Why Startups Fail: Steve Blank Talks about the Lean Startup

Last week, Steve Blank, the father of the Lean Startup, spoke at the Irwin M. Jacobs Hall at Qualcomm headquarters in San Diego. I was fortunate to be able to attend. It was a terrific venue along with fabulous content from Steve. Here are some takeaways from Steve’s talk:

• Becoming a startup founder is a calling and failure is part of the process.

• Studies have shown that people who come from dysfunctional families are well-suited to be entrepreneurs, possibly because they have often have unusually well-developed survival skills.
• Founders are intensely curious and prefer chaos over structure. They get bored when things become stable, and may even sabotage the status quo in order to create the justification to make “changes.”
• Entrepreneurship is always experiential and the willingness to “pivot” strategies—as required—is essential to success.
• Startups are not smaller versions of large companies. In large companies, it’s all about execution, because large companies already have a known business model that they have been executing successfully. Startups are in search of a business model that they can validate.
• There are no facts inside your building. Get out of your office and do customer research and development to get feedback about your idea.
• Most startups fail because of lack of product/market fit.

• A startup plan is a set of unproven assumptions, not facts.
• “Faith-based” or “fact-based” conversations are both fine, but don’t confuse the two.
• One of Eric Ries’ key contributions to the Lean Startup was to adopt the concept of rapid iteration (for testing startup assumptions) from lean-agile software development.

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• The goal for a Minimally Viable Product (MVP) is to reduce the investment of time and effort required to make iterations that lead to validating the startup idea or pivoting.
• 30-40% of startups fail because of team issues such as lack of alignment among the founders on important topics such as individual commitments (like time commitment) and individual expectations (like exit goals and equity sharing).
• Crowdsourcing sites like Kickstarter and Indiegogo are the worst things that have happened for the Lean Startup. This is because raising money too early can prematurely (that is, before the customer research and development has been completed) lock the startup into a tactical commitment to build a product. The product definition at that stage may not be the best one to drive the long-term value of the company.

There are three main components to the Lean Startup:

1. The Business Model Canvas, which is at its core explicitly identifies the fit between the product (or service) and the market (the “where to play and how to win” hypothesis)
2. Customer Development (“get out of the building”)
3. Lean-agile engineering approaches to developing and testing an MVP

There were a few colorful stories as well. One was about the time he called his Russian-immigrant mother to tell her that he had lost $30 million (of venture investment money in a failed startup he was running). “Where did it go?” she asked him. He explained that it was someone else’s money. “That’s a shame.” she said, “What are you going to do? You can’t change your name because it’s Blank.”  Steve told her that the reason he called her was to tell her that these same investors just offered him another $15 million to lead another startup company. “Mom, you used to tell me that the streets in America were paved with gold,” he said. “You were right!”

Mom, you used to tell me that the streets in America were paved with gold. You were right! Click To Tweet

Another instructional story was about a startup team that was working to develop a drone to fly over farms to provide information to farmers on how their crops were doing. They were so focused on building the drone that they forgot what their real business was. Steve reminded them that they were selling data, not drones. He counseled them to immediately stop working on the drone and start finding a way to validate whether there was a market for the data they wanted to sell. Eventually, the startup team agreed, and in the process of customer development, they not only validated their core value proposition of providing actionable data for farmers, but they also learned something new. There were thousands of aerial vehicles called “crop dusters” that had already been flying over their target customers’ fields for decades. By partnering with the owners of these crop dusters to attach camera equipment to their planes, they completely eliminated the need to develop drones. The MVP and value proposition weren’t about the drones; they were about the data.

Let’s keep the conversation going. Consider joining the Lean Selling Group on LinkedIn.

Stefan Lemperle MD, Ph.D., MBA, the founder, President & CEO of AscentX Medical, contributed to this article.

About: Robert Pryor is a Lean Selling author and community builder as well as a CEO, speaker, and educator on cutting-edge sales processes. His new book is Lean Selling: How to Slash Your Sales Cycle and Drive Profitable, Predictable Revenue Growth by Giving Buyers What They Really Want. Follow by joining the LinkedIn Group “Lean Selling” or on Twitter @LeanSelling.