“Skateboards?”, you might be asking yourself? Yes, I might answer you, “skateboards”.

You might then ask, “But don’t Lean Startup and Customer Development only pertain to technology startups?”

While I could outline why I have a passion for applying Lean Startup thinking to all sorts of domains outside of technology startups — I thought Nick’s own words speak volumes.

(Nick has allowed me to share our conversation over Facebook, which I have annotated slightly.)

Nick Jones:
Hey Patrick–Thanks for putting the Entrepreneurs Guide to Customer Development out there! It’s helped me with both longboard customers, and growing a user base for my skate-app! Looking forward to your next book!

Patrick Vlaskovits:
awesome. great to hear. would love any specific stories about how it helped.

Nick Jones:
It helped me with the boards by pushing us to define our actual target customer, and getting a little more precise with our product-market fit.

We were under the assumption that our eco-friendly board was a “one size fits all” product, which was complete BS. We were using google/facebook ads and targeting everyone from teenagers, to age 40-50 athletic/outdoor men.

[This is the default belief upon which many entrepreneurs first operate.

Who wants my product? Everyone.  WRONG! 

With The Lean Entrepreneur we hope to stamp this out once and forever.]

After 18 months of basically shooting for every possible skate demographic under the sun, breaking even, and marketing to skate shops nonstop, we decided to drill down and only market to two key groups.

One was the new entrants to the sport, the other was ppl who liked #Longboarding or #Skateboarding, and #Recycling on facebook. So we hit those two groups hard with ads, and sales grew by 2.5x in a 2 month period.

[As Brant Cooper often notes, think 'small' to get big.]

Of course we realized that these were our 2 biggest segments based on returns from our previous ad spends, but we were skeptical about ONLY marketing to them. We haven’t looked back since, now we’re hitting them hard, as well as only marketing to small handmade/funky/quirky retail shops.

[A product and segment are a dyad. Like two puzzle pieces, they have to fit without being forced.]

Stings a little bit to not be killing it with skate shops, but having a high return with the quirky shops helps ease the pain. We estimate that 70% of our customer’s first board is a Lavish one, so moving forward we’re slowly rolling out more advanced models for the riders looking for a more intense experience (downhill/freestyle).

[This shows strong understanding of their segment.]

Whenever we design a concept board, we email just 10 cruiser-customers to hear their response on it, usually around 4 are interested and willing to pre-order. So I guess my major takeaway would be committing to segments, and not thinking our board is a one size fits all type product.

[Sounds simple, right? Certainly simple, but not easy. Kudos to Nick for getting this far. The future of Lavish Skateboards is a bright one.]

Brant Cooper’s and my next book, The Lean Entrepreneur takes Lean Startup to the mainstream. Expect more stories about how a Lean Startup approach moves the needle in businesses big and small.

PS You should order The Startup Pack so you can get video tutorials on how to segment your market properly.

This is a mistake, one that demonstrates misunderstanding of the term.

A Minimum Viable Product is a triad.  It is composed of:

• The hypothesis/objective you are trying to learn
• from the target market segment you are trying to learn about
• and the form it takes to achieve that learning

Stay away from the mediocre middle. Cognitive dissonance is painful.

“We aren’t losing deals to other VCs, we are losing deals to startups that continue to bootstrap.”

-anonymous venture capitalist lamenting the state of affairs to me

We’re now long into a new startup reality. One that will be characterized by constant change. The rules of the game are changing, the disruptors themselves are being disrupted, and tactics that worked a few years ago are now nothing but useless cruft.

By now, it isn’t news that the new startup reality is more global (eg Estonia, Israel, New York), more social/crowd-y (eg Twitter, Meetup, Kickstarter)  more inexpensive (eg RoR, AWS, AppFog, Google Apps), more distribution/platform-based (eg App Store, Google App marketplace, App Exchange, Pinterest), more metrics-driven (eg Lean Startups, KissMetrics, Unbounce) and savvier (keep reading) than ever before.

In future posts I will get into what I think is really happening in terms of startups and innovation from a 1 million foot-level, but for now, I am interested in expounding upon is how the confluence of the factors listed above is shifting the balance of power between entrepreneurs and investors, while still favoring the moneymen and money-women, to more and more to the side of the entrepreneurs.

