Startup Lessons Learned
Last updated on 2012-05-24
About the Book
What do PayPal, Flickr, Blogger and Twitter have in common, other than being successful and on the web?
They all started as something else first, something which was a failure.
The founders of these companies found ways to pivot from what they were doing to what they needed to do to succeed. Plus, they managed to do this before running out of money!
One of the few people who deeply understand this process is Eric Ries, the former CTO of IMVUand former Venture Advisor at Kleiner Perkins Caufield & Byers. Eric coined the term “Lean Startup” to describe startups that can successfully apply principles from agile software development and Steve Blank’s Customer Development process to the process of building a startup which is both low-burn and ferociously customer-focused.
This isn’t just theory for Eric: this is what IMVU did — the process has been described as “How IMVU learned its way to $10M a year.”
If you want to understand how to iteratively build a lean startup, you need to understand what Eric understands. This includes:
- how to increase your runway without getting more cash
- how to properly do split testing
- how to collect real metrics, not vanity metrics
- how and why to do continuous deployment (IMVU managed to deploy an average of 50 times per day!)
This knowledge, when presented in workshop form, costs $2000 for one day—and it’s worth every penny.
However, for under $30 today, you can download and read a PDF book of Eric’s wisdom about Lean Startups. The PDF is over 700 pages and is a pleasure to read. No, it’s not the same as a one day workshop—but at less than 2% of the cost, it’s a steal.
Eric Ries’s Startup Lessons Learned is in many senses the spiritual successor of Paul Graham’s Hackers and Painters:
- Both Paul Graham and Eric Ries are technologists, successful entrepreneurs and compelling writers.
- Both books are collections of essays which were first published on the authors’ respective blogs, and which are still freely available on their blog archives.
- Both collections of essays have been extensively read on the internet and have influenced many startup founders.
If you are doing a startup today you absolutely need to read Eric’s book.
As Eric says,
A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. (Lean Startup webcast postgame – p. 361)
If you are building any new product or service in these uncertain times, you can learn a great deal from the wisdom contained in this book—whether you are at a startup or a big company.
(If you’re not doing this, but you know someone who is, you can buy the PDF for them as a gift.)
Continue below for some of what you’ll learn, or click the buy button on the right of this page to buy the PDF of Startup Lessons Learned now.
Customer Development vs. Stealth Mode
Startups operate in stealth mode, right? According to Eric Ries, however, there are rare times when stealth is a good strategy, but it amplifies risks without necessarily improving rewards.
Stealth is a customer-free zone. (p. 435)
Validated Learning About Customers
If you’re a startup founder you’re probably pretty good at keeping people busy—but are you sure you’re making progress? Getting clear about what constitutes progress is probably the biggest shift in mindset required to build a lean startup.
What’s the difference between a vision and a delusion? The vision is grounded in reality.
Three types of people have reality distortion fields: good startup founders, bad startup founders, and crazy people. (Lean Startup fbFund wrap-up – p. 438)
Is your startup based on a delusion or vision? They often get blurred by entrepreneurs!
OK, let’s talk about the vision thing. It’s so important, and also so dangerous. Being able to convince other people around you (those within the “reality distortion field”) is necessary to sustain the passion and energy that a startup needs. But it can also be used for evil – to convince people to abandon their senses and work on something that nobody will ever want. How can we tell the difference? I saw a lot of people stealing glances at someone else in the room while I was talking about this. I’ve been there: is it me or my cofounder that’s crazy? What if it’s both of you? Use some customer development to find out. (p. 438)
Split (A/B) Testing
One specific way to differentiate between vision and delusion is to use Split Testing, a.k.a. A/B Testing.
The power of A/B testing is so under-exploited in product development, that I’m trying new ways to explain its benefits. Remember that we can use split-testing for both the problem team and solution team, and that causes a lot of confusion. Split-testing is great for linear optimization; making our landing pages, conversion rates, and retention metrics incrementally better day-in day-out. But it’s also amazing for testing big hypotheses, like what our customers really want to get out of our product. If you’re not doing both, you’re missing out. (p. 439)
Although there is cost and overhead associated with continuous deployment, the benefits are immense. One such benefit is that, when combined with A/B testing, you can try out small features in less than the amount of time it takes to argue or prioritize them. Nothing is more demoralizing to an engineering team. Prioritizing in a vacuum is a leading source of waste.
