Boys Rules, Girls Lose – Women at Work

Posted on August 30, 2010 by steveblank

My two daughters are now in college and have put their toes in the working-world with summer jobs. As they’ve grown older, they’ve heard their parent’s advice about women in the workforce.

This post is not advice nor is it a recommendation of what you should do. It’s simply my interpretation of what I observed watching my daughters grow up. Our circumstances were unique, times have changed, and your conclusions and opinions will most certainly differ.

Gender Differences
Growing up in the 60’s and 70’s when women were struggling against inequality in jobs, pay, etc., my wife and I came into parenthood with an unconscious bias that gender differences were mostly cultural. So how we raised our kids was an unintended science experiment.

When our two girls were toddlers, my wife started dressing them in overalls, and consciously bought them trucks and “boy toys” to play with along with dolls. We were both surprised and bemused to see them ignore the trucks and cars and prefer to play house. A bit later, our biggest eye-opener was when our younger daughter started asking for the “pretty pink dresses” instead of the overalls. (Given they didn’t watch TV, we ruled that out as a major role in their choices.) We started to believe that perhaps there was some hard-wiring about gender.

Boys With Sticks
As our kids reached grade school, the next lesson was watching them at play. I remember hiking with my girls and two 8-year old boys. When we stopped for lunch, the boys found sticks and immediately began a sword fight. When they tired of that, the boys chased each other and wrestled until they were exhausted. The girls, finding their pile of sticks, began building something together and telling each other stories. The suggestion of “why don’t you guys try each others games?” was met with utter 8-year old disdain. I realized I was looking at something – competition versus collaboration – that also seemed hard-wired. (Competition versus collaboration is my shorthand for a much longer set of gender-linked behaviors.)

Boys Rules, Girls Lose
When I entered the business world, I quickly found that office politics was just an older version of boys with sticks. The testosterone level was higher, and the game was more like musical-chairs with winners and losers until there was a single person on top. As a guy I didn’t need a rulebook to understand the game; there was a hierarchy, it was competitive, I win you lose.

It took me awhile but I realized that implicitly that advancement in corporations was unconsciously constructed around how men interact with each other. And unless they consciously work at it, most companies are not set up for collaboration.

As I grew older I realized that women in the workplace around me were having a harder time than the guys. They’d all come from college equally ambitious, but only after a few years, something different was happening to their careers.

Over time, I observed women who succeeded in the business world (as defined by their interest in moving up the hierarchy) headed in one of four career directions:

  1. They chose departments within corporations where collaboration was an asset like Public Relations, HR, customer service, etc.
  2. They set up their own companies to provide services and ran their own companies collaboratively.
  3. They opted out of the workplace and raised a family, returning later.
  4. They figured out the “boys rules” and followed them (having to work harder and smarter to prove that they were.)

Understand There Are Rules – And They’re Not Yours
When my girls started to play soccer, I used to remind them, “Make sure the people on the field aren’t carrying sticks because if they’re playing field hockey while you’re playing soccer, you’re going to get hurt.” As they got older, they understood I wasn’t only talking about sports but that I was trying to teach them how to figure out the rules of any game they were about to play.  And that included the workplace.

My advice to our daughters about women in the workplace has been pretty simple:

