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THE GUIDE IN BRIEF

Is the lean startup still a good idea?

DANIELE SIMONELLI for Quartz
Published Last updated This article is more than 2 years old.

💡The Big Idea

Entrepreneurs are told to focus relentlessly on finding “product-market fit” but it’s blinding them to all the other ways their businesses can fail. Here’s the TLDR on our latest member-exclusive field guide on the lean startup.


🤔Here’s Why

1️⃣ The “lean startup” taught entrepreneurs that the key to success was testing and customer feedback.

2️⃣ But the extremely public stumbles of WeWork, Theranos, Uber, and others have drawn new attention to the many ways in which startups can go awry.

3️⃣ To succeed, founders need more than “product-market fit”—they need to put more focus on people and teams.

4️⃣ Right now, Covid-19 is presenting new challenges for startups

5️⃣ but experiments in online fundraising could help them weather the storm.


📝 The Details

1️⃣ The “lean startup” taught entrepreneurs that the key to success was testing and customer feedback.

The architects of the lean startup, Steve Blank and Eric Ries, argued that entrepreneurs should prioritize talking to customers and adopt an iterative approach: building “minimum viable products,” running experiments, collecting data, and “pivoting” as necessary in search of “product-market fit.” Borrowing from the concepts of lean manufacturing, agile development, and design thinking, they preached a bias toward action and promised to turn entrepreneurship into a science—or at least something like it. By doing so they would help more startups succeed.

2️⃣ But the extremely public stumbles of WeWork, Theranos, Uber, and others have drawn new attention to the many ways in which startups can go awry.

In some of these cases, companies that seemed to have product-market fit found other ways to fail, by scaling too fast, creating and tolerating toxic cultures, and even engaging in fraud—all papered over, at least for a time, by massive amounts of venture capital flowing into the startup sector. As important as customers are, successful startups also require strong organizations, technologies, and strategies.

3️⃣ To succeed, founders need more than “product-market fit”—they need to put more focus on people and teams.

Jim Barksdale, the former CEO of Netscape, used to say that “We take care of the people, the products, and the profits—in that order.” Many startup failures and scandals of the past few years can be traced to ignoring that philosophy. By the time founders realize the importance of culture, of management, and of treating employees well, it’s often extremely difficult to fix what’s gone wrong. That’s often when the board decides it’s time to bring in a new CEO.

4️⃣ Right now, Covid-19 is presenting new challenges for startups.

Plunging consumer demand and the prospect of an extremely sharp and possibly very protracted global recession threaten to put countless startups out of business. Quartz reviewed advice from VCs, drew on some lessons of past crises, and organized our findings by topic. In summary: Close any fundraising currently in progress, recalculate your burn rate, start cutting costs, over-communicate with both employees and customers, clarify roles on your team—and don’t lose hope.

5️⃣ Experiments in online fundraising could help them weather the storm.

Y Combinator, the prestigious Silicon Valley accelerator, was forced to ask its most recent startup cohort to do their demo day online. The decision was made out of necessity but, like so many other things that the coronavirus has affected, it could end up having permanent effects. Y Combinator has a strong incentive to ensure that this year’s batch of startups receives as much funding as previous years. If it can figure out how to do a demo day remotely, it could alter the way startups around the world pitch investors.