Lessons Learned from Capital Factory Demo Day 2010: What Does It Really Mean To Be Lean?

At Wednesday’s Capital Factory Demo Day, one of the major takeaways for me was that many of us don’t really know what a lean startup is, or how one is successfully managed. This idea was brought to my attention during Ash Maurya’s presentation called “How to Identify a Lean Startup”.

In Ash’s talk, he hits on a huge discrepancy in today’s entrepreneurial world. Founders, venture capitalists, and incubators may all have different definitions of leanness, but few know what a lean startup is.

What is a lean startup?

A lean startup is one that makes hypotheses and tests them in quick succession, folds in viable feedback and remains focused throughout this process – in an almost scientific method-like approach. To quote Eric Ries, “startups that succeed are those that manage to iterate enough times before running out of resources.”

Leanness is important in 2010 because in the startup ecosystem, there’s less money and more innovation. Just ask any of Austin’s entrepreneurs who have started multiple companies over the past few decades. It’s a simple issue of supply and demand – the fewer investment dollars available the higher the demand for tested and proven technologies in which to invest.

The argument I’m making (and sharing with Ash) is that teaching current and future entrepreneurs the true nature of “going lean” enables more battle-tested and proven future technologies to live another day. Some of today’s trendy, but quickly fizzling apps lack true market testing in order to scale — because either they didn’t test enough times to reach a marketable solution to a real problem, or they didn’t fit the problem to the right customer. Entrepreneurs don’t always hit on the right problem/solution fit, and going lean in the way that Ash describes helps manage against this common pitfall.

There is always a large degree of uncertainty when running a startup though. This is what I call the X factor and what Ash describes as the “Leap of Faith”. It’s the variable that states, “Yes, you’ve proven your technology and a group of people are using it. But no, that does not mean success is guaranteed.”

It is this “Leap of Faith” that keeps even the most intelligent, hard-working entrepreneurs up at night. It tells us that nothing is a proven science, and luck holds a part in any company’s destiny.

Still, for the first-time entrepreneurs attending Capital Factory Demo Day, the idea of treating their business like a series of scientific hypotheses, testing and re-testing, using this stringent process to define and measure progress throughout development, is very valuable. Especially as more of the methods taught in science creep into how we do business.

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