Principles of Lean Startups, presentation for Maples Investments

Image via WikipediaSteve Blank and I had the opportunity to create a presentation about lean startups for Maples Investments. Maples Investments is the only venture investor I know who has oriented their entire strategy to lean startups. They've invested in many great companies, including IMVU, Digg, Kongregate, Twitter... you get the idea. I really enjoy working with them and their companies.

Steve and I worked to find a metaphor that would help explain the power of lean startups, and why they have a serious competitive advantage, especially in these challenging economic times. We borrowed John Boyd's OODA loop, a concept from military strategy. Boyd emphasized the importance of agility in combat: "the key to victory is to be able to create situations wherein one can make appropriate decisions more quickly than one's opponent." We think this same principle applies to startups, which have the same problems of maneuvering on unknown or confusing terrain.

As I've written previously, lean startups are built upon three main trends:

• Technology commoditization. It is becoming easier and cheaper for companies to bring products to market, leveraging free and open source software, cloud computing, open social data (Facebook, OpenSocial), and open distribution (AdWords, SEO). Lean startups have the ability to use this commodity stack to lower costs and, more importantly, reduce time to market.
  
  
• Agile software development. Agile allows companies to build higher quality software faster. This speeds up the Ideas-Code-Data feedback loop. Combined with the technology trends above, it also enables rapid deployment strategies like just-in-time scalability.
  
  
• Customer development. It's not enough just to build a product with great features - you have to figure out if there is a market for it. The only way to do this is to get out of the building and test your hypotheses against reality. The biggest source of cost/time advantage that all lean companies have is avoiding building features that customers don't want.

In this presentation, we tried to summarize those trends, show how they give startups an advantage in good economic times as well as bad, and explain why they enable a new and better investment strategy. Hopefully others will find it useful as well.

For those interested in getting started with agile or customer development, I thought I'd include a few links. My path to lean startups began with Kent Beck and extreme programming. The best resources there are his book Extreme Programming Explained: Embrace Change and the gentle introduction at extremeprogramming.org. For customer development, start with Steve's book The Four Steps to the Epiphany or take a look at his recent Entrepreneurial Thought Leader Lecture.

Lean Startup presentation for Maples Investments by Steve Blank and Eric Ries

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