Of all the tactics I have advocated as part of the lean startup, none has provoked as many extreme reactions as continuous deployment, a process that allows companies to release software in minutes instead of days, weeks, or months. My previous startup, IMVU, has used this process to deploy new code as often as an average of fifty times a day. This has stirred up some controversy, with some claiming that this rapid release process contributes to low-quality software or prevents the company from innovating. If we accept the verdict of customers instead of pundits, I think these claims are easy to dismiss. Far more common, and far more difficult, is the range of questions from people who simply wonder if it’s possible to apply continuous deployment to their business, industry, or team.
The goal of continuous deployment is to help development teams drive waste out of their process by simultaneously reducing the batch size and increasing the tempo of their work. This makes it possible for teams to get – and stay – in a condition of flow for sustained periods. This condition makes it much easier for teams to innovate, experiment, and achieve sustained productivity. And it nicely compliments other continuous improvement systems, such as Five Whys. (p. 410)
Whenever something unexpected happens, ask “why” five times: behind every technology problem is a human one. This kind of Five Whys root cause analysis is essential to improvement.
I have come to believe that this technique should be used for all kinds of defects, not just site outages. Each time, we use the defect as an opportunity to find out what’s wrong with our process, and make a small adjustment. By continuously adjusting, we eventually build up a robust series of defenses that prevent problems from happening. This approach is a the heart of breaking down the “time/quality/cost pick two” paradox, because these small investments cause the team to go faster over time. (p. 145)
Once this type of process takes root in your company, an amazing improvement feedback loop can set in.
Over time, here’s my experience with what happens. People get used to the rhythm of five whys, and it becomes completely normal to make incremental investments. Most of the time, you invest in things that otherwise would have taken tons of meetings to decide to do. And you’ll start to see people from all over the company chime in with interesting suggestions for how you could make things better. Now, everyone is learning together – about your product, process, and team. Each five whys email is a teaching document. (p. 145)
But what does it mean to build a Lean Startup?
In a typical lean company, waste is defined as “every activity that does not create value for the customer.” And this is 100% correct. By driving this kind of waste out of your company, you actually boost creativity by eliminating bureaucracy, busy work, unnecessary hierarchy, and, of course, excess inventory. … But startups require a special kind of creativity: disruptive innovation. … By the standard of “customer value,” most innovation-seeking experiments are waste. Lean startups operate by a different standard. I suggest they define waste as “every activity that does not contribute to learning about customers.” (aka “how you get to product/market fit.”) (p. 105)
What happens as your company grows?
You don’t get a memo that tells you that things have changed. If you did, it would read something like this: “Dear Eric, thank you for your service to this company. Unfortunately, the job you have been doing is no longer available, and the company you used to work for no longer exists. However, we are pleased to offer you a new job at an entirely new company, that happens to contain all the same people as before. This new job began months ago, and you are already failing at it. Luckily, all the strategies you’ve developed that made you successful at the old company are entirely obsolete. Best of luck!” (p. 136)
Pivot, Don’t Jump, to a New Vision
What if you’re going in the wrong direction? Or how do you know if you are?
Increasing iterations is a good thing – unless we’re going in a circle. The hardest part of entrepreneurship is to develop the judgment to know when it’s time to change direction and when it’s time to stay the course. That’s why so many lean startup practices are focused on learning to tell the difference between progress and wasted effort. One such practice is to pivot from one vision to the next. (p. 418)
Cash is Not King
In a startup, cash is oxygen, right?
Cash on hand is just one important variable in a startup’s life, but it’s not necessarily the most important. What matters most is the number of iterations the company has left. While some cost-cutting measures reduce that number, others increase it. In lean times, it’s most important to focus on cutting costs in ways that speed you up, not slow you down. Otherwise, cutting costs just leads to going out of business a little slower.
The full formula works like this:
runway = cash on hand / burn rate
# iterations = runway / speed of each iteration
To read more, click the buy button on the right of this page to buy the PDF of Startup Lessons Learned now.
- August 2008
- Paul Graham on fundraising
- Refactoring for TDD and interaction design
- September 2008
- Test-Driven Development as andon cord
- Just-In-Time Scalability
- On deployment
- Not crossing the chasm
- Ideas. Code. Data. Implement. Measure. Learn
- Great open source scalability tools from Danga
- Greasemonkey compiler
- Customer Development Engineering
- The lean startup
- Waves of technology platforms
- Seth Godin: How often should you publish?
- Smarticus — 10 things you could be doing to your code right now
- A new version of the Joel Test (draft)
- Marc Prensky’s Weblog: Cell Phones in Class
- Andrew Chen: Growing renewable audiences
- SEM on five dollars a day
- How to listen to customers, and not just the loud people
- The one line split-test, or how to A/B all the time
- How to Usability Test your Site for Free
- How to get distribution advantage on the iPhone
- Lo, my 5 subscribers, who are you?