  • The language of business is about winners and losers. Bosses who read Sun Tzu’s “The Art of War” as a guide to business strategy or “Leadership Secrets of Attila the Hun” are unlikely to create a culture of collaboration.
  • There are implicit rules of competition and collaboration in companies.  It’s not that anyone is hiding a secret rulebook; it’s just that no one has articulated the rules.
  • In most companies men set these rules. Again, nothing secret here, but men don’t realize that they behave and think differently. They don’t have to explain the rules to other men so it never occurs to them to explain the rules to women.
  • As women, they will be expected to perform to boys rules as defined in their workplace: This means they need to spend the time understanding what the rules are in their company and industry. If they don’t, they will find others less competent but more adept at playing the game getting promoted instead of them.
  • Women can be equally competitive if they desire. It’s not a question of competency. Or a skill only boys have. If they want to succeed by competing they can. They just have to learn the rules and practice them.
  • Find mentors then become one. In every organization or industry there’s someone who’s figured out the rules. Seek them out and know what they know. By the time you do, it’s your turn to mentor someone else.
  • Collaboration can make you a stronger competitor. The irony is that organizations which collaborate are more effective competitors. When they reach a position of authority, use their instincts to build a fearsome organization/company.
  • If they prefer to collaborate and don’t want to play by boy’s rules, they need to understand what their career choices are. There are plenty of other ways to be a productive member of society other than a position on a corporate org chart.
  • Understanding the rules and career options doesn’t mean the rules are right or they have to accept them as the only career choices.  They can make change happen if they so desire. But they need to understand the personal costs of doing so.
  • Some find the idea of gender differences uncomfortable. Having fought to have men and women be treated equally, discovering that there may be gender specific hard-wiring for behavior sets up cognitive dissonance. Some simply won’t accept that there are workplace gender differences.
  • I may be wrong. Perhaps I misunderstood what I’ve seen or that time has changed the workplace significantly. Take this advice as a working hypothesis and see if it matches your experience.

Time will tell whether we gave our daughters good advice.

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Filed under: Family/Career/Culture | 51 Comments »

The Non-Dummies Guide to Customer Discovery

Posted on August 26, 2010 by steveblank

Customer Development is a stupidly simple idea. It’s one that you can describe in 30-seconds or less. But it took me 3 years and almost 300 pages of 10-point type to describe the concept in my book The Four Steps to the Epiphany.  Unlike a traditional business book, The Four Steps is more akin to a reference manual for how to “engineer” a startup – from the initial search for a repeatable business model all the way through the management techniques to transition to a company. Entrepreneurs who use it effectively have dog-eared pages marked with sticky notes.

Enter Brant Cooper and Patrick Vlaskovits who looked at my text as the equivalent of War and Peace. They decided that what the world needed was a simple explanation of the key concepts of Customer Discovery – the first of the four steps of Customer Development. Their book The Entrepreneur’s Guide to Customer Development: A cheat sheet to the Four Steps to the Epiphany does just that. If you are interested in Customer Development, there’s now a quick and simple way to get up to speed.

This is a book you should have on your shelf.

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Filed under: Customer Development | 7 Comments »

Solving the Innovator’s Dilemma – Customer Development in a Big Company

Posted on August 23, 2010 by steveblank

One of the ways I learn is to teach. My students ask questions I can’t answer and challenge me to solve problems I never considered. At times I’ll do what I consider an extension of teaching; a two-day Customer Discovery/Validation intensive session with a large corporation serious about Customer Development at my ranch on the California Coast.

My last session was with a passionate, smart, entrepreneurial team from a Fortune 100 company. (And if I told you who they were I’d have to kill you.) Their copies of the Four Steps were dog-eared and marked with sticky notes. We spent two days of analyzing and exploring their customer discovery visits just completed across South America, Africa and Asia. Learning which hypotheses survived these visits were eye-openers for all of us. We used what they learned to plan their next steps for additional Discovery, and ultimately Customer Validation.

It reminded me of the differences in Customer Discovery between a scalable startup and a big company. Here’s what we observed:

It’s Easier for Big Companies to Get Meetings – But It’s Not Always a Blessing
When a big company calls prospective customers to set up Discovery meetings, their datebook fills up fast. Execs at higher levels than you’d expect join the meeting eager to hear what the big company has to say about their industry. That’s the good news. The bad news is that the meetings become far more formal and more crowded, than one that a startup would have. This crowd actually dampens the opportunity for learning. Since the meetings attract senior execs everyone around the table waits for the big boss to speak and follows his or her lead. This stifles or shuts down the important “outlier” conversations that drive pivots and iterations in the discovery process.

