The Lean Startup Summary That Helps You With a Successful Fundraising

When it comes to raising money for your business venture, it can be a bit daunting.
Even if you’ve heard of the concept before, figuring out how to go about it and what exactly you need to do first can be overwhelming.

Luckily, there is a succinct summary available that helps you successfully fund your business venture. That’s right, with the Lean Startup methodology , raising capital isn’t just easier — it’s also faster and more efficient too.

The Lean Startup method is a way to test your business idea as fast and cheaply as possible. It’s not just for software startups. Anyone can use it, whether you have an existing business or not.

Most businesses need time to build up a customer base before they can make any profits. Testing your business before investing more time or money is also known as being “lean” or enterprise-friendly.

In this article, we discuss what the Lean Startup is and how it can help you raise money for your business venture.

What is a Lean Startup?

A startup is an organization committed to innovating in the face of great uncertainty, according to Eric Ries. This holds true whether there is simply one individual working in a garage or several seasoned employees in a boardroom of a Fortune 500 company.

A lean Startup is an approach to business that combines an entrepreneurial mindset with the rigor of scientific methods to create high-growth businesses.

It is based on “validated learning,” rapid scientific experimentation, and a number of counterintuitive practices that shorten product development cycles, measure actual progress without turning to vanity metrics, and discover what customers really want.

It was inspired by the lessons learned from lean manufacturing. It enables a business to quickly change course, revising plans millimeter by millimeter and minute by minute. This methodology takes an iterative approach to product development.

Lean Startup also emphasizes testing hypotheses through validated learning to create high-growth businesses. Lean Startup is an approach to creating high-growth businesses.

It’s an entrepreneurial methodology that combines rigor with an experimental mindset to create high-growth businesses.

Which Investors use the Lean Startup Methodology?

Venture capitalists are usually hesitant to invest in the startup when there has been absolutely no client validation as explained in this article.

If businesses have initially focused on building a technology for a few years without paying attention to client needs, they, according to investors, frequently come to the conclusion that their products do not meet their target markets after spending years of resources and time on research and development.

As a result, they fail. Due to the fact that the lean startup approach offers confirmed hypotheses that have been tried out on clients, it is said that this possibility is reduced.

In a study conducted on investors a few years ago in the Netherlands, the investors did contend that because the customer is involved early in the development process, they expected businesses utilizing lean startup to get their product to the point of market penetration faster.

The approach is also thought to be a capital-effective strategy to reach product-market fit because the earlier customers are brought into the development process, the sooner an entrepreneur can determine that a pivot is necessary and no more resources are wasted.

What are the key learnings of the lean startup approach for a successful fundraising? We discuss three main points below.

Key Learning 1: Eliminate Waste and Produce Real Value Through Validated Learning

You want to raise money for your business, and you want to do so as quickly and efficiently as possible. That is why you are looking towards the Lean Startup methodology. The first key learning of the Lean Startup method is to eliminate waste and produce real value through validated learning.

You want to eliminate anything that is not adding any value whatsoever. Through validated learning, you want to ensure you are creating true value for your customers. Delivering a product or features that no one wants constitutes waste in a startup.

For instance, your employee might feel incredibly productive if they spend many weeks programming a new feature. What if none of your consumers truly use or want that feature, though? Then all those programming hours were actually a waste. This type of “wasteful productivity” is typical in startups.

Validated learning, according to Eric Ries, is the answer to this kind of waste. Validated learning is a method for evaluating your product’s worth and quality from the viewpoint of your customers.

With verified learning, you can quantify the effect of each new product update. Utilizing metrics, tests, and experiments, you’ll truly quantify it.

Key Learning 2: The Leap-of-Faith Assumptions: Test Your Value and Growth Hypotheses

The second key learning of the Lean Startup method is the leap-of-faith assumptions. The leap-of-faith assumptions in a startup plan are the most riskiest ones. The value hypothesis and the growth hypothesis are the two most crucial assumptions.

These result in tuning variables that manage a startup’s growth engine. An attempt is made to rev this engine during each iteration within the startup to see whether it will turn. Once it is up and going, the procedure is repeated while accelerating steadily.

Leap-of-faith example (will make or break your company): One of these bets in the iPod industry was that consumers would pay for music. Another example was that for Zappos.com whether people buy shoes online or not.

You cannot be certain that you truly comprehend any aspect of the business challenge until you have first-hand experience with customer yourself. One rule is to get out of the building as only outside the office we have access to the information about the customer that we need.

Key Learning 3: Develop a Minimum Viable Product to Test Your Idea in the Market

The third key learning of the Lean Startup method is to develop a minimum viable product (MVP). You want to develop a MVP in order to test your idea in the market.

According to Eric Ries, you should attempt to launch a basic version of your product BEFORE you believe you are prepared. An MVP is this as we explained further in this post with the example of Dropbox.

This is crucial because startups who wait until their product is “done” before releasing it to customers frequently discover that they wasted months or years producing something that no one wants. Ries was desperate to avoid repeating his early startup mistakes because this is exactly what happened.

The main point: Even if you don’t believe your product is ready, release a basic version to the public (or to a limited number of customers). You can start learning from the analytics and feedback from your customers by creating a minimum viable product. You need to know this information in order to create products that consumers truly desire to use.

Investors would like to see a good product-market fit and a tested and validated MVP with customer feedback can be informative. It