- Thoughts on scientific product development
- The three drivers of growth for your business model. Choose one.
- You don’t need as many tools as you think
- The lean startup comes to Stanford
- Q&A with an actual reader
- October 2008
- What does a startup CTO actually do?
- About the author
- The product manager’s lament
- When NOT to listen to your users; when NOT to rely on split-tests
- The App Store after the gold rush
- Three decisions to make on virtual goods
- The engineering manager’s lament
- Lean startups vs lean companies
- Chuck’s Code & Learning: Learning to write tests that matter
- A hierarchy of pitches
- John Doerr’s 10 lean startup tips
- November 2008
- Principles of Lean Startups, presentation for Maples Investments
- Getting educated about advertising, agencies, and media buyers
- Learning from Obama: maneuver warfare on the campaign trail
- Stevey’s Blog Rants: Good Agile, Bad Agile
- Using AdWords to assess demand for your new online service, step-by-step
- What is customer development?
- Where did Silicon Valley come from?
- Five Whys
- The four kinds of work, and how to get them done: part one
- The four kinds of work, and how to get them done: part two
- ScienceDaily: Corporate culture is most important factor in driving innovation
- Lo, my 1032 subscribers, who are you?
- Net Promoter Score: an operational tool to measure customer satisfaction
- The ABCDEF’s of conducting a technical interview
- December 2008
- The four kinds of work, and how to get them done: part three
- Getting started with split-testing
- The hacker’s lament
- January 2009
- Continuous integration step-by-step
- Engagement loops: beyond viral
- Assessing fit with the Wisdom of Crowds
- Happy new year
- Lessons Learned on Mashable today
- Sharding for startups
- Lessons Learned office hours
- CPI > CPC
- February 2009
- Why PHP won
- Lean hiring tips
- Three freemium strategies
- Refactoring yourself out of business
- Achieving a failure
- The lean startup @ Web 2.0 Expo (and a call for help)
- Continuous deployment and continuous learning
- The free software hiring advantage
- You buy virtual goods
- What is a market? (a guide for hackers)
- Continuous deployment with downloads
- Work in small batches
- Please teach kids programming, Mr. President
- The lean startup at UC Berkeley Haas School of Business
- March 2009
- Throwing away working code
- Employees should be masters of their own time
- Lo, my 2295 subscribers, who are you?
- Don’t launch
- Combining agile development with customer development
- Join the Lean Startup discussion at Web 2.0 Expo for free
- How to build companies that matter (the lean startup on O’Reilly Radar)
- Venture Hacks interview: “What is the minimum viable product?”
- The metrics and levers of engagement, presentation on Engagement Loops for Facebook Developer Garage SF
- The Lean Startup at Agile Vancouver April 21st
- Cash is not king
- The Lean Startup workshop coming soon
- April 2009
- Web 2.0 Expo session followup
- Built to learn
- Validated learning about customers
- Product development leverage
- Speaking with Steve Blank at startup2startup; webcast on May 1; other upcoming events
- May 2009
- Lean Startup webcast post-game
- Videos galore
- More video “what to do if customers don’t like your (initial) product” plus full webcast
- Fear is the mind-killer
- The Lean Startup Workshop - now an O’Reilly Master Class
- June 2009
- Last chance to register for The Lean Startup at HP on May 21
- The Lean Startup at SIPA follow-up
- Austin: the Lean Startup tour continues
- It’s a startup, not a spreadsheet
- The Lean Startup Tokyo edition
- Lean Startup Workshop scholarship program
- Why Continuous Deployment?
- Pivot, don’t jump to a new vision
- July 2009
- Join the lean startup discussion at Facebook on Thursday
- How to conduct a Five Whys root cause analysis
- Lean Startup fbFund wrap-up
- Lean Startup fbFund slides and video
- 10 years of entrepreneurship
- The Principles of Product Development Flow
- Embrace technical debt
- Techstars brings The Lean Startup to Boulder
- A new way to recruit for (and find) startup jobs
- August 2009
- The Steve Jobs method
- Minimum Viable Product: a guide
- Revisiting the Software Design Manifesto (and what’s changed since then)
- Introducing the Lean Startup Cohort subscription program
- Fall speaking tour starts tomorrow
- The Promise of the Lean Startup
- Marching through quicksand
- Building a new startup hub
- September 2009
- Don’t be the Ice Cream Glove
- What would you want to tell Washington DC about startups?
- Happy blogiversary (my present: a brand new URL)
- The cardinal sin of community management
- International tour about to begin
- Gov 2.0 Summit wrap-up
- Testing the new Disqus comment system
- Support the Startup Founders Visa with a tweet
- Entrepreneurial Thought Leaders (and a request for help)
- October 2009
- The curse of prevention
- A large batch of videos, slides, and audio
- Innovation inside the box
- Inc Magazine on Minimum Viable Product (and a response)
- Myth: Entrepreneurship Will Make You Rich
- Case Study: Using an LOI to get customer feedback on a minimum viable product
- A real Customer Advisory Board
- November 2009
- New York: three straight days of Lean Startup (two of which are free)
- December 2009
- Business ecology and the four customer currencies
- What is Lean about the Lean Startup?
- Why vanity metrics are dangerous
- Continuous deployment for mission-critical applications
- January 2010
- Towards a new entrepreneurship
- Is Entrepreneurship a Management Science? (for Harvard Business Review)
- Amazing lean startup resources
- Two Ways to Hold Entrepreneurs Accountable (for Harvard Business Review)
- Case Study: Continuous deployment makes releases non-events
- Lo, my 18891 subscribers, who are you?
- February 2010
- Speaking 2010: Webstock, GDC, Web 2.0, and more
- Tell your Startup Visa story
- Beware of Vanity Metrics (for Harvard Business Review)
- Why diversity matters (the meritocracy business)
- Kiwi lean startup + Australia next
- March 2010
- Startup Visa update
- Startup Lessons Learned - the Conference (April 23, 2010 in SF)
- For Startups, How Much Process Is Too Much? (for Harvard Business Review)
- The new startup arms race (for Huffington Post)
- Speed up or slow down? (for Harvard Business Review)
- Two new scholarship programs for lean startups
- New conference website, speakers, agenda
- April 2010
- Six streaming locations
- Kent Beck keynote, “To Agility, and Beyond”
- Learning is better than optimization (the local maximum problem)
- Conference streaming, sponsors, discounted tickets
- The Lean Startup Intensive at Web 2.0 Expo SF (May 3, 2010)
- Sneak preview, Grockit
- Sneak preview, KISSmetrics (and more)
- Four myths about the Lean Startup
- Lean Enterprise Institute webinar, April 28
- Video update on the Startup Visa Act
- May 2010
- The Lean Startup Intensive is tomorrow at Web 2.0 Expo
- Philosophy Helps Start-Ups Move Faster (WSJ on the Lean Startup)
- Thank you
- June 2010
- The Five Whys for Startups (for Harvard Business Review)
- No departments
- What is a startup?
- July 2010
- The Entrepreneur’s Guide to Customer Development
- Founder personalities and the “first-class man” theory of management
- Some IPO speculation
- Case Study: kaChing, Anatomy of a Pivot
- Case Study: SlideShare goes freemium
- August 2010
- The Lean Startup: innovation through experimentation
- Lo, my 57692 subscribers, who are you?
- The Superbowl ad test
- The visionary’s lament
- Good enough never is (or is it?)
- September 2010
- Stop lying on stage
- The Lean Startup Bundle
- Case Study: Rapid iteration with hardware
- November 2010
- Why do we do this?
- January 2011
- Why we need to teach MBA’s about modern entrepreneurship (and what Harvard Business School is doing about it)
- Case Study: UX, Design, and Food on the Table
- Lean Startup junkies
- February 2011
- A month is fifteen weekends
- March 2011
- The Lean Startup SXSW + bundle + tournament
- SXSW updates
- New York Lean Startup Week
- April 2011
- The real entrepreneurs of New York City
- Beyond the garage
- May 2011
- New speakers + Ignite + streaming locations
- Get the very first copy of the Lean Startup Book
- Case Study: Lean UX at work
- June 2011
- Appsumo Action Video
- Open Innovation in DC
- July 2011
- The Lean Startup Book is here
- Venture Deals
- August 2011
- Winter is coming
- The ink is on the dead trees
- September 2011
- The Last Lean Startup Bundle: claim $3,000,000 in prizes
- The power of small batches
- The Lean Startup Book Tour
- Updates from the road
- Best. Birthday. Ever.
- October 2011
- Case Study: The Nordstrom Innovation Lab
- November 2011
- That old-time startup religion
- STARTUP IS VISION
- January 2012
- London Calling
- February 2012
- The Hacker Way
- March 2012
- The Lean Startup at SXSW 2012
- SXSW Update
- Doing > Talking
- April 2012
- Founder’s Dilemmas: Equity Splits
- May 2012
- A new field guide for entrepreneurs of all stripes
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