Solution: try to get a blend of one-on-one meetings along with the group session. And be sure to set expectations for the meeting before it happens.

We’re Not Here for a Sales Call
If someone from a large company is flying halfway around the world to visit your company, your presumption is they have something to sell you. Crucial in the Customer Discovery process is not selling…it’s listening. The exploring, probing, gaining reactions is why you’re there. (Of course, if someone forces a purchase order on you and you reject it, you’ve just failed miserably at entrepreneurship.)  Disabusing the audience of the notion that the visit is a sales call is vital to the customer discovery mission. Followers of the Customer Development process know that you can’t start selling until you have transformed product, customer and other hypotheses into a validated business model and sales roadmap. (Short-circuiting that process is a major “foul” that often leads to premature business models and suboptimal sales results.)

To potential customers who’ve never been asked for their opinion before, the purpose of a Discovery meeting can be confusing. There are business cultures where the vendor/customer interactions are limited to “here’s what I have to sell, do you want to buy it.”

Solution: spend more time on the “setup” for the meeting. Tell potential customers before you meet, “We’re working on an interesting product and we’d be happy to share where we are in exchange for some feedback. But we are not here for a sales call.”

Getting the Customer to Talk is Even More Challenging
There’s no more important skill in Customer Discovery than “good listening.” When a big company shows up, everyone expects an important formal presentation, which is hardly your Discovery mission at all.  Structuring the conversation in a way that elicits feedback before you reveal the product hypothesis is essential to getting honest reactions, good or bad. Yet just reading your questions from a list is a real-turnoff. Insert them casually into a conversation and don’t try too hard to get every one of them answered in every meeting.

Solution: One of our favorite hints, from a great post by ash maurya, is to pose problems to the group in a randomized list. “We see these three problems in your industry.  Do you agree?  Could you rank them in order of importance to you?”  This literally forces a discussion and prioritization and is repeatable again and again. “We believe the most important features you need in a supersonic transporter are….” or “Our research tells us that female consumers most want a, b, and c.”

Big Companies are Bred for Large Scale Success
When you’re doing disruptive innovation in a multi-billion dollar company, a $10Million dollar/year new product line doesn’t even move the needle. So to get new divisions launched large optimistic forecasts are the norm. Ironically, one of the greatest risks in large companies is high pressure expectations to make these first pass forecasts that subvert an honest Customer Development process. The temptation is to transform the vision of a large market into a solid corporate revenue forecast – before Customer Development even begins.

Solution: Upper management needs to understand that a new division pursuing disruptive innovation is not the same as a division adding a new version of an established product. Rather, it is a organization searching for a business model (inside a company that’s executing an existing one.) That means you may find that revenue appears later than the plan called for, or that there are no customers or fewer than the plan suggests.

Customer Development Without Agile Engineering Is A Plan For Failure
Beleving in Customer Development but still retaining waterfall development for engineering and manufacturing is a setup for problems if not outright failure. Even in a large company you can’t do Customer Development without aligning some part of engineering to respond to unexpected customer needs and findings.

Solution: Get engineering buy-in by. Make sure the engineering and manufacturing plans “before” Customer Development don’t look the same as “after” Customer Development.

Spend your Way to Success Usually Results in the Opposite
Ironically large revenue goals may lead to largesse in overfunding the new division, with the implicit assumption that dollars can “buy your way to success.” All the money in the world doesn’t negate the painful search for a business model, or the lack of a scalable/profitable one. And new divisions in large companies operate just like startups who get overfunded – somehow their expense budgets always equal at least their funding.

Solution: Eight and nine digit funding before Customer Discovery is a curse not a blessing. Take the money in tranches (equivalent to VC “rounds”) predicated on milestones in finding a repeatable and scalable business model.

