Over the years I observed a few things in the startup world, working on my own projects, helping others and having gone through quite a few business plans, slide decks, presentations and so on.
Here are a few things I came across (still relevant today):
- People tend to fall in love with their ideas and start tunneling.
- People tend to follow the typical technology push methodology.
- People see early stage funding as a validation of an idea or business.
- People prefer to spend an incredible amount of time building the perfect product instead of getting a quick “No” and then finding out how to improve it.
Just to name a few. This isn’t all quite new, especially after the introduction of the Lean Startup by Eric Ries, which addressed most of these issues. It developed into the number one source of startup knowledge for every founder out there (more or less justifiably).
For many of us (including myself) Lean Startup was the introduction into the world of startup education. We all got soaked in by the hype that built around it. But I have to be honest here. I never read the entire book.
I just skimmed most of it and will maybe skim it again before publishing this post to make sure I won’t get shit-stormed for my incompetency of reading an entire book.
So I won’t be talking as a Lean Startup expert/consultant or whatever in this post. I will simply talk about my own observations, from my personal point of view, how I understood and used it and how the majority of people that I met along the way employed it and tried to build their startups.
Now you might say that I’m not in the position of judging.
And that’s totally true. But I’m one of the people that use it. I’m a customer so to say. I guess it’s always good to zoom out for a moment, bring in an outsider’s unbiased perspective and reflect about these kinds of things.
The observations I was able to make over the last few years and especially months were confirmed by seeing a great amount of people doing the same things over and over again.
The question here is not whether or not the way we use Lean Startup is the way its author intended it to be used. The question is more why we do actually use it the way we use it today. And to my experience a lot of people interpret it the way they want to or just feel like.
I have the impression that every Lean Startup practitioner group has its own interpretations of the material, which is good because it leaves a lot of creative space and so on. But many of us just get lost in infinite testing loops. To me Lean Startup was an excellent excuse to drop an idea once it didn’t turn out to be an immediate success.
And as we all know, what it really takes to build a startup is persistence. It takes a hell lot of persistence and discipline to get up every morning, look at our computer screen, see our friends driving around in BMWs while we sit in our pajamas at home and still see no progress at all. It kills us.
Because building companies is a lot of trouble, Lean Startup somehow developed into a kind of growth hacking tool, which it clearly isn’t. It doesn’t replace the sleepless nights, days, weeks or even months of worries.
Unfortunately that seems to be the general understanding of the concept at the moment (that’s what I mainly saw at least). It’s an excuse for us to quit early. I tried this, I tried that. I measured this and that. No one bought it. It didn’t work out, so I just quit and went on to the next project.
But the way we should look at it is that it’s just a simple toolkit that tells us a few things we should consider while building our startup. Especially from an engineering perspective. Nothing more, nothing less.
The biggest misconception is that it’s a complete toolkit for building a successful startup, which it clearly isn’t. It’s a toolkit that is still missing a few tools, which is totally fine. Remember Eric Ries is an engineer and the book is written from the perspective of an engineer.
Instead we need to find a few missing tools and skills ourselves while we build our products according to Eric Ries, read other startup books or by simply talking to other people. But I realized that most of the tools and skill sets you need will only appear right in front of you in retrospect.
You will only see what was missing, what you left out and didn’t take into consideration once the entire thing burned down. Once you’re broke. Once your business didn’t work out. Once you had to shut it down.
I had the exact same epiphany after my first few projects didn’t quite work out. And that’s something I’m thankful for. Because not having incorporated them automatically taught me what I needed to pay attention to whenever I want to work on my next projects.
As those were all great lessons for me I’d love to share those findings with you. So here are my top 10 things I wish Lean Startup had told me before I crashed and burned my projects:
#1 Early adopters are no market
Looking at how a lot people out there employ Lean Startup (including myself) it seems to me that the only thing people pay attention to are early adopters. It definitely makes a lot of sense to look for people that have a certain problem.
But we will never really know by focusing on early adopters how big the market really is. And I’m not talking about what analysts or some papers tell us. I’m talking about the real market size and share we’ll be able to conquer.
We might have 100 people using and experimenting with our product but at the end of the day we don’t really know how big the market really is. It might just be those 100 people and that’s about it.
So what if we build our product together with those 100 people and after a few months of hard work we realize that we already cover the entire market? Well, then we might be pretty screwed up, I guess…
#2 Market your idea upfront
Therefore, it makes a lot more sense to market our idea upfront like crazy. We need to go out there, push our idea, MVP, landing page or whatsoever across all communication/marketing channels and see whether or not customers are pulling in.
As soon as we have people pulling in, signing up on our landing pages and so on we have a first sign that we might be onto something. And the best thing about it: we won’t just attract early adopters. We will be able to attract a more diverse group of people.
We might be able to attract people from all sorts of parts of the technology adoption lifecycle, such as innovators, early adopters, early majority and so on. This means we will get a better idea about the real market size and potential of our idea instead of just focusing on early adopters or some analyst’s reports.
#3 Build up a huge demand
The problem about not having a solid demand already lined up once we launch our product becomes obvious when we look at Dave McClure’s pirate framework. It essentially tells us that for two products we want to sell we need to have at least 100 people that are generally interested in our product (clicked, signed up, etc.).
That means only 2/100 people interested in our product will end up buying it. Now you do the math how many potential customers you need to be able to attract to reach your projected amount of customers that you wrote down in your business plan.
