I attended the (sold out) SVASE MAIN Event last night in San Francisco that had a panel discussion on the Lean Startups – Do They Really Work? By definition a lean startup would mean “lean marketing” and that is where I have personally leveraged social media to execute lean marketing.
As a veteran of many successful (and unsuccessful) startups I find the term “Lean Startup” to be repetitive. It’s interesting that – even years after the tech bubble – we need to call them “lean” startups. Aren’t startups always lean? Isn’t that always the case, that startups should be capital efficient, they should be scrappy, they should stretch every dollar and more with less?
The simple answer is “no.” Companies today, especially B2B or enterprise software companies are still running expensive budgets and taking on large amounts of capital before they have a proven sales model and demand in the market.
However, there are a “new breed” of startups that have subscribed to the Lean Startup concept (coined by Eric Reis) whereby they start very small (often “two guys and a dog”, as Rob Hayes of First Round Capital likes to say) and they prove their model first, often before any funding, but if they do get funding its $500,000 or even $50,000 – not the $5M to $10M that software companies received in the past. Why is this possible? It costs much less to start a company today because:
- You don’t need servers, it is very cost effective in the Cloud
- You don’t need infrastructure, you can use inexpensive (often free) services in the Cloud to run your business
- You can engage your customers directly through inexpensive social media
- You can iterate on products with agile development and engage customers through a new process called Customer Development (a concept from Steve Blank).
The lean startup concept also recognizes a new reality, in my opinion, that not all startups have to be a “home run” or a failure. Do the math on how traditional venture works and you can see why many, if not most, need to swing for the fences. However, the lean startup can exit for $20M and make good returns for all parties involved. As Rob Hayes said last night, a $20M exit for a traditional venture backed company is a colossal failure, but for an entrepreneur who owns all or most of the equity, that is material. And any early stage VC (meaning a true early stage firm like First Round) who invested $50K or even $500K, they are still getting a solid return on their investment.
Lean marketing, especially through leveraging social media, can help lean startups accomplish their goals of engaging with customers, getting market feedback, and establishing thought leadership for your founders in the community. Never before has it been possible to reach so many people, so quickly, so efficiently. It still comes down to a product that solves a real problem – I can’t make people like your product – but I can make sure they are aware of it and, if liked, it gets attention and drives demand through social media.
Why is it lean? Because the software and services available today to blog, network, bookmark, socialize, monitor and measure our service online is much less expensive and much more efficient. There are many examples of companies, from lean startups to large corporations leveraging social media. And you should notice the costs in these examples are relatively small.
My last company, Silver Tail Systems, we had minimal budget to our awareness and used social media extensively (blog, twitter, social bookmarking, video, SEO, communities, webinars) to drive awareness and ultimately drive leads.
The Lean Startup and Lean Marketing concepts are new trends that are proving their value today. I believe in the concept and practice them with my clients. Im interested to get your feedback and examples where lean marketing has worked for you.
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