Here’s my “Startup” column from the April 2015 issue of Christian Computing magazine.
Over the past couple of months, I’ve introduced the concept of a “startup” and we’ve discussed why the church should really care about startups. As you’ll recall, we’ve developed this definition for our discussion: A startup is a new venture working to solve a problem where the solution is not obvious and success is not guaranteed. Starting this month, we’ll talk about the latest thinking on how to successfully launch a new startup.
The Old Model and Why It Changed
For the past dozen years, I’ve served as an executive for a large corporation. I’ve worked with startups in various ways over those years, but my head hasn’t been completely “in the game” of entrepreneurship. Over the past several months I’ve reimmersed myself in the startup community. What I’ve found has been very refreshing and encouraging.
In the past, the generally accepted approach for starting a new business was to spend a few months developing a detailed business plan, raising all the funding needed to get the business off the ground, and then seeing if it worked. One way this has been described is that startups were managed as if they were simply tiny versions of big businesses.
The general rule of thumb is that 9 out of 10 new businesses fail. In the old model, if your business failed, you would have invested months of your time and significant amounts of money typically invested by family members, friends, and others. This type of failure can be devastating and often makes a second attempt impossible.
This approach naturally constrained the number of new businesses that were even attempted. Most successful small business owners continued to run their business just like big businesses and didn’t feel significant kinship with other “entrepreneurs.” That started to change, somewhat, with the emergence of “rock star” entrepreneurs emerging from the computer revolution including Bill Gates and Steve Jobs. However, it was the Internet revolution that fundamentally changed the nature of startups.
The New Model
With the emergence of the Internet, and follow-on capabilities, such as e-commerce, social networking, and cloud-based services, the upfront investment (in time and money) to launch a new business has been dramatically reduced. Also, the Internet has ushered in new models for funding startups including Angel Investors and Crowd Funding (e.g. Kickstarter).
While I was quite aware of these changes, what I had missed was how these changes fundamentally altered how entrepreneurs launch new businesses. I think the two most significant impacts have been the emergence of startup communities and the development of the Lean Startup methodology.
When I founded or co-founded my first two startups, I felt very much like a lone wolf. Today, entrepreneurs are blessed with tremendous opportunities to network with other startup-minded people who help share the burden and provide encouragement along the way. This community networking takes many forms from fairly informal meetup opportunities (like 1millioncups.com groups which meet in over 50 cities around the world), to short term opportunities to engage on new business ideas (like Startup Weekend) to extended support engagements including accelerators and incubators. While most entrepreneurs, and therefore most startup community activities, won’t be focused on advancing the gospel, some (for example Praxis Labs) are emerging at the intersection of faith and entrepreneurism.
Seeing this level of community support for entrepreneurs has been incredibly encouraging to me, but the biggest change that I’ve noticed is in the process of launching a new business. As I implied above, new technologies have made it easier to launch startups faster and with less upfront investment. While this hasn’t necessarily changed the rule of thumb that 9 out of every 10 startups will fail, it does mean that startups can fail faster and less catastrophically. It also means that many more entrepreneurs can take a shot at starting a new business, and can try and try again without crushing discouragement.
The Lean Startup methodology has emerged as the most accepted process for launching a new unproven business model. In my simplified way of thinking about it, Lean Startup changes the model from emulating how big businesses operate to instead emulating how scientists discover and better understand the wonders of God’s creation. In the Lean Startup methodology, the business model is viewed as a collection of hypothesis to be tested.
While we, as founders, probably have a good basis for making a good guess at what customers want or how we can make money, it’s still a guess. In the old model, we would take our collection of guesses (which we actually considered to be facts or truths), spend months doing as much old-fashioned research as we could to prove they were true, collect the “truths” and research into a 100-page business plan, and then try to convince investors to give us the money to implement this untested business model.
In the Lean Startup methodology, we acknowledge each hypothesis and figure out how best to test and refine each one. As with the scientific method, we iterate multiple times through a loop of hypothesis-test-observe-refine until we have great confidence that our hypothesis is true enough to go with. In fact, even after we launch, we continue to test and refine to improve the business and to adapt to changes in the environment. Testing may involve hitting the streets and talking to real customers and potential partners. Instead of assuming what they want and need, we ask them and match that up with the value proposition we are building. Testing may also involve launching an early prototype of the business and letting real customers use it to see if it really creates value for them in the way we imagined and to see if they really use it in the way that we thought they would. Depending on the nature of your product, the Internet may make this easier and less expensive than you might imagine.
While this discussion has focused on business startups, I’m guessing that many readers see the old 100 page business plan approach at work in their churches and ministries, and I hope you are starting to see how the Lean Startup approach could be a better model. Instead of spending months planning and gaining approvals and funding before you test, why don’t you start testing in small ways now? Instead of waiting until everything is in place before you launch, why not launch a minimized version of what you’re envisioning now and see how the community starts to engage with it?
Of course, we know that “A man’s heart plans his way, But the Lord directs his steps.” (Proverbs 16:9) No matter what methodology we use, the most important thing we can do is to pray for God’s wisdom, direction, discernment, and blessing on our efforts.
With that as encouragement, I hope that this series will prove beneficial to you and that some will start to consider yourselves to be entrepreneurs who can pursue new ventures for the glory of God!
Titus 3:14 tells us “And let our people also learn to maintain good works, to meet urgent needs, that they may not be unfruitful.” It is my hope and prayer that these articles will help you be fruitful to the glory of God.