The great investors already grok this — the not so-great are about to be a whole helluva lot pain as they attempt to remain relevant in order to get a seat at the Good Deals table.

Simply put, in the new startup reality, today’s savvier entrepreneurs, with more flexibility in financing (Kickstarter anyone?), are no longer assuming investors’ value-add (sans money) – but are actively verifying that a value-add exists and making sure that they get investors who add considerable non-monetary value or pressing investors who don’t, to provide better financing terms. And in some cases, intentionally pursuing “dumb money”.

To recap, a non-exhaustive, and non-mutually exclusive, list of how an investor can add value (ostensibly) to your startup:

Their Network

You want this investor to invest in you because their network is relevant to your startup. Not only is it high-quality and far-reaching, it goes beyond simple introductions because they possess a singular ability to make people in that network actually do their bidding…for you.  <—- Read this again. And again. This is rare.

While many investors claim this – very, very few actually can deliver on this promise. Today’s entrepreneurs, unfunded and funded alike, are comparing notes on these claims. Does Jane McVentureCapitalist get her calls or emails returned? Can she force, cajole or beseech people to do her bidding on your behalf?

(Inversely, such investors see a natural fit to leverage and hedge their investment in you and your startup vis-à-vis their network.)

The Signaling Effects

This investor is a high-quality brand-name. You should trade on their name for the high-value signaling effects it provides. Broadcasting that you are funded by such an investor makes it radically easier to hire top talent, to create a perception of stability and fait accompli success, to make deals with potential partners, to get the attention of the press easily, and to sell your startup, amongst other things. It should be readily apparent to you who these investors are and who they aren’t.

Note: these brand names used to be the name of the actual VC firm, but now the brand value appears to be accruing to the actual partner.  This is not trivial.  See if you can suss out what that implies for your startup and for the other partners (perhaps those who don’t have a brand name) in the firm.

Pattern-Matching & Specific Domain/Phase

A particular investor has both deep and broad experience in the same space you are attempting to disrupt. Similarly, you are in or will be in a specific phase of company building that an investor has an unusual talent for – be it starting out or scaling hyper-growth or the sale of your startup.

(Recent) Startup operational experience

This investor has been around the block once or twice in a startup, they know your pain, your dreams and your reality better than you know it yourself. They’ve shed copious amounts of blood, sweat and tears to get across the finish line.

This is tricky — while many investors will claim both a) relevant operational experience and b) willingness to fight in the trenches with you — not many actually possess both. Also, this may swing the other way, you don’t actually want their hand on your steering wheel.

On the other hand, this is one that is relatively easy to verify via your entrepreneur back-channels.

Everything to Everyone

Watch out for this category. What is their value-add? Warning sign: they have discomfort verbalizing it and aren’t used to being asked about it. They’ll say it’s a little bit of everything. I don’t buy it, and neither do today’s savvy entrepreneurs.

Savvy entrepreneurs would rather take money from so-called “dumb money” that, at least: Stays the f*ck out of your way.

My sense is that great investors know precisely where and when they actually add value and also know how to stay out of your way, and not impede you with wind-bag advice and onerous ceremony and status re-enforcing ritual. “Dumb money” that knows it is dumb money isn’t so dumb in my book.

Summa summarum, based on my conversations with entrepreneurs and early employees, who have exited, whose startups are still in play, some funded and some not-funded —- they firmly believe that, in some cases, it is advisable to take “dumb money”, on good terms, that provides more value-add by staying out of their way and not pretending to be everything to everyone than it is to take money from the middle-tier folks who destroy value and waste your time by not delivering on their value-add promises.

It is the middle-tier investor class that may prove most dangerous, fickle and least valuable to your startup. They like to pretend they bring to the table an exploitable network, strong signaling, domain expertise, and operational experience – but rarely do – and by fooling you, they actually destroy value by wasting your time and sapping your creativity.

Head’s up. You’ve been warned.

PS Pre-order a copy of The Lean Entrepreneur.

