After Eric Ries’ recent talk at TechHub in London, I queued up to ask him the Lean-related question burning on my lips, which is this: because startup guys like me ‘get’ the whole point of Lean Startups, shouldn’t he be giving talks to audiences of angels instead? Without a corresponding Lean Financing Movement to work with inside the angel community, isn’t Lean Startups just a typical dot.com-era technical solution to a social problem (and as such doomed to failure)?
My immediate concern was that of all the 120+ UK angels I’ve talked over the past year, I’d be fairly surprised if more than 3 or 4 knew enough about the Lean Startup methodology to know whether it was a good or bad thing in an investment. All the same, Eric told me that a number of US angels were now actively looking at startups with a Lean eye, and that the number of such angels was growing all the time over there. OK, thanks but… pretty lean pickings as answers go, and not hugely helpful for us in the UK. 😦
I suspect the core problem here is that because the startup funding process has for so long been constructed around the slamdunk / the set-piece goal / the home run / (insert your favourite sport metaphor here), the Lean Startup principle of “tactical pivoting to iteratively learn from customers how to get to product/market fit” is a financial model mismatch. You know – for decades, startup funding has been based around The Big Bet, the build-your-Frankenputer-and-let’s-get-to-the-end-line… in fact, the whole concept of the end line. Startups were essentially mini-casinos for angels, with each table holding an MBA whose (business) plan claimed to have some inside track on the dealer’s (i.e. the market’s) cards.
But take away the MBAs, take away the business plan, and indeed take away the whole concept of an end line, and what should the conceptual basis of lean funding be? Never mind product/market fit as the end-point of the lean learning, what about the angel / lean startup fit at the start-point? What would The Lean Funding Movement look like?
Much as you’d expect, the issue seems to be that we have become so accustomed to big seed rounds driven by lead angels or Series A/B rounds driven by super-angels / syndicates / VCs, we have no practical conceptual model for small rounds driven by entrepreneurs. Yet if startups are iterating in £50K / $75K increments, shouldn’t funding be at this sort of level too? But isn’t that a kind of tranche funding (which everyone sneers at)?
Alas, I don’t have an easy set of answers to cut and paste here: but I do think that this is the right questions to be asking. For me, this is actually the cutting edge side of the Lean Startup Movement – for without any real conception of Lean Funding, what’s the point, what’s it all for?