There’s an Overhead Cost to Being an Entrepreneur in a big, established corporation
Large companies are just plain organized – with rules, HR, finance and more importantly, are built around process and procedures for execution. It’s why so few big companies succeed at true entrepreneurship.

Solution: Assume as a given that as a new division head at least 15% of your time will be spent managing up and protecting down. Few in your own company will understand what you’re up to.

Lessons Learned

  • Customer Development in large companies has it’s own unique challenges
  • Some parts of being a big company make it easier, others make being a startup even riskier

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Filed under: Big Companies versus Startups: Durant versus Sloan, Customer Development, Teaching | 10 Comments »

How Customer Development Failed Us

Posted on August 18, 2010 by steveblank

One of the attributes of great entrepreneurs is that they are tenacious and relentless. This guest post is from Andrew Elliott of Lottay. Andrew read the Four Steps to the Epiphany, tracked me down at California Coastal Commission hearing in Santa Barbara, and had me meeting with him in a stairwell during a break in my day-long meeting.

Here’s his story of when Customer Development failed.

——–

Hi, we’re Lottay!  We’ve been a startup for the past two years or so and we’ve come to a critical point on this crazy roller coaster ride.  Here’s our story:

We started like most entrepreneurs — an idea, an opportunity, and very little money. Our vision was to radically change the gift card industry. We were lucky to learn about Customer Development early on in the life of our startup.  It made more sense than our 60 page business plan predicated on a B-school class and a supernatural ability to predict the future. More importantly, we’d witnessed Customer Development’s massive success at another local startup.

We bought Steve’s book, started product development and began reaching out to customers ins search of our first earlyvangelists. Along the way we were fortunate to meet Steve, develop strategic partnerships, and raise a series A round of investment.  Confident we were Doing It Right, we pressed forward.  We even had some pretty monumental successes.  So how did Customer Development fail us?  Well, perhaps it’s more accurate to say that we failed customer development.

In retrospect, our mistakes fell mainly into one of two categories:

(1) Failure to follow the process

(2) Failure to be honest with ourselves

If we could travel back in time to that fateful meeting at the Coffee Cat and give ourselves a good talking to, what would we say?  Well, it just so happens that we’ve fitted Ross’s 2001 Subaru with a flux capacitor, gotten our hands on some plutonium and we’re about to hit eighty eight miles per hour!  Here’s what we plan to say:

Write it Down
This seems so obvious, yet it must be said: write down and track the evolution of your hypotheses. It’s something that’s almost too easy to gloss over — keeping track of your hypotheses and the results of your customer development work are vital. Failure to keep track of our hypotheses meant we were never quite clear on what was working and what was not.  This meant we had a hard time focusing our development.

It’s your vision damn it!
The customer does not define the product or vision for the company. The founders do. In Four Steps to the Epiphany Steve says you’re looking for a niche – he means that you’re going to hear a lot of “No’s” and that’s okay. What’s not okay is letting these non-customers define your vision daily.

Failure to maintain a coherent vision allowed us to pitch one thing, “It’s a virtual gift card you can spend on anything!” while selling something else, “It’s an ecard + money!”  After a while even we didn’t know which was our actual vision.

Make Money or Take Money?
Focus on revenue from day one.  It’s the only reliable metric for success. You may think you’ve found your earlyvangelists but you can only be sure when they start making you money.

Taking outside investment gives you options. But with this money comes temptation. Temptation to focus on growth and worry about revenue later.  Temptation to stay the course when your gut tells you it’s time to change.  Making revenue your first priority does so many good things for you as an entrepreneur – saves cash, validates customers, and tells you if you have a real business. It’s only a business if you make money.

Fail Fast and Move On
Being honest with yourself is perhaps the hardest part of being an entrepreneur. You’ve sold your friends, your investors, and yourself on your vision. You wouldn’t be putting yourself and your family through this if you didn’t believe in your idea. So who keeps you honest and tells you when you don’t have a business? Your customers and your hypotheses.

