i

The Lean Startup An Investigation Into Factors That Contribute to Startup Success

ii

DISCLAIMER This work has been undertaken as part of a student educational project and the material should be viewed in this context. The work does not constitute professional advice and no warranties are made regarding the information presented. The Authors, Cambridge Judge Business School and its Faculty do not accept any liability for the consequences of any action taken as a result of the work or any recommendations made or inferred.

iii

CONTENTS PAGE Executive Summary i The Lean Startup Methodology 1

a) The origin 1 b) The Application of the Lean Startup Methodology 1 c) The Lean Startup Principles 2 d) Limitations of the Lean Start-Up Methodology 3

Overview of Research Methodology 5 Summary of Findings 7

i) Companies 7 ii) Founders 8 iii) Consumer (B2C) vs Enterprise (B2B) 9 iv) Investors 9 v) Founders 9

Findings and Recommendations 10

1) Startups Overall 10 2) Startups in Enterprise Software and Services (B2B) 12 3) Startups in Ecommerce and Consumer Web 13 4) Startups in Consumer Mobile 14

5) Situations Where the Lean Methodology is Less Applicable 15 Conclusion 17 References 18 Appendices 22

1 Startups Interviewed 22 2 Founders 26 3 Consumer vs Enterprise 27

i

EXECUTIVE SUMMARY The central objective of this report is to examine and identify key factors that contribute to the

success of start-up companies, with particular focus on the lean startup methodology widely

applied by early stage ventures to help mitigate risks, minimize costs and shorten product

development cycles. To achieve this, our team undertook primary and secondary research over a

three week period. Based on findings from 64 in-person and telephone interviews with founders,

ventures capitalists, accelerators and industry experts, as well as from researching Cambridge

University and online startup databases, we formulated recommendations related to factors and

best practices that increase the likelihood of startup success. The research has revealed a number of

findings, which form the basis for general recommendations when developing a new venture.

In total, 22 recommendations were made split over four sub-categories: 1) Startups Overall;

2) Startups in Enterprise Software and Services (B2B); 3) Startups in eCommerce and Consumer Web;

4) Startups in Consumer Mobile. In addition, we also highlighted situations as to when the lean

startup methodology is less applicable.

Overall, this study reveals that the road to success for startups is a complex process involving

multiple and, in many cases, product or sector-specific, strategies and methodologies, some in line

with the lean startup methodology, others not. Whilst no one-size-fits-all approach prevails, we

found that the lean startup methodology should be used by companies as a toolkit, reference or

philosophy, but not as a strategy. This study also demonstrates that there are many other variables

to consider that equally have an impact on success. Factors such as deploying innovative marketing

and distribution channels, exploring new markets, building trust, exploring new niches, as well as

choosing the right business model also critically impact the likelihood of survival, and ultimately

success, during the early stages of a company.

1

THE LEAN STARTUP METHODOLOGY

A. The Origin

Eric Ries, a Silicon Valley entrepreneur, proposed the lean startup methodology as an approach for

starting a business in his 2011 book The Lean Startup. In the technology sector where over 75% of

companies fail, according to Shikhar Ghosh of Harvard Business School (Gage, 2012), the possibility

of increasing success is valuable.

In his book, Ries outlines a methodology capable of shortening product development and release

cycles by following a handful of core steps. Ries main claim is that through this methodology

startups can mitigate, or at least minimize, risks, achieve higher levels of productivity, and decrease

costs. The foundation of the lean startup methodology is the lean manufacturing movement of the

1980s, aimed at eliminating processes that did not create value for the customer (Ohno, 1988). Ries

combined the Toyota lean principles with his own startup experience and previous work done by

Steve Blank, another Silicon Valley serial-entrepreneur and academician, to form the central theses

of The Lean Startup.

B. The Application of the Lean Startup Methodology

Since 2011, the application of the lean startup methodology has proliferated and is now regularly

adopted by many startup companies. Advancements in technology (such as cloud computing) allow

for cheaper, faster development and delivery of new products and services. Startups can now test

the feasibility and attractiveness of their products/services before fully committing to developing

them. Additionally, founders can create and test multiple versions of their offering, known as split

testing, to find out which features and value propositions resonate with their users. Leveraging this

process, the entrepreneur can determine if they have reached product-market fit or if they need to

pivot - make a major change to the product, their company structure or the business model. This

process enables startups to quickly respond to customer demand as well as make changes early in

the product development cycle before spending too much time, energy and resources on features

that customers do not want.