Follow @Pv

@PatrickFoley @leanstarter @danmartell I was first to blog about it, but @pv and @hnshah helped conceptualize it.

— Sean Ellis (@SeanEllis) April 30, 2012

1) A Growth Hacker, like a “visionary”, is only anointed with the sacred oil of growth hacking ex post facto. Once, you have delivered huge and exponential growth in users/leads/sales, you are a Growth Hacker.  Before that, you are a Growth Rookie. <— ain’t nuthin’ wrong with being a Growth Rookie.

2)  Growth hacking comes after the early stage chaos and post-product-market-fit.  This bears belaboring: growth-hacking comes after most, if not, all elements of your business model have already been figured out and shown to work — especially, the paramount elements of your market segment (who), your value prop (what) and marketing channels (how).

Think about it. Sean Ellis, Growth Hacker extraordinaire and definer of the term, is famous for building a survey tool that attempts to quantify how close you are to Product-Market Fit!

Question: Why would Sean bother do that?

Answer: You can only scale growth once you have something to grow. (Yes, that is a tautology.)

So, all you startups crying for a Growth Hacker to join your startup pre-Product-Market Fit to effectively “rescue’ you; you simply don’t get it.  And no true Growth Hacker will join you.

Worse yet, when used outside the context of Product-Market Fit, the term Growth Hacker becomes the next meaningless lame startup jargon: Social-Media-Ninja-Rockstar-Blah-Blah.

3)  Growth hacking is fundamentally a creative activity.  Once you meet true Growth Hackers, like Sean Ellis or Noah Kagan, you see inherent in their personalities is a frighteningly powerful combination of creativity and analytical thinking.  Sounds easy, right?  All of you are thinking: “Wait a sec, I am totally creative and, like, super analytical! Mom always said so!”.

Great. I am happy for you.  Add millions of users and you too can be a Growth Hacker.

PS Contra Andrew Chen, growth hacking has absolutely nothing to do with if one is able to code or unable to code.  Defining a Growth Hacker by the ability to code is like asking for point guard in basketball who can also post up and bang down low.  Yes, Magic Johnson was a 6’9″ point guard who could play any position on the court, but you’d take a great point guard however you could get him or her.

So, all things beings equal, yes, you’d take a GH who is able to code over one who is not, but that dilemma almost never arises and/or is a great one to have.  (Read: You don’t have that problem.)

Not only are Sean, Hiten and me not considered technical, but most of the “Shadow Growth Hackers” I know, the direct-marketing/PPC/super-affiliate marketing — you know, the people who really control the internet, aren’t either.

PPS If you’re in Los Angeles on August 17th, come see Andy Johns’ talk on Growth. FWIW Andy has added hundreds of millions of users over his career.

PPPS Pre-order a copy of The Lean Entrepreneur.

Follow @Pv

A lot of thoughtful comments on the topic of mentoring — allow me to throw something into the mix:

I wonder how much of our advice is actually iatrogenic in nature. How often have we done our best to give what we thought was pure contextual gold, the hapless patie—- I mean, startup founder,
followed it to the letter and they became measurably worse off because it? Like a doctor accidentally prescribing the wrong medicine, we, unintentionally but well-meaningly, have caused damage or injury.

The concept of iatrogenesis for startup founders isn’t ever discussed in startup-land, but should be.

If you want to extend this line of thinking — how do startup incubators/accelerators measure & prevent ”nosocomial infections” between startups? In other words, how does one identify and prevent bad habits/practices from spreading amongst startups within the confines of an investment vehicle?

In the past, I have suggested to Bjorn and Max from Startup Genome think about this for their purposes. Someone please run with this.

PS — Go pre-buy The Lean Entrepreneur. Thanks.

Surf The Wave Art by @FAKEGRIMLOCK for The LeanEntrepreneur.co

It has been too long since I last blogged. This blog post will update you as to what Brant Cooper and I have been up to for the last few months, namely: finishing our new book, The Lean Entrepreneur.

We’re excited about The Lean Entrepreneur. It is a wholly new book that takes what we wrote about in The Entrepreneur’s Guide to Customer Development to another level, demonstrates the application of Lean Startup-like thinking in anywhere one desires innovation: social entrepreneurship, automotive manufacturing (ironic, right?), tech startups, music and artist development, and finance and investing, to name a few.