There may come a time you need to face the fact that the earlyvangelists you thought you had are actually just very polite users.  Face the fact that your product won’t be able to make money or scale.  Face the fact that your hypotheses are all wrong.  And ultimately, face that fact that it’s time to majorly rewrite your vision. The sooner you face these facts the more chances you’ll have to course-correct and win.

The Future?
Now that we’re back from the past, how are we moving forward?  Well, we’re back to customer discovery.  And this time we’re writing it down. In fact, we’re creating a simple software solution that guides us through documenting customer interactions and validating our hypotheses (let us know if you’re interested in testing it). We’re also charging customers and partners right off the bat for our services.  And we’re using that money to do more customer discovery and validation. Finally, we’re holding ourselves accountable to our vision and hypotheses.

Disclaimer
Keep in mind that our opinions are just that. We may have no idea what we’re talking about. After all we’re just some guys trying to make it in this crazy startup world.  We’d love to know what you think. Do these ring true to you?  How do you keep track of your vision and hypotheses?Leave a comment or email us at contact@lottay.com.

Lessons Learned

  • Customer Development is like being Agile.  It’s easy to say you’re doing it. Hard to actually do it.

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    Filed under: Customer Development | 14 Comments »

    Teach Like You’re the Student

    Posted on August 10, 2010 by steveblank

    “I never have let my schooling interfere with my education.”
    – Mark Twain

    Every time I see my graduate students try to teach for the first time, it’s usually so painful I bite my lip. Then I remember the first day I stood up in front of a classroom.

    You Hired
    My first job in Silicon Valley was at ESL (a supplier of intelligence and reconnaissance systems,) I had managed to talk myself into getting hired as a training instructor. (Long back-story here.) The company had a major military contract to deploy an intelligence gathering system to Korea, they needed to train the Army Security Agency on maintenance of the system, the 10 week training course (6-hours a day) hadn’t been written, and the class was supposed to start in 6 weeks.

    I convinced them that I knew the type of training military maintenance people need, and I had done some informal teaching in the Air Force. Out of desperation and a warm body right in front of them, they realized I was probably better than nothing, so I got hired.

    As I wrote the course, I was handed a couple of books on how to put together a training class for the military and given some advice on how to assemble lessons.  But besides my own experience as a student in military technical training classes, I had never taught more than one person at a time.

    The Dry Run
    About a week before the course was due to start, the manager of training said, “Steve, we’d like to see you do a dry run of a class tomorrow. Pick the material you feel most comfortable with teaching and give us a lecture for an hour.”

    I didn’t sleep that night. While I had taught my peers in the military how to repair equipment, it had been informal side-by-side training on a lab bench. I had never been in front of a classroom. I was scared and nervous.

    The next day I stood up in front of the classroom and in the audience was the rest of the training department, my manager and the manager of the entire intelligence system program.

    I don’t remember exactly what class material I taught, but I do know I gripped the side of the podium so hard my fingers hurt as I read my notes and droned on. I was so nervous that I skipped an entire page of notes.  In the one or two times I managed to look up, I saw my boss wincing, the program manager putting his head in his hands, and then most everyone drift out of the room.  After about 20 minutes my manager said, “Thanks Steve, that’s enough.”  He quickly left and when I passed him in the hall, he was in deep conversation with the program manager, and I could hear snippets of my name and the word “terrible.”

    Even I knew I had done horribly.  I was ashamed and disappointed, and when my manger called me into his office that afternoon, I thought I was going to be fired before the class started.