That said, the application of the lean startup approach depends on the product/service being

developed, the target market, the questions asked, the product maturity, as well as the type of

business being created. In addition, the applicability of lean startup principles can also depend on

2

the customer channel (B2C or B2B) and the complexity of the problem being solved. Lastly, the

nature of a product itself can affect a companys decision to apply lean principles. For example,

companies involved in the design of software can easily modify and iterate changes during its

development, even multiple times per day. However, companies that are designing hardware

solutions such as new silicon cells for solar panels cannot frequently iterate due to costs involved in

making even slight design changes.

C. The Lean Startup Principles

The five key principles, as devised by Eric Ries in The Lean Startup, are:

1) Entrepreneurship is Everywhere

Entrepreneurial approaches apply to any organization, of any size, operating in any sector.

Entrepreneurs are everywhere, not only in their parents garages.

2) Entrepreneurship is Management

Founders should use a scientific method to make decisions and build sustainable businesses. Ries

also advocates pivoting, the ability to change strategy without changing the vision. For example,

if a company has a valuable product, however not for the customer segment it initially targeted,

then it can pivot and change the target market or even the intended purpose of the

product/service.

3) Validated Learning

Ries recommends a process of validated learning whereby companies run quick and frequent

experiments to validate each element of their product/service before moving on to the next

phase of development. This is achieved by designing tests to see how customers will react to

certain changes in the product, for example by testing two versions to see which customers

prefer (also known as split testing). This contributes to the build-measure-learn cycle (see

below).

4) Build-Measure-Learn

Founders should develop a hypothesis about a particular aspect of a product or service and to

determine what information is required to obtain an accurate result. This process does not

involve asking customers what they want, but understanding what customers want by observing

what they actually do with a product/service. Following this, startups can build a Minimum

3

Viable Product (MVP, hereafter), which is a version of the product that enablesa minimum

amount of effort and the least amount of development time. The minimum viable product lacks

many features that may prove essential later on but enough that the product can be tested with

customers (Ries, 2011). Ries argues that one of the key measures of success is the time it takes to

learn - how quickly a hypothesis is validated or rejected. Therefore, the focus should be to

minimize the total cycle time through the build-measure-learn feedback loop to gain competitive

advantage by learning faster than the competition.

5) Innovation Accounting:

Traditional accounting and performance metrics, such as revenue, that work for larger

established companies often do not fit early stage companies that generate little revenue and

negligible profits. Therefore, instead, Ries suggests a process of innovation accounting which

focusses on indicators that allow startups to gauge short-term impact and trajectory, such as

customer acquisition and churn rates.

D. Limitations of the Lean Start-Up Methodology

Despite the advantages offered by lean startup methodologies, critics raise a number of limitations:

i) Could Slow Time to Market

Lean startup thinking promotes looking for an opportunity, establishing the market and business

case, then developing, testing and validating a hypothesis before launching a product. However,

in todays fast paced world, changing consumer tastes and rapid technological innovations move

fast and, on occasion, this model can be redundant. According to Ben Horowitz, the co-founder

of venture capital giant, Andreessen-Horowtiz which has investments in AirBnB and Facebook,

by making running lean an end, you may lose your opportunity to win the market, either

because you fail to fund the R&D necessary to find product/market fit or you let a competitor out-

execute you in taking the market (Gobry, 2010).

ii) Suffocates Innovation and Creativity

The lean approach encourages rapid testing and iterations by adopting a fail fast, fail cheap

philosophy. Whilst this process might encourage companies to operate more efficiently, it can

suffocate creativity, and thus innovation, and potentially drive very talented, creative people

away.

4

iii) Makes a Poor First Impression

As mentioned previously, the lean start-up methodology promotes building a MVP. In this way,

companies can avoid investing too much time, effort and money into building a finished product

that customers might not want. However, critics argue that often companies only get one chance

to make a first impression and risk discouraging potential customers by putting them through

continuous iterations, updates and interface changes.

iv) Discourages Investing in the Future

Lean startup thinking implies that startups should not spend money on anything that is not

directly adding immediate value to the customer. However, strategic cases exist whereby

spending more now will bring value in the future. This requires a long-term vision and strategy as

opposed to short-term development cycles and incremental iterations.

v) Encourages Features Not Whole Products

The lean startup methodology follows a scientific approach to eliminate waste and mitigate risk.

