How to Build a Lean Startup,
step‐by‐step #leanstartup
Eric Ries (@ericries)
h?p://StartupLessonsLearned.blogspot.com

Agenda What is a startup? • Why do startups fail? •
IntroducJon to the Lean Startup • Product Development in a Lean Startup • Specific techniques • – ConJnuous Deployment – Rapid Split‐tesJng – Five Why’s

What is a startup? • A startup is a human ins)tu)on designed to deliver a new product or service under condiJons of extreme uncertainty.
• Nothing to do with size of company, sector of the economy, or industry

Why do startups fail? • Rarely fail because the product doesn’t work • Usually fail because there are no customers
• Quality of the iniJal idea is not correlated with success • Startups that succeed are those that manage to iterate enough Jmes before they run out of resources • Time between these iteraJons is fundamental

The Lean Startup • Anything we can do to shrink the Jme between major iteraJons will increase the likelihood of success.
• Speed is the startup compeJJve advantage.

Lean Startups Go Faster • Commodity technology stack, highly leveraged (free/open source, user‐generated content, SEM).
• Customer development – find out what customers want before you build it. • Agile so]ware development – but tuned to the startup condiJon.

Commodity technology stack • Leverage = for each ounce of effort you invest in your product, you take advantage of the efforts of thousands or millions of others.
• It’s easy to see how high‐leverage technology is driving costs down. • More important is its impact on speed. • Time to bring a new product to market is falling rapidly.

Customer Development ConJnuous cycle of customer  interacJon Rapid hypothesis
 tesJng about market, pricing, customers, …  Extreme low cost, low burn, Jght focus  Measurable gates for investors h?p://bit.ly/tpTtE

A tale of two startups, revisited • Mirrors the changes in development methodologies over the past few years. •
Let’s look at those changes schemaJcally. • These examples are drawn from so]ware startups, but increasingly: – All products require so]ware – All companies are operaJng in a startup‐like environment

TradiJonal Product Development Unit of progress: Advance to Next Stage Waterfall Requirements Design
Implementa2on Verifica2on Maintenance Problem: Known Solution: Known

Agile Unit of progress: a line of working code “Product Owner” or
in-house customer Problem: Known Solution: Unknown

Product Development at Lean Startup Unit of progress: validated learning about customers ($$$) Problem: Unknown Solution:
Unknown

Minimize TOTAL Jme through the loop IDEAS LEARN BUILD DATA
CODE MEASURE

How to build a Lean Startup • Let’s talk about some specifics. These are not everything you need, but they will get you started
• ConJnuous deployment • Split‐test (A/B) experimentaJon • Five why’s

ConJnuous Deployment IDEAS Learn Faster Code Faster LEARN
BUILD Five Whys Root ConJnuous Cause Analysis Deployment DATA CODE Measure Faster MEASURE Rapid Split Tests

Continuous Deployment • Deploy new
software quickly • At IMVU time from check-in to production = 20 minutes • Tell a good change from a bad change (quickly) • Revert a bad change quickly • Work in small batches • At IMVU, a large batch = 3 days worth of work • Break large projects down into small batches

Cluster Immune System What it
looks like to ship one piece of code to production: • Run tests locally (SimpleTest, Selenium) Everyone has a complete sandbox o • Continuous Integration Server (BuildBot) o All tests must pass or “shut down the line” Automatic feedback if the team is going too fast o • Incremental deploy Monitor cluster and business metrics in real-time o Reject changes that move metrics out-of-bounds o • Alerting & Predictive monitoring (Nagios) Monitor all metrics that stakeholders care about o If any metric goes out-of-bounds, wake somebody up o Use historical trends to predict acceptable bounds o When customers see a failure: Fix the problem for customers o Improve your defenses at each level o

Rapid Split Tests IDEAS Learn Faster Code Faster LEARN
BUILD Five Whys Root ConJnuous Cause Analysis Deployment DATA CODE Measure Faster MEASURE Rapid Split Tests

Split‐tesJng all the Jme • A/B tesJng is key to validaJng your hypotheses •
Has to be simple enough for everyone to use and understand it • Make creaJng a split‐test no more than one line of code: if( setup_experiment(...) == quot;controlquot; ) { // do it the old way } else { // do it the new way }

The AAA’s of Metrics • AcJonable • Accessible
• Auditable

Measure the Macro • Always look at cohort‐based metrics over Jme • Split‐test the small, measure the large
Control Group (A) Experiment (B) # Registered 1025 1099 Downloads 755 (73%) 733 (67%) AcJve days 0‐1 600 (58%) 650 (59%) AcJve days 1‐3 500 (48%) 545 (49%) AcJve days 3‐10 300 (29%) 330 (30%) AcJve days 10‐30 250 (24%) 290 (26%) Total Revenue $3210.50 $3450.10 RPU $3.13 $3.14

Five Whys IDEAS Learn Faster Code Faster LEARN
BUILD Five Whys Root ConJnuous Cause Analysis Deployment DATA CODE Measure Faster MEASURE Rapid Split Tests

Five Whys Root Cause Analysis • A technique for conJnuous improvement of company process. •
Ask “why” five Jmes when something unexpected happens. • Make propor)onal investments in prevenJon at all five levels of the hierarchy. • Behind every supposed technical problem is usually a human problem. Fix the cause, not just the symptom.

There’s much more… IDEAS Learn Faster Code Faster LEARN
BUILD Split Tests Unit Tests Customer Interviews Usability Tests Customer Development ConJnuous IntegraJon Five Whys Root Cause Analysis Incremental Deployment Customer Advisory Board Free & Open‐Source Components Falsifiable Hypotheses Cloud CompuJng Product Owner Accountability Cluster Immune System DATA CODE Customer Archetypes Just‐in‐Jme Scalability Cross‐funcJonal Teams Refactoring Semi‐autonomous Teams Developer Sandbox Smoke Tests Measure Faster MEASURE Split Tests Funnel Analysis Clear Product Owner Cohort Analysis ConJnuous Deployment Net Promoter Score Usability Tests Search Engine MarkeJng Real‐Jme Monitoring Real‐Time AlerJng Customer Liaison PredicJve Monitoring

The Lean Startup • You are ready to do this, whether you are: – Thinking of starJng a new company, but haven’t
taken the first step – Are in a startup now that could iterate faster – Want to create the condiJons for lean innovaJon inside a big company • Get started, now, today.

Thanks! • Startup Lessons Learned Blog – h?p://startuplessonslearned.blogspot.com/
• The Lean Startup Workshop – An all‐day event for a select audience – May 29 and June 18, 2009 in San Francisco – h?p://training.oreilly.com/theleanstartup/ • Other upcoming events – h?p://bit.ly/b9w1y