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by Christophe Mandy Class cases on Aquion Energy and Predictive Biosciences were chosen specifically to illustrate that the lean concepts don’t just apply to the web-based consumer facing startups that the paradigm is usually associated with. In both cases, running lean involved the same kind of hypothesis testing, pivoting and search for product-market fit, just on a different timescale and with a different context. But if the lean principles aren’t enabled by the sort of economics that underlie internet companies, why did the concept only arise now? The “eliminating waste” Toyota-Production-System-like ideas in manufacturing are more than 40 years old and were all the rage almost 20 years ago. One possible answer would be to suggest that ideas in management theory for startups hadn’t evolved enough until the last ten years, and that nobody had thought of generalizing success stories into the key lean principles. This implies that applying lean principles would have always led to high...

by Christophe Mandy The first half hour of every LTV class follows a similar pattern. We invariably spend some time discussing whether the company under scrutiny truly is lean startup and evaluating where on the LEAN-NOT LEAN scale we should place it, and right around that time we implicitly (and in one case explicitly) assume that although the lean framework is elegant and concise, it should be taken with a grain of salt, and the success or failure of a company does not depend on its dogmatic application, nor do all companies apply each principle consistently. Invariably, somebody compares the company under scrutiny to a highly successful enterprise that was manifestly not a lean startup (traditionally Google, Zynga or Facebook).That DropBox ignores some of the customer feedback it gets, or that IMVU waits until it gets no traction or income before actually paying attention to customer feedback makes neither more or less of a lean startup than the other. So this simple evaluation begs...

by Sarah Dillard In my last post, I wrote about cognitive startups .  A cognitive startup balances vision and feedback by utilizing the frontal cortices of its founding team to think through genuinely new situations and building a limbic system to supply real-time data on how best to react (or not) to familiar situations.  For any product connected to the internet, building the limbic system is no longer the hard part.  It’s figuring out what to do with all that data.  If you believe HP CEO Mark Hurd, “more data will be created in the next four years than in the history of the planet. ” But what about for VCs?  Their work is different.  Whether a fund succeeds can play out over a decade.  Moreover, there can be a high noise to signal ratio when sorting through failures and successes and trying to draw conclusions.  This is why the cognitive VCs are hackers.  Not coders, but hackers.  They hack the world around them to give them more feed...

by Mark Datta Author’s note:  Few things reinforce a concept so well as light parody, so please read my post in this spirit. Credit for the Vegas theme goes to Joris Poort . I’m sitting on a flight to Vegas, deciding what to write this blog post about – so naturally my mind turns to the parallels between lean start-ups and gambling strategy. Up and down the Strip, you’ll find gamblers who believe they have the system to make money in Vegas…guaranteed. That’s what Burrell Smith would call a ‘ reality distortion field ’. As most statisticians will tell you, there is indeed a way to pretty much guarantee a profit – and that’s to be the casino. That’s basically being Google or Facebook, where you run the platform and set the rules of the game. But let’s consider the more interesting situation of an aspiring professional gambler who lands in Vegas for the first time, with a few thousand bucks in his wallet and a big idea. He’s smart enough to realize that he has no chance to compete i...

by Joris Poort Lean methodology values employing minimal effort to get to the next milestone.  Lean principles have a short-term focus to test hypotheses, which is quite rational considering that once a hypothesis is disproven you haven’t wasted any time in further wasted effort.  Customer development methodologies also encourage similar principles, ensuring a deep understanding of the customer and the market before embarking on the development of an expensive product that nobody wants to buy.  These lean principles and culture will work great in optimizing the path to get initial traction, but could wreak havoc on further development of the product causing avoidable risks down the line. Creating technical debt through minimizing waste Specifically in software development, lean product development can result in significant technical debt.  To be sure, technical debt refers to the costs associated with hasty software development resulting in neglecting architecture,...

by James Matthews Early on in our Launching Tech Ventures course we had the privilege of a visit from Eric Ries to our classroom for a Q&A session. Eric is a leading proponent of the lean start-up methodology; he has written extensively on the subject and has coined much of the terminology of the (increasingly formalized) discipline. One particular point that Eric made stood out to me that day. He made the argument that Moore’s Chasm is a benefit, not an obstacle to the lean start-up. Geoffrey Moore’s seminal book, “ Crossing the Chasm ,” describes a major problem faced by many technology companies: there is a chasm in the product lifecycle between early adopters (or “visionaries”) and the early majority (or “pragmatists”). One fundamental difficulty in crossing the chasm is that your early adopters are not good referees for the mainstream – even if these “visionaries” love your product, the rest of the world does not trust them. Moore observed that many companies failed when cr...

by Varun Gupta Valuations of three of the most spoken about technology companies that are arguably still only scaling up: Facebook at $65 billion (General Atlantic got in today for 0.1% stake at a valuation, 30% higher than the previous month’s); Twitter at $7.7 billion; LinkedIn at ~$3 billion. What really are these companies being valued on? More importantly, what should an entrepreneur focus on – valuation or intrinsic business model? Sadly, the adage of “test, and then invest” is not being used to test the business model, but only to seek a superficial product-market fit. When Facebook, foursquare, Twitter, etc., get rewarded through the means of valuation on the number of registered members they show every month, it is unlikely that they are as driven to increasing ARPUs. The predominant thought in the industry is to get the user base; revenues and profits will follow through some mysterious force of nature. This, inexplicably, assumes that the user base is captive, upcoming com...