Do investors appreciate Lean Startup?

I had the opportunity to host the  Lean Startup stage at recently concluded AgileIndia2012 conference.   I personally had done a workshop (Innovathon) in this conference along with my friend Vinay Dabholkar.

Its almost unimaginable today where the startups endup  if they don’t know what Lean Startup thinking is.

Keeping my bias towards lean fully intact, I more than once wondered how this plays out with early stage investors (individuals, angels and VCs).   Do investors understand and appreciate Lean Startup?

Imagine, having to present to an investor your story.  You are presenting an idea that you believe will work.  But you are a humble and learned lean startup practitioner. You know you have many Leap Of Faith assumptions that need to be validated throughout your course.

If you are the CTO/Architect of the solution what would you do?  Wouldn’t you try to build a product that is flexible and can quickly be pivoted towards new direction?  This is more than modularization. This is laying a platform keeping the vision intact.

(Caution : Platformization does not mean you sit in a dark room building bottom up with no feedback loop from external world. This is more about how you organize your code)

For an investor who doesn’t understand this, it can sound as one or more of the following

  1. You are not entirely sure what you are trying to do
  2. You are not  “passionate enough” on your idea.
  3. Your focus is too broad and you seem to be trying to do too many things. (Platform is supposedly a tabu word in investment circles while that is the only savior for most companies surviving today.)

Eric’s lean startup literature is silent about this investment struggle of startups.

If the company has to pivot and bring out a new value proposition, how would the investors look at them?

While I am mulling over this, I attended this  TiE Seattle event some time back.   It’s quite a revelation to hear some of the angels actually endorsing this ability and openness to pivot as a strength and not a weakness.

As much as we the self-congratulatory-smartass-startup-geeks are moving along the new ways of innovation (read lean startup),  investors are not behind.   At least not all of them.

Read this excerpt from Chris Devour (Founder’s Co-op)

“…if you are in the fight, and you’ve actually gone out there and you’ve got a team and you are building stuff and you are doing customer development, and all of that great, crazy lean stuff, I want to know what you are up to…”

If that is not enough here is what Dave Parker (Founder Institute) has to say

“The reason that team is so important is because your lame-ass idea is going to get pivoted a couple times, maybe more. So, if I back the team and not the idea, the ability for the team to go: ‘We had a hypothesis, it didn’t work, oh shit, we have to go find another hypothesis.’ And, it is by the way, an ‘Oh, shit’ moment. Because you are like: ‘Oh shit, everything we’ve been working for just it a wall.’ And that’s not an iteration, that’s a pivot. ‘We used to sell meat, we now sell cars.’ It is that wholesale of a change … and pivots are painful. And the reason you invest in the team is because you are going to have a pivot…. The idea that you think you are going to go do today for most of you … is not the idea you are going to finish with.”

(Read the full story at

In essence, lean startup way of working is not anymore desired only by startup geeks and lean startup proponents. It is becoming an expectation from investment community as well.

-From Seattle

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