the money slushing around in markets looking for investments. Part of the effect of increasing wealth disparity is the the very rich have much more capital than they need to live and want to invest.
Starting a startup in 2002-2005 was hard, just the mechanics of it. Incorporating took several thousand dollars of lawyer time; there was no Clerky, and online LLC-generators were largely unknown. Accepting payments meant getting a merchant account with a CC; no Stripe, Square, or other payment processors. Payroll meant dealing with ADP or PayChex; benefits meant hiring a person to manage those relationships. There was no YC, generally no seed funding ecosystem other than angels, no AngelList, no gigantic startup blogging scene where everybody gives advice on everything.
As a result, there were plenty of unfilled pain points, and potential customers were overjoyed when someone would actually come talk to them about it rather than assuming they knew what was best, a la big companies or massively VC-funded startups.
Now, everybody and their brother is founding startups, which means that if you do happen across a genuine pain point, there are already 2 dozen startups working on it. Customers get weary of even talking to prospective entrepreneurs because they've had that conversation so many times before. I've done the Lean Startup methodology, and have several friends that have tried it; the most likely outcome today is that you'll talk to a 100 customers (after trying to talk to several hundred more who don't respond), and then discover that there's no actual market need addressable with current technology and you should keep your day job.
Like most knowledge related to markets, once everyone believes it's true, it ceases to be true.
It prevented you from wasting time on a product that has no market.
At some point you also have to apply the same logic to methodologies that you apply to ideas, though. The point of the Lean Startup methodology is to avoid wasting time implementing ideas that won't work so you can find a scalable, sustainable business model quicker. If your goal is to found a startup and all experience is that the Lean Startup methodology, in 2018, does not provide a scalable, sustainable way to do that, then you should ditch the methodology. Chances are you'll have to do your own methodology invention, though, because once a scalable, sustainable way to get rich becomes commonly known, it ceases to be sustainable.
(See also Bitcoin, which was a great way to get rich when nobody considered it a way to get rich, and then became a great way to become poor when everybody was certain it would make them rich.)
There are plenty of opportunities out there big enough to make a founder very wealthy, but not big enough to attract the least bit of interest from a VC.
But, there is competition everywhere, and it gets fiercer by the day. So pick something you're truly interested in and roll with it until the wheels fall off. That's really your only chance ( if you have one at all ).
There are quasi-legendary cases in history (think Spartan and Byzantine super-soldiers) of a tiny band with no resources executing ludicrously successful military campaigns, so I guess it's not completely impossible.
I guess the idea is that they are starting a studio to create short content, and hope to make billions selling the content?
There are plenty of very successful ones but you just don't hear about them as often.
The core idea is good but even the book itself was trying to stretch an academic paper further than it needed to go.
It's common sense. And that's how I'd summarise much of the philosophy involved in the lean startup.
And conversely; if you invest a lot of money in an idea without testing it, you're gambling.
The lean startup is alive in well in most entrepreneurial ventures. Starting a food truck? Grocery store? Custom t-shirts? Indie video game? Small focused SaaS?
The echo chamber is real. "I looked outside and saw no lean startups, its dead!"
What you're talking about is locally called a "lifestyle business" (not a "startup") -- a small business that can provide a comfortable living for the founder and a few employees, but which has essentially zero longer term growth prospects.
This point seems to be the source of much confusion in the comments here.
businesses and risk capital are not related. Proof: businesses existed long before risk capital.
After reading Bad Blood, I am not convinced that Holmes (at least initially) intended to perpetrate a fraud. She may have believed it was possible to produce the machine she dreamed off, and it was a question of putting in the R&D. (It still might be possible).
If this is the case, the "lean" methodology would have saved her if she had just started out small and focused on developing the tech first.
Saved in the sense of convincing her it did not work and that it was best to return the rest of the money.
There was a time when the distribution deals were signed and the tech wasn't read and the deals were used to raise cash that really must have felt like things have gone too far.
It sounds like if they had allowed the machine to be a little bigger, and if they had compromised on being able to take a little more blood (instead of the one drop they had been marketing), they could have had a real machine that would produce reliable results.
Then they could have iterated and continued the push to miniaturize what they already had commercialized.
Instead, Holmes insisted on a sample size that technically they couldn't achieve reliable results with, and when faced with the decision of compromising on spec to get something to work, or release something that didn't work and then lie about it, she chose the latter.
If anything, a "lean" approach (to the extent possible with medical testing hardware) would have benefited them.
It would be crazy -- I mean in a cosmic way, not talking about any particular person -- if it were possible to get a decent MVP if it were slightly larger and took in slightly more blood.
The book implied this might have been possible, but it was not clear to me.
I don’t know what to think about Holmes. At this point she thinks she just did what every other (male) startup founder did, and that she’s getting singled out for punishment when plenty of other startups over promised and under delivered. She doesn’t seem to grasp that flopping on some shitty social media site is far lower stakes than lying about medical issues, which makes me question her ethics and grasp on reality.
Does she hold out examples? I don't know of any under delivery of this magnitude. (I think even webvan peaked at $4.8 Billion in value. It eventually had peak sales of $178million).
You’d have to inflation adjust those numbers to be fair, but I suspect that you’re right in calling this one of the biggest under deliveries in a while.
Even at early-stage investment, if you don't have a really specific product narrative doing a sound-bite sized thing, you'll get a lot of feedback about how it all needs to be very simple and you need to have a specific product definition.
This is not a defense if Theranos, but rather just some insight into the ways that VC preferences, pattern-matching, and fairly simplistic capacity to vet anything through a "pitch" tend to distort how one goes about raising money and what one can reasonably raise money for. There probably needs to be some increased diversity in funding sources for "hard tech" problems.
The issue I've always had with the concept of "MVP" is that it trivializes the problem space you can reasonably pursue, and collapses all the solutions into something you can throw together quickly, which also seriously distorts the incentives for rigor around making anything.
It probably works fine for another Daily-Lifestyle-Thing-as-a-Service/App, but it seems less likely to work for something like creating a new sensor for an avionics system.
I suspect that's the case too. Especially considering she didn't take money off the table.
It seems she was completely invested in the idea of fake it till you make it. Dangerously so.
> Lessons Learned...The Lean Startup isn’t dead
Ah yes, there you go.