    Teach Like You’re the Student
    As I sat in his office, I wondered if they would pay me through the end of the month or would they just walk me out the door that day. The latter seemed likely when he said, “I’ve never seen my boss so depressed. He thinks the Army is not going to pay us for the training course if you teach it.”  I was waiting for the “you’re fired” words to come out his mouth. Instead, I was blown away when he offered,” Well the good news is that you can’t get any worse.”  And he was smiling. He continued, “You figured out 6-airplanes and 3-vans full of computer equipment in six weeks.  That’s better than anyone we have on staff could have done.  Your lessons are clear and well organized.  And most importantly you love this stuff, and it comes through when you talk about it.  But we thought you were going to have a heart attack up in front of the room.” I started to exhale.  Maybe he wasn’t going to fire me. He laughed as he said, “In the last 15 years I’ve hired lots of training instructors, and something tells me you’re going to be pretty good at it… if you get through the first two weeks.”  Then he gave me some advice about teaching that’s stuck with me for more than three decades: “Just pretend you’re teaching you.  How would you do that? What would you want to know? What did you dislike when you were taught? What stories would you tell to make it understandable? What would keep you interested and engaged?”

    I Love This Job
    The class started a week later, and the first two days were as painful for me as they were for my students.  At first I never left the podium and was afraid to stop reading my notes. But after the second night, the class and I all went out drinking in Sunnyvale, and I realized that my manager was right – my students were exactly like me.  What they wanted to know was what I would have wanted to know if I was in that classroom. Over the next weeks as I slowly relaxed, I started to connect with the class. I stopped reading my notes, got out from behind the podium and started telling stories about my own experience and all the things that could go wrong that weren’t in the manual.

    I’ve never stopped.

    Lessons Learned

    • Research says teaching excellence is associated with extraversion, agreeableness, conscientiousness, openness, and low neuroticism.
    • My experience says that all that may be true, but you need to teach like you’re the student.

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    Filed under: ESL, Teaching | 17 Comments »

    The Rise of the Lean VC – Consumer Internet Gets Its Own Investors

    Posted on August 5, 2010 by steveblank

    Consumer Internet investing seems to have split off from traditional Venture Capital, and is creating a new category of VC’s: Lean VC’s.  I think you can blame Customer and Agile Development for a small part of it.

    Here’s why.

    Electron-based Venture Capital
    When I first came to Silicon Valley the world of Venture Capital looked pretty simple. VC’s invested in things that ran on electrons: hardware, software and silicon.  While individual VC’s inside venture firms specialized in particular domains (PC’s, peripherals, semiconductors, test equipment, operating systems, applications, etc.,) their investments had roughly the same time horizon and were focused around things that used electrons – primarily computing and computing infrastructure.

    The VC business took off with the rapid growth of the semiconductor business. Fairchild Semiconductor became the progenitor of a flood of Silicon Valley chip companies and at the same time the adoption of the limited partnership as the model for Venture Firms gave VC’s their own profitable business model. The personal computer business was built on top of the semiconductor business about the same time that the last of the pieces of Venture Capital were falling into place – the 1979 change in the EISRA “prudent man” rule allowing pension funds to pour billions into Venture Funds.

    Here’s what the start of Valley chip business looked like on a genealogy map, tracing most all of its DNA back to the first Silicon Valley chip company, Schockley Semiconductor.

    Cell-based Venture Capital – The Birth of Biotech Venture Capital
    In 1980 Genentech became the first IPO of a venture funded biotech company. The fact that serious money could be made in companies investing in life sciences wasn’t lost on the venture community.  But the knowledge that VC’s had built investing in electron-based companies didn’t translate to expertise in cell-based or cell-proximate companies.  The technologies were different, the time horizons were different, (2 to 5x longer to take a drug through FDA trials ~14 years,) and the regulatory environment was different (barely any in traditional VC investments compared to FDA trials for drugs and 510K approvals needed for medical devices.) Finally the amount of capital needed to take a drug to FDA trials could be enormously expensive, at least 10x more than startup costs at an electron-based company.

    The two watershed events for biotech startups were the Bayh-Dole Act of 1980 and the Orphan Drug Act of 1983. Bayh-Dole allowed for private ownership of government funded intellectual property developed in universities while the Orphan Drug Act created incentives for developing drugs for disorders afflicting fewer than 200,000 Americans.