And only beginning to build up this huge demand once our product is ready to be launched might be an even worse idea…
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#4 Educate potential customers into early adopters
A few months ago I wrote about the early adopter education process which says that there are basically no early adopters for our products. Even if there might be a few people having a certain kind of problem you are trying to tackle they are not your early adopters yet.
They usually need to be educated first before they will become your early adopters. They don’t know you and they don’t trust you. Hence, they are only interested prospects and the probability that they will go ahead and start being your early adopters is quite slim. Another thing is that finding them is almost impossible in the wide area of the Internet.
Even if you have the biggest network on this planet earth really finding them is almost impossible. The only way to find people interested in your idea is going out there, marketing your idea all over the place (Ads, Forums, Blobs, Reddit, SEO, etc.) and then start educating them.
The people that at the end of the day transfer real money to your bank account are your early adopters. All the others are just outside noise…
#5 Build up trust trough interaction
The biggest advantage of educating potential customers into early adopters is the fact that the education process will enable trust building. The more we interact and engage with our prospects before we try to sell them our product, the higher the probability of a successful sale.
If we look at company sales, about 2% of all sales come from customers a corporation interacted with only once. About 80% of a company’s sales come from customers they interacted with 7+ times.
This means that once we finished building our product and we try to sell it we will usually have only 2% of people buying our products. This is clearly not enough for a cash strapped startup. It’s actually an absolute startup killer. It’s nice to know and understand this concept upfront.
Now if we go and start the interaction and engagement as soon as possible we might have had more interactions, more trust and then more successful sales.
For me this approach resulted in a 5 times higher conversion of interested customers into paying customers.
#6 Validate your idea
Before writing a single line of code it makes a lot more sense to validate the idea first. The sooner we validate it the less we will fall for the trap of falling in love with our idea, ignoring feedback, feeling it is the greatest thing on planet earth and we won’t start tunneling.
Validating means that we try to sell it as soon as possible. We don’t necessarily need to have the final product yet. In many cases we usually don’t need the product at all. All we need is to be able to answer the following question:
“Do they trust me enough to transfer money to my bank account?”
If we can answer this question with a simple “Yes” then we can go on and start validating our idea. If we can’t, then we need to find out why we think people won’t trust us enough to wire money to our bank accounts.
And the good thing about it: people that validated our idea are our real early adopters that will help us to figure out what the broader market really wants.
#7 Customers buy when they want to, not when we want to
Another problem that I encountered and had to learn the hard way myself was the fact that we meticulously work towards the launch of our products to only find out that no one or close to no one buys our products. The thing is that people usually don’t feel like buying when we are ready to sell.
It’s a fact that most people are not interested in buying right now. Only 10% (2-3% buy right now, 7% consider it) of your potential audience is open to buying right now. The rest is not even considering it, or even thinking about it. They might consider it in the future but have way more pressing issues right now. Or they might not even know that they need it. Imagine the following situation:
You want to sell a SaaS product that allows small businesses to easily create a mobile app. The moment you want to sell your product (e.g. via an ad) is usually not the moment your potential customers are thinking about building an app.
At this very same moment you are competing with hundreds of other very urgent and pressing tasks that might be more important than building an app.
Hence, people won’t buy it right now. They will buy it once they have to tackle the decision whether or not they need an app. In most cases they simply forget about your ad or your sales pitch.
So what shall we do?
We need to go back and work through #3 and then #4, meaning that we first need to educate people (e.g. “Why Not Having An App Will Kill Your Business”) and then start to build up a relationship based on trust.
#8 Don’t get stuck in infinite testing loops
What happened to me many times is that I got stuck in infinite testing loops, not advancing a single inch and not getting any actionable metrics out of the entire thing.
At the end of the day I didn’t validate my idea, had an unfinished product and wasn’t really a single step closer to understanding my customer’s true needs. You can read more about these experiences here: Why Lean Startup is bad for Gen-Y Founders
#9 Investors only care about metrics
The thing about having a product that we built together with a small group of people that might want to use it and maybe pay for it someday is usually not enough for an investor to write us a cheque. We need to understand that all we have so far is a simple prototype but no metrics at all.
We don’t know our KPIs (key performance indicators). The only thing we can show investors after a few months is a working prototype and that’s already about it. We won’t be showered with money even though we desperately need it because we don’t have any funds left.
That’s when we usually start to realize that product-market fit according to an investor comes down to people buying our products like crazy and the entire thing is already taking off. That’s quite an unfortunate finding, as we thought product-market fit means that people use our product and give us great feedback.
Whereas it was about the KPIs (cost of customer acquisition, customer lifetime value, etc.) all along and not about being able to present a working and validated prototype (the emphasis here is on prototype and not business)…
#10 I clearly can’t think about anymore items here. My brain is completely empty now.
Summing up, I feel like these (and other) missing pieces should somehow be included in the Lean Startup methodology. Maybe in a Lean Startup 2.0 version or whatever. I strongly believe it would help a lot of Lean Startup practitioners and especially first time founders if these things were incorporated into the methodology.
It might result in many more successful “Lean Startup” startups as we see right now (which aren’t that many, right?). After all, Lean Startup is the number one thing most people will be introduced to when they want to find out about how to build a successful startup.
And for most of us it will stay the only thing we might ever read about startups (except some stuff from Steve Blank maybe).
Don’t get me wrong here. I’m not saying that all of this is something wrong about the concept itself. It might be more of an issue of the people using the methodology rather than the methodology itself.
In case you feel the same way, feel free to share it with everyone you know that ever used or read Lean Startup. This needs to spread and reach as many Lean Startup practitioners as possible.
Only ideas that spread win…