All of that, in it and of itself, is deeply interesting. But what we are most excited to cover in the book is the context and landscape of Lean Startup thinking.

Many a time, Brant and I have asked ourselves, “Why Lean Startup now? Why not 10 years ago? Or even 50 years ago?” The answers to those questions are explained by the coming social, economic and cultural sea changes we are rushing into headlong…whether we like it or not.

Think of yourself sitting on surfboard a hundred yards offshore, and a set of massive waves are visible on the horizon as they build towards the shore.

These waves are powered by the mobile internet and mobile devices, by the read/write digital fabrication technologies such as 3D scanning/3D printing, by “cultural technologies” such as crowdfunding, crowdsourcing and of course, by *Lean Startup-like methods themselves.

Currently mid-2012, we have only begun to feel the power of these disruptive waves. And when they start to converge upon the shore, suffice to say, we will be living in interesting times.

In the Lean Entrepreneur, we interview amazing entrepreneurs who are living in this future, and are kind enough to report back to us.

But back to the you on your surfboard – you have two choices:

1) You can paddle back to shore and build a fortification to protect yourself. (Think music labels in the last +10 years or so)

2) You can swallow hard, paddle farther outside (ie away from shore) and position your board and yourself to surf. (Think Lean Entrepreneurs)

If you choose 1) — you will be obliterated and washed away. Maybe not immediately, but certainly very soon. And when you do, it will be ugly; kicking and screaming the whole way.

Let me give you a contemporary example:

Entrepreneurial education (and education as we now know it) has just begun to feel the cold spray of this wave, and entrenched stakeholders aren’t happy about it. Direct competition like MIT OCW, New.edu, Udacity, Udemy and other learning platforms are going to displace traditional education. Moreover, hackathons like Lean Startup Machine and Startup Weekend are also disrupting entrepreneurial education. As are incubators — incubators aren’t just at the bottom of the investment ladder but also they are the top of the education ladder. Why go into debt for MBA, when someone will pay you to take a crack at a startup?.

Online learning platforms, hackathons, incubators are all initiatives that are surfing these waves, ie they have chosen 2). Now, listen for the unsheathing of the knives as those (eg student-debt-financial-industrial complex, tenured faculty, textbook publishers etc etc) in their fortifications find themselves about to be washed away.

Personally, I am very bullish about the prospects of unlocking human capital and creativity globally vis-a-vis this sort of disruption in education. This will make the world a better place, but the transition to this will be painful.

Now back to you: WHO are you? Where are you relative to these coming waves? Are you paddling out into deeper waters? Or are you scrambling to get to shore?

More on this later….

BUT TODAY you should get go buy The Lean Entrepreneur AppSumo Bundle while you can. It is 96% off, has a bunch of apps + pre-order of The Lean Entrepreneur.

*Yes, that is an argument for endogenous effects.

1) If you’re in the Los Angeles area, come by the next LeanLA meetup and see Jason Calacanis interview Eric Ries.  All attendees also get a copy of the The Lean Startup.  You should RSVP ASAP.

2)  I wrote an article that kind people at Harvard Business Review blog deemed fit enough to publish. My takeaway — it doesn’t really matter where your “vision” comes from (divine inspiration or customer feedback) — but you probably should check it against reality.  Henry Ford’s steadfast adherence vision to his vision served him well initially, when he found “Product-Market Fit” with the Model T, but when the markets changed, his vision no longer resembled reality.  Read the whole thing on HBR.  (Thanks to Brant Cooper, Eric Ries, Ben Yoskovitz, Sean Murphy & Steve Cheney for reading drafts and giving me their thoughts.  Much appreciated.)

Steven of CargoHawk has put together a suite of startup-themed t-shirts that I suggest you check out.

For example:

One of my favorite analytics tools, Crazy Egg, has it’s own shirt.

Notable investor and great blogger, Bred Feld, has Feld Thought t-shirts available too.

As well as a bunch more.  If you have a startup or startup themed project and want to promote yourself via t-shirts — get in touch with Steve.