Whilst effective, this approach can adversely affect decisions based on a greater vision requiring

heavy investment, guts and/or faith. Furthermore, some critics argue that it encourages

companies to focus on building incremental features rather than complete and meaningful

products. According to Inc. Magazine, the lean startup methodology is good for companies that

are developing software or other consumer services. However, it falls short in making great core

products (McCorvey, 2012).

vi) Doesnt Optimise for Revenue Maximisation

One of the major arguments against lean startup thinking is that although it helps to minimize

risk and possibly increase chances of achieving revenue, it does not increase chances of

maximizing revenue. Great innovators are visionary because they are able to experiment and

take risks. However, as noted by Broughton, not everyone can be Steve Jobs.

vii) MVP Wont Meet Needs of Sophisticated Customers

The lean startup methodology promotes a MVP approach to product development. However,

critics suggest that this can be rudimentary and encourage the development of products which

are not deep in their functionality or meet the demands of sophisticated consumers. Companies

risk going to market with a lacklustre product/service.

5

OVERVIEW OF RESEARCH METHODOLOGY Research for this consulting project was divided into two parts: primary and secondary research. The

primary research consisted of in-person and telephone interviews designed to collect in-depth

qualitative information/data from entrepreneurs, investors and industry experts, with a focus on

critical success factors for startups. These interviews formed the basis of the investigation as limited

academic research exists on the lean startup methodology. The team spent three weeks

interviewing 64 entrepreneurs, investors, accelerators, and other experts to get their experiences

and insights. The list of interviewees can be found in Appendix 1.

The team also carried out secondary research using startup databases available online such as

Crunchbase, Mattermark and AngelList, as well as through general internet research and consulting

databases accessible through Judge Business School Information Services. Due to the private nature

of many of the early stage companies studied, the team found limited company information on a

small selection of the sample.

Given the limited academic research on the lean startup methodology, the team decided to

approach the project as an exploratory study. Therefore, based on the lean startup methodology,

the team designed a structured, open ended questionnaire template that was used for all

interviews.

The questions fell into 6 categories:

Company Profile

Founders and Team

Entrepreneurial Management

Product (including the Validated Learning and Build-Measure-Lean principles)

Metrics and Marketing (including the Innovation Accounting principles)

Funding

Other

The team designed two types of questionnaires: one for founders/startups, the other for venture

capitalists, incubators, and industry experts.

6

For inclusion in the study, the team targeted tech startups based in the United States that

represented the industries and sectors within Idealabs current and historical portfolio. The team

specifically focused on companies founded before 2013 that had received, at least, seed funding.

The team sought a wide sample of companies, from those that had successfully IPOd to those that

had shut their doors, although the less successful companies proved more difficult to convince to

participate.

7

SUMMARY OF FINDINGS i) Companies In total, the team interviewed 13 investors, experts and incubators, as well as 51 startups with:

A combined total funding of $2.5 billion

An average company age of 5.4 years

A median number of 20 employees.

Most of the companies interviewed applied lean principles to some extent. However, the degree to

which these principles were applied varied significantly.

ii) Founders

When analysing responses from founders, it is evident that being a sole founder is often too

demanding and undesirable. However, equally, having four or more founders can cause difficulty in

maintaining alignment. The team found that the ideal number of co-founders was two or three, and

startups with two co-founders raise, on average, at least twice as much money as startups with

three founders.

The team also analysed the difference between first-time founders and serial entrepreneurs. First

time founders are more likely to:

Pivot

Conduct customer interviews

Launch their company with friends or classmates

Attempt to take on larger, more complex problems (like multi-sided markets and social

networks)

Whereas serial entrepreneurs are more likely to:

Reach product-market fit faster

Apply lean principles in their approach to business

Use agile software development practices

Raise more money

Please see Appendix 2 for an overview.

8

iii) Consumer (B2C) vs Enterprise (B2B)

In addition, the team detected differences in the approaches taken by consumer-focused companies

(B2C) versus enterprise-focused companies (B2B).

Overall, B2B companies:

Are more likely to create an MVP

Pivot more often

Are more likely to find product-market fit

Place more emphasis on metrics to track performance

Whereas consumer-focused companies (B2C):

Conduct more split testing

Release new versions of their product more often

See Appendix 3 for an overview.

iv) Investors

Overall, investors viewed the lean startup principles favourably, as important tools for early stage

companies to use, but recognised that applicability varies and must be considered on a case by case

basis. For investors, the top key success factors were the founding team and the potential market for

the product/service.

v) Funding

The general consensus among respondents was that more funding does not necessarily lead to

higher levels of success and that, at times, higher levels of funding can even inhibit success by

causing startups to become complacent, lose focus and pursue less creative solutions. In addition,

our findings showed no correlation between the number of funding rounds and success, or between

the amount of funding and the application of lean startup principles.

