Lean Startup Versus Raising Capital

Lean Startup is about experimentation and learning. It’s about being intellectually honest and methodical in your approach. It’s about going slow before going fast. It’s about moving backward before moving forward.

Investing on the other hand is about storytelling and big vision. It’s also about proof and hockey stick traction.

So when raising money how do you balance this dichotomy?

Over the last few years as Lean Startup has grown in popularity, many startups went to raise money with the mantra, “We’re lean!” Throw in a pivot or two and boom, you were raising seed capital. Lean was (and is) a breath of fresh air for startups and investors, shining light on the harsh realities of building companies. Investors appreciated the more rigorous approach; they felt like they were being sold something more real…

But along the way something bad happened. Lean Startup got watered down and pivot got bastardized. Startups popped up over a couple days with no vision whatsoever; but pounding the Lean drum, they went out to raise capital anyway. A backlash grew amongst investors who, understandably, got tired of hearing Lean a thousand times over, with little else. I wouldn’t recommend walking into an investor pitch and saying, “We’re a Lean Startup,” it’s not going to go well. Frankly, I don’t think that was ever the right strategy.

The key is in blending awesome storytelling & big vision and practical, dirt under your fingernails strategy & tactics.

If you can’t tell a compelling story and tug on investors’ heart strings, you just won’t get their attention. A lot of founders aren’t natural storytellers, but it’s a skill you need to work on aggressively, because it makes a huge difference. Paint a great story, emote an immense vision, and you have a chance of drawing investors in.

At the same time, you can’t just wave your hands around, boldly say, “Imagine a world where…” and expect them to bite. I know a few people that can do that, but most of us can’t. So you need to get into the details–into the strategy and tactics–and show investors how you’re going to execute aggressively and intelligently towards your vision. That’s where Lean comes in. Lean Startup and Lean Analytics are all about strategy and tactics. They give us a practical guidebook on how to execute. You can paint an awesome picture, weave a fantastic story, share an immense vision, and then bring investors down into the details. Explain to them what you’ve learned and how you’re experimenting. Talk with confidence about the approach, and root it in more than just your own imagination. Use Lean principles and analytics to ground what you’re doing. The vision and story you paint will become that much more real when you demonstrate your ability to strategically execute and “get shit done” (with Lean Startup and Lean Analytics serving as the foundational guide).

Successful entrepreneurs can sell the dream and convince/demonstrate to investors that they’re ones to realize it (which is where the practical “stuff” plays a big part). That’s the key to blending storytelling and Lean, and in turn using Lean as an effective means of raising capital.