    After a while, the only thing Biotech VC’s had in common with their compatriots who invested in electrons was that they both invest.  (In some Venture Capital firms they may share the same roof and overhead, but no one is confused, they’re in very different businesses.)

    The Rise of the “Lean VC’s” – Consumer Internet Gets Funded
    For a few reasons, I’ve been struggling to make sense of all the noise happening in what others have called the Super Angel arena. First, my students are confused about who to talk to and how to think about funding their consumer internet startups.  Second, and full disclosure, I’ve invested in a few of these funds; and third my teaching partner Ann Miura-Ko is a partner in one of these funds.

    My take is that we are watching an entirely new category of Venture Capital firms emerge.  It is as an important a split as when the biotech guys hung out their shingles.

    Consumer Internet startup investors are now their own category.  I call them “Lean VC’s” to emphasize why they’re different.

    (In his indomitable way, Dave McClure describes this shift best, but I have to screen-scrape his posts, paste them into Word and clear the formatting to read them.)

    One could argue that there’s nothing new here, as Internet distibution models started in 1995. But in reality they only became mainstream ~5-7 years ago. Most of the social and mobile channels (YouTube, Facebook, Twitter, iPhone, Android) have emerged in just the past 3-5 years. But these VC’s aren’t Lean because they fund startups with web-based distribution models. It’s because the startups are doing something very new that make them “Lean” :

    • These startups embrace customer and agile development that Eric Ries has been evangelizing.
    • They build a minimum feature set.
    • Quickly iterate the product in front of customers.
    • Drive for a repeatable and scalable business model (revenue in Dave McClure’s investment thesis, “network of scale” in Union Square’s.)
    • Their capital needs are low at the front end. The advantage of commodity software stacks drops initial startup costs for Internet Commerce companies. (But scaling customer acquisition may take the same amount of dollars as a traditional software startup.)

    Lean VC’s are Different
    The skills needed to succeed as a “Lean VC” are different from those needed for traditional software investing. Previous experience of investing in software companies that hire direct sales organizations and take years to build the product using waterfall development doesn’t translate to expertise in Consumer Internet startups. The technologies are different, the speed of execution, iteration and pivots are different and the time horizons for exits are different, (2 to 5x shorter for a consumer Internet company.)

    Finally, the “death of the IPO” and the emergence of the “small market M&A” changes Consumer Internet economics. One of the interesting characteristics of these new “Lean VC” funds is that they can be smaller than the traditional multi hundred million dollar VC fund. The small investments necessary to get a consumer internet startup going enables Lean VC’s to make lots of early bets and double-down when early results appear. (And the results do appear years earlier then in a traditional startup.)

    (BTW, just like the Biotech VC’s who may share a building with Electron-based VC’s, you may find a Lean Venture Capitalist sitting under the same roof as a traditional VC. Just make sure they get and embrace the Lean VC principles. The test is, ask them how they differ in their investing philosophy from the rest of their firm.)

    Lean Angels
    Along with Lean VC’s a new class of angel investors has emerged. YCombinator, Techstars, et al, have been described as incubators but in reality they are the new “Lean Angels.”  These angels “get” the sea change happening in Internet Commerce. The difference is that unlike Lean VC’s, these angels help their startups rapidly develop the product, but typically don’t add much help in developing the market/customers. And while they provide the initial investment they rarely follow-on with the Series A dollars needed for scale. They’re a great feeder system for the new class of Lean VC’s.

    Lessons Learned

    • Entrepreneurs in the consumer Internet space should look for funding from Lean Angels or Lean VC’s
    • Lean VC’s are expert in on-line distribution, Agile and Customer Development
    • They drive for early results inexpensively, and invest heavily when they see results
    • Their strategies for their startups differ – some focus on revenue, others build large networks of users

    Filed under: Customer Development, Venture Capital | 24 Comments »

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