9

vi) Marketing and Distribution

While lean startup principles primarily apply to the product development process, the most

successful companies in our sample also found ways to apply piloting, split testing, frequent

iterations to their sales, marketing, and overall distribution efforts. One theme that emerged from

our interviews is the importance of creative marketing and distribution in tech startups. In software

companies, specifically, as the barriers to entry decrease and competition intensifies, distribution

methods, and not the product itself, emerges as a key differentiator. Multiple founders emphasized

the importance of using inexpensive marketing tactics such as creating content for inbound

marketing and search engine optimisation; fostering relationships with influential bloggers and

thought leaders to generate buzz; and leveraging less-crowded, emerging platforms and

marketplaces.

10

FINDINGS AND RECOMMENDATIONS This section presents the main findings and recommendations for consideration by Idealab. It

focuses largely on the key factors that contribute to the success of start-ups. Some of the findings

validate the relevance of lean principles. However, it is evident from the in-depth and company-level

investigation that the determinants of success are much more complex and diverse than implied in

the lean startup methodology. In the course of research for this study, the team identified a

number of other factors critical for success, including a number of common tipping points.

The findings and recommendations will be grouped into four categories.

1) Startups Overall;

2) Startups in Enterprise Software and Services (B2B);

3) Startups in eCommerce and Consumer Web;

4) Startups in Consumer Mobile.

1) Startups Overall

Based on analysis and findings from the research, the team recommends that startups:

Create a Concierge MVP

Founders should test all ideas and concepts before developing any software/hardware. In

this way startups can minimize cost whilst understanding which features of a particular

product or service customers want. Testing hypotheses offline requires devising innovative

tests. For example, one expert we consulted recommended creating a fake website to gauge

consumer interest. Other founders cited using competitive third party marketplaces to test

their product concept before building their own.

Talk to Customers to Build Empathy

Effectively utilizing customer feedback is a key step in the lean startup methodology.

However, our research suggests that customer surveys and focus groups can often yield

superficial and potentially misleading results and insights. According to the many of the

companies interviewed, the most effective feedback comes from in-depth interviews with

customers and truly understanding their pain points, such as what keeps them up at night.

11

Build Testing into Company DNA and Validate Throughout

Product split testing is a cornerstone of the lean startup methodology. However, our

interviews indicate that split testing must not only be used to test product hypotheses, but

throughout the entire business lifecycle and facet of its operations. Several companies we

spoke with credited a nail before scale approach to human resources, customer service,

and sales as a key to their continued success.

Acknowledge and Test Biases

One of the barriers to success, and possible reasons for failure, can be the founders blind

affection for his/her idea. To eliminate bias, founders should encourage others to highlight

the pitfalls and drawbacks of beloved ideas, and should design tests likely to surface flaws

and misconceptions.

Be Cautious of False Negatives

One of the downsides of lean startup approach is the possibility of false negative results

from poorly designed tests. This could mean that startups forgo profitable and lucrative

opportunities. Therefore, to avoid false negatives when testing a new hypothesis ensure that

a sample size is large and representative, and make sure to dig into the why behind a

certain outcome. For example, one of the founders interviewed recalled the first customers

introduced to their MVP. Just one out of the first twenty customers finished their order.

Instead of dismissing their entire product concept, the founder conducted follow-up

interviews with the nineteen customers that had abandoned the cart. He found that while

all nineteen liked the product, they didnt want to pay the full price upfront for an untested

product. The company moved to a monthly subscription model and offered a one-month

free trial and saw their cart conversion increase exponentially.

Track and Drive to Custom Metrics

Each company should devise custom performance metrics that drive the most value to its

business and should only track metrics that matter most to its success. The lean startup

methodology encourages startups to use performance metrics such as customer retention

rates or customer churn rates (Innovation Accounting). Whilst these are certainly useful for

gauging performance, the most critical metrics for a startup can be those that are unique to

its business. For example, in the case of a media company, it may not be the traffic that

matters the most, but the overall depth and quality of the content.

12

2) Best Practices for Enterprise Companies (B2B)

Based on our analysis and findings, startups serving SMEs and large enterprise customers should:

Engage in Thought Leadership

The most successful enterprise-focused companies interviewed had founders who were

deeply-rooted and involved in their respective industry communities. In this type of

business, the success of a product/service can be largely based on technological or industry

credibility rather than social credibility. Therefore, to gain traction and respect in the

community, founders should take on the role of thought leaders by seeking opportunities to

promote their expertise by presenting at conferences, writing blogs on their company

website and social networks, establishing a Twitter following, and exploring innovative ways

to demo their technology to key influencers.

Use the Power of Partnerships

Partnerships enable startups to piggyback on other platforms to gain traction and achieve

joint wins, as well as unlock access to key distribution channels and networks. A number of

interviewees highlighted this point and attributed their success to partnerships with larger

counterparts very early on. In addition, several founders cited the failure to establish critical

partnerships in the beginning as the primary reason for lack of early momentum.

Bundle Products with a Service Package

Many companies highlighted that, often, enterprise solutions developed by innovative

startups can be complex making them difficult to use. Founders should consider bundling

consulting service packages with products to ensure high customer satisfaction, engagement

and retention.

Choose the (Right) Business Model

Enterprise companies should choose the business model that best matches their specific

offering. Our research indicates that, recently, many enterprise companies start with a

freemium model - a pricing strategy by which a product or service is offered free of charge -

before switching to a strictly paid model. Often, the rationale for a freemium product is to

gain traction and build a large user base more quickly. However, this also means that

companies are not generating significant revenues and must often dedicate resources to

13

support non-paying customers. In many cases, this makes long-term profitability difficult

because, as the company moves toward a paid-only model, it is hard to convince customers

to pay for a product/service they are used to receiving for free.

Explore Acquisitions When Possible

The acquisition of smaller competitors was cited as an effective strategy for several B2B

startups, both to fill product or business gaps, as well as gain market share. Plus, potentially

bullying out other competitors through aggressive technology development. Acquisitions

often require deep pockets and dont fall within the lean startup framework. However, they

proved to be a popular strategy for a number of companies interviewed.

3) Best Practices for eCommerce and Consumer Web companies Based on our analysis and findings, startups in eCommerce and consumer web should:

Focus on Delighting and Surprising Customers through Delivery

Increasingly, companies that set themselves apart do so by devising innovative and creative

marketing and delivery channels. It is no longer possible to compete on product or price

alone. A number of eCommerce companies that we spoke with focused specifically on

curation-- helping customer navigate through a sea of product offerings.

Build Feedback Directly into the Order Flow

Many respondent companies focused on building feedback loops into every purchase that a

customer makes to improve their offering on a continuous basis. In addition, many devised

new and innovative ways for customers to give feedback within the post-purchase order

flow to decrease the friction in obtaining responses. This increased the number of responses

received, thus, helping to improve their offerings.

Focus on Unsexy Niches

Curation and customer feedback loops help to improve product/service and delivery, but do

not address customer acquisition and retention issues. Our research suggests that focussing

on smaller, unsexy niches of underserved customer bases can be an effective strategy to

gaining traction and market share.

14

Build Community Before Product

Build a community around your product/service even before it has been developed. Begin as

a forum or blog on a larger platform such as Facebook or WordPress. In doing so,

entrepreneurs thinking about serving a specific market can go beyond simply testing a

sample of potential customers, as outlined by the lean startup methodology, but actually

build a user base before having a product/service. Some larger companies that began as

blogging platforms have built-in ecommerce functionality to serve this specific demographic

of entrepreneur.

Use Mobile to Help Retailers Improve Their In-Store Experience

Larger retailers with brick and mortar locations focus on enhancing their multi-channel

experience. They have realized that their ecommerce websites can be used, not only to

attract online sales, but also to drive traffic towards physical stores, as well as improve the

in-store experience. This shift in focus has forced many retailers to rethink their online

presence, as well as invest in their mobile experience.

4) Finding and Recommendations for Consumer Mobile and Apps

Based on our analysis and findings, startups in consumer mobile and apps should:

Build a MLP (Minimum Loveable Product) instead of an MVP

Whilst many companies interviewed agreed with the MVP principle of the lean startup

methodology, they stressed the importance of building a minimum loveable product or

minimum desirable product as mobile app companies often have only just have one chance

to provide immediately utility to the user, especially in a sector where success is heavily

dependent on design and/or attractiveness.

Cosy up to Apple and Google

A high percentage of mobile users search for new apps by perusing the top selling apps

within the Apple and Google Play stores. To increase the chances of an app being featured,

companies must follow the submission guidelines for each app store, as well as foster

relationships with the app store category managers.

15

Build Trust

One point raised by a number of companies not considered in the lean startup approach, is

the importance of building and maintaining a customers trust. Mobile apps have the

advantage of being able to collect meta data about their users, push onscreen notifications,

and easily publish to social networks like Facebook and Twitter. However, users have high

expectations for privacy which must be respected.

Test Your Product Using Mobile Web

As noted previously, the lean startup methodology promotes continuous testing and

iteration. For mobile application this is a challenge because companies not only have to ask

users to download multiple versions, but also face app store penalties for releasing too

often, and can even lose online reviews when they submit a new version. Therefore, our

research indicates that companies should consider testing their product concept, navigation,

and workflows using mobile-web at first, before developing native applications. One

founder credited the use of a mobile website instead of a mobile app with saving his

company hundreds of development hours on an unnecessary feature.

Appeal to tech nerds

In the startup world, technologists are often early adopters and can be celebrities in their

own right with the power to influence other consumers. Therefore, as one company

interviewed stated, getting in the pocket of techies is key.

Go where your competition isnt

Many app categories and markets are oversaturated with indistinguishable offerings. If an

app spans many genres, consider entering a less populated app store category and/or

building traction in less attractive, underserved markets. One company interviewed brought

up the case of WhatsApp, which focused on dominating the European and South American

markets before turning its attention to the USA.

16

5) Situations Where the Lean Methodology is Less Applicable

As already noted above, we found numerous examples where the lean startup methodology was

critical to success. However, several interviews also revealed cases where lean startup principles are

difficult to apply:

Pharma/Biotech

The investment requirements in the pharmaceutical and biotechnology industries make it

virtually impossible for a company to produce an MVP with the intention of testing and

iterating multiple times. It can take years and millions of dollars to come up with one version

of a drug or medical device, which are both subject to strict regulatory requirements.

FinTech

The financial services industry is also heavily regulated, making it difficult to make fast and

regular changes to platforms that provide services for managing and/or transferring funds.

In addition, major players in this industry, such as banks and Visa and MasterCard, can be

slow moving, creating an unwanted drag effect.

Hardware

Often, a truly representative MVP of a hardware product can be expensive and time

consuming to produce at scale. Any changes to the design will have implications for the

parts and components that go into its production, and this cost will either be borne by the

company or its customers. Furthermore, each iteration effects the downstream supply

chain. Therefore, applying the lean startup approach to hardware companies can be very

complicated, time consuming, and costly.

17

CONCLUSION As highlighted in the findings and recommendations, many different factors contribute to startup

success, from the right combination of the founders to the correct application of lean startup

principles. This exploratory study showed that while merits exists for applying the lean methodology

and its tools to help start-ups navigate marketing and product development, cases and situations

emerged where the lean principles might not be the appropriate.

In addition to founders, venture capitalists also view lean startup methodologies as useful tools that

encourages startups to take small, careful, and cost-efficient steps to reach product-market fit,

which minimizes risk in the process.

Overall, this study revealed that complex process of transforming a startup into a successful

company cannot be completed following the lean startup methodology alone. In other words, there

is no a set formula or one-size-fits-all approach for success. Each venture must be built using its

own recipe of principles and strategies. One recurring theme from almost every interview is that the

lean startup approach is important and all start-up companies must be aware of it. However, it

should not be treated as a strategy, or a religion, but as a philosophy and a set of tools. Each

startup must be strategic and find its own approach, deciding which lean startup principles are

relevant to its specific needs and which other factors should also be considered.

18

REFERENCES - Bernstrom, A. (2011) 5 Things You Need To Know About Building A Successful Startup. Business

Insider. Available at: http://www.businessinsider.com/5-keys-to-startup-success-2011-5

[Accessed: 12th March 2014]

- Blank, S. (2014) Why Companies are Not Startups. Available at:

http://steveblank.com/2014/03/04/why-companies-are-not-startups/ [Accessed: 30th March

2014]

- Blank, S. (2013) Why the Lean Start-Up Changes Everything. Harvard Business Review. Available

at:

https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=29512&i=29514&cs=72931ba

a3b05f76aca8090b33db139b0 [Accessed 12th March 2014]

- Broughton, P. D. (2011) Book Review: The Lean Start-Up. Financial Times. Available at:

http://www.ft.com/intl/cms/s/2/8a022f32-de33-11e0-9fb7-

00144feabdc0.html#axzz2wwJ9cST0 [Accessed 15th March 2014]

- Broughton, P. D. (2010) Lean start-up thinking that works for all. Financial Times. Available at:

http://www.ft.com/intl/cms/s/0/30f3bcac-e07e-11df-abc1-

00144feabdc0.html#axzz2zPAQyVR7 [Accessed 15th March 2014]

- Burgstone, J. (2012) What's Wrong With the Lean Start-up. Inc. Magazine. Available at:

http://www.inc.com/jon-burgstone/flaws-in-the-lean-start-up.html [Accessed 15th March 2014]

- Carbonara, P. & Overfelt, M. (2000) The Dot-Com Factories Internet incubators say they're the

new way to create great companies. Their history and methods say, "Startups beware, or risk

getting caught in the gears.". CNN Money. Available at:

http://money.cnn.com/magazines/fortune/fortune_archive/2000/09/18/290065/index.htm

[Accessed 9th March 2014]

- economist.com. (2014) Tech Startups: A Cambrian Moment. The Economist. Available at:

http://www.economist.com/news/special-report/21593580-cheap-and-ubiquitous-building-

blocks-digital-products-and-services-have-caused [Accessed 17th March 2014]

19

- economist.com (2014) Tech Startups: Testing, Testing. The Economist. Available at:

http://www.economist.com/news/special-report/21593581-launching-startup-has-become-

fairly-easy-what-follows-back-breaking [Accessed 17th March 2014]

- economist.com. (2014) Accelerators: Getting up to speed. The Economist. Available at:

http://www.economist.com/news/special-report/21593592-biggest-professional-training-

system-you-have-never-heard-getting-up-speed [Accessed 17th March 2014]

- Fernandez, P. (2012) In Defense Of The Not-So-Lean Start-Up. FastCompany.com. Available at:

http://www.fastcompany.com/1817146/defense-not-so-lean-startup [Accessed 15th March

2014]

- Foundersatwork.com. (2012). What Goes Wrong. Available at:

http://www.foundersatwork.com/1/post/2012/10/what-goes-wrong.html [Accessed 30th

March 2014]

- Gage, D. (2012) The Venture Capital Secret: 3 Out of 4 Start-Ups Fail. The Wall Street Journal.

Available at:

http://online.wsj.com/news/articles/SB10000872396390443720204578004980476429190?mg

=reno64wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10000872396390443720204

578004980476429190.html#articleTabs_comments%3D%26articleTabs%3Darticle [Accessed

30th March 2014]

- Gobry, P. E. (2010) Go Ahead, Raise And Spend As Much Money As Webvan. Business Insider.

Available at: http://www.businessinsider.com/ben-horowitz-screw-this-lean-startup-stuff-

sometimes-you-have-to-spend-big-to-win-big-2010-3#!CgKLt [Accessed 11th March 2014]

- Hartman, K. (2013) The Lean Start-Up. How Todays Entrepreneurs Use Continuous Innovation to

Create Radically Successful Businesses. Summary of the Lean Start-up. Available at:

http://www.kimhartman.se/the-lean-startup-summary/ [Accessed 12th March 2014]

- Jackson, S. (2009) Research Methods and Statistics: A Critical Thinking Approach. 3rd edition,

Belmont, CA: Wadsworth

20

- Loizos, C. (2011) Lean Startup evangelist: Eric Ries is just getting started. Thompson Reuters.

Available at: http://blogs.reuters.com/small-business/2011/05/26/lean-startup-evangelist-eric-

ries-is-just-getting-started/ [Accessed 2nd March 2014]

- Malik, O. (2012) What history teaches us about startup incubators. Available at:

http://gigaom.com/2012/01/04/what-history-teaches-us-about-startup-incubators/ [Accessed

9th March 2014]

- McCorvey, J.J. (2012) Lean, but not so mean. Inc. Magazine. Available at:

http://www.incmagazine-digital.com/incmagazine/201112?pg=20#pg20 [Accessed 15th March

2014]

- McGinn, D. (2012) Too Many Pivots, Too Little Passion. Harvard Business Review. Available at:

http://hbr.org/2012/09/too-many-pivots-too-little-passion/ar/1 [Accessed 30th March 2014]

- Miller, P. & Bound, K. (2011) The Startup Factories: The rise of accelerator programmes to

support new technology ventures. Available at:

http://www.bioin.or.kr/InnoDS/data/upload/policy/1310018323687.PDF [Accessed 9th March

2014]

- nbia.org. The History of Business Incubation. Available at:

http://www.nbia.org/resource_library/history/ [Accessed 9th March 2014]

- Ohno, T. (1988) Toyota Production System. Productivity Press. p. 8.

