When I first learned about the Lean Startup Movement I thought that it meant running a company lean and spending as little money as possible. The first image that came to my mind was a team making a trip to Costco for Ramen and an 100-pack of Mountain Dew. As I continued to read about Lean Startups I realized that being lean, and bootstrapping were completely different concepts. The problem is that when most people think “Lean” they think of spending less money or running on a shoestring budget. This is not what it means to run a Lean Startup but given how much confusion there is over this term I thought I’d cover this on Startup Monday.
So let’s start with the definition of Lean Startup:
A Lean Startup is a company that focuses on quickly creating prototypes with the goal of testing assumptions. Customer feedback is used to drive each iteration allowing for much faster evolution than a traditional development process.
Notice there’s nothing in this definition that talks about spending very little money or eating Ramen and using a cardboard box as a desk. The Lean Startup Methodology is a process, it doesn’t have to do with spending a little or a lot of money, it has to do with quickly building prototypes to test your assumptions with real customers. Now let’s look at the definition of Bootstrapping:
To finance your company’s startup and growth with the assistance of or input from others. (Entrepreneur.com)
You’ll notice that this definition is not so much about a process of quick iteration or using testing, instead it means financing your startup with the help and money of others. It means doing everything you can to cut costs and run financially lean. This is where the confusion comes in – when someone says they are running financially lean this means “Lean” in its general dictionary definition as running economically or with the bare basics.
When you’re using “Lean” to discuss startups you could be talking about a company with thousands of employees and millions of dollars in funding. In Eric’s book he talks about a 7,000-person Lean Startup, a little company you may have heard of, Intuit. As you probably know Intuit is not bootstrapping, in fact they have plenty of money, but they are following the Lean Startup principles to iterate quickly and make products and services that customers love.
I hope this helps to clear-up one of the common points of confusion when it comes to Lean Startups. If you haven’t yet read Eric’s book it really is a must-read along with his blog Startup Lessons Learned.