Thursday, October 30, 2008

John Doerr's 10 lean startup tips

I just saw video of John Doerr's talk yesterday at VentureBeat’s “How to manage your start-up in the downturn” roundtable event. The tips are based on advice JD solicited from great KPCB entrepreneurs. I was impressed enough to transcribe (and paraphrase) the list. You can see the whole video at the end of this post.
  1. Act now, act with speed.
  2. Protect the vital core of the business.Use a scalpel to make strategic cuts.
  3. Get 18 months or more of cash (runway) in the business against a conservative forecast.
  4. Defer all facilities expansions, capital expenditures. Use Google Apps. Reprioritize & rerationalize all R&D. Defer.
  5. Negotiate. Everything is negotiable in this climate.
  6. Everybody should be selling. Selling is an honorable profession. Everyone from the receptionist to engineers is selling. Not just about expenses, about increasing revenue.
  7. Offer equity instead of cash. Voluntary salary reduction program.
  8. Pay attention to where your cash is. All cash in most secure possible instruments.
  9. Make sure for planned revenues you have "leading indicators" to know if you will hit it.
  10. Over-communicate with employees, investors, customers. Don't sugar coat.
What I find remarkable about this list is how many of them apply to lean startups in good times and in bad. For example, on the "leading indicators" front, I think companies should use a funnel analysis to drive decisions and get rapid feedback on how they are progressing. This can take the form of a traditional sales pipeline or a registration-activation-revenue chart. I've also used the voluntary salary reduction tool - it's particularly useful as a way to get passionate employees who don't have a lot of personal expenses to buy into the mission of the company at a deep level. And even for those employees who can't afford to take much reduction, it's sobering to go through the exercise of deciding if they believe in the company enough to put their own money into it. At IMVU we strongly believed that everyone in the company had to be involved in selling. There's no better way to learn what customers want (or hate!). And it's hard to know if you're truly succeeding without a focus on revenue.

I hope the startups who are struggling with the current downturn will use it as a motivator to make cuts that actually increase their tempo and speed. A crisis can clarify what's important, and getting clear about what's important is the criticial first step to seeing waste clearly (see Lean Thinking). And once you can see waste, you can start to get it out of the way of your execution, and become a truly lean company.

The Entire Video of John Doerr Giving 10 Tips for Start-ups to Avoid the Econalypse

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1 comment:

  1. How do you drop a phrase like "voluntary salary reduction tool" and then not describe it :)

    Unless you're simply talking about the standard "hey, take less cash and I'll give you more options" type conversation. When you said "tool" I thought you actually meant you had a tool.....