- Poort, J. (2011) Lean Startups: The Most Efficient Path To Non-Differentiation

Launching Tech Ventures, HBS. Avaialble at:

http://launchingtechventures.blogspot.co.uk/2011/02/lean-startups-most-efficient-path-

to.html

- Ries, E. (2011) The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to

Create Radically Successful Businesses. Crown Businesses.

21

- Sharkey, M. (2013) 6 things wrong with the Lean Startup model (and what to do about it).

Venture Beat. Available at: http://venturebeat.com/2013/10/16/lean-startups-boo/ [Accessed

15th March 2014]

- Steiner, C. (2010) Ten Technology Incubators Changing The World. Available at:

http://www.forbes.com/2010/04/16/technology-incubators-changing-the-world-

entrepreneurs-technology-incubator.html [Accessed 13th March 2014]

- Wagner, A. (2011) Y Combinator: The Harvard Of Silicon Valley. Available at:

http://www.huffingtonpost.com/2011/06/09/y-combinator-harvard-silicon-

valley_n_874245.html [Accessed 9th March 2014]

- Zwilling, M. (2011) Top Startup Success Factors Include Some Surprises. Business Insider.

Available at: http://www.businessinsider.com/top-startup-success-factors-include-some-

surprises-2011-12 [Accessed 13th March 2014]

22

APPENDIX 1 Startups Interviewed

Company Interviewee Position

Alteryx Dean Stoecker Founder & CEO

Appirio Narinder Singh Co-Founder & CTO

Auction.com Jake Seid President

BabyJunk Tom Jones CEO

Climate Corp. Jim Ethington Vice President

CloudFlare Matthew Prince Co-Founder & CEO

Cobblestay Drew Graham Founder & CEO

CrazyEgg Neil Patel Co-founder

GameMix Ivar Chan CEO

Genesis Media Joshua Feuer CPO

GuestDoor Ian Reddy CEO

23

HipGeo Scott Daniel Founder & CEO

HomeAway Carl Shepherd CSO

HubSpot Bradford Coffey

VP Product Strategy & Coroporate Development

Innovid Tal Chalozin Founder & CTO

Itography Melissa Tyree Co-Founder

Lookout Mobile Kevin Mahaffey Co-Founder & CTO

Magoosh Bhavin Parikh Founder

Mavryx Max Bruner CEO & Co-Founder

Narvar.com Amit Sharma Founder & CEO

NatureBox Gautam Gupta CEO & Co-founder

Neuropace Frank Fischer Founder & CEO

On Demand Therapeutics John Santini President

24

OpenDNS David Ulevitch Fouder & CEO

PayPerks Jake Peters CTO

Placemeter David Fine on

behalf of Florent Peyre

5th employee

Egreetings Network Tony Levitan

Co-Founder & Former President

Qualaroo Jason Meresman VP Product & Cofounder

Red Clay Designs Ashley Etling

Design Director, Co-Founder

SavvyMoney Scott Crawford CEO

Scribd Jared Friedman Co-Founder & CTO

shopkick Cyriac Roeding Co-Founder & CEO

Shoto Sachin Duggal Co-Founder & CEO

Sqord Coleman Greene Founder & CEO

Stitch Fix Mike Smith COO

25

..and 26 other startups, Venture Capital funds and incubators/accelerators.

TaKaDu Amir Peleg Founder & CEO

Techonomy David Kirkpatrick Founder & CEO

Tuffwerx Eric Dreyer Founder & CTO

26

APPENDIX 2 Founders

# of Founders Funds Raised Alignment and Emotional Support

Notes

Being a sole founder is very hard

2 founders raise 2x more than 3 founders

3 founders raise 2x more than 1 founder

Teams with 4 or 5 founders tend to have more difficulty aligning

27

APPENDIX 3 Consumer vs Enterprise CONSUMER ENTERPRISE

Pivoted

Customer Development

MVP

Split Testing

Frequent Releases

Lean Startup Principles

Product-Market Fit

Metrics

Product vs Customer

Product Focus

Customer Focus

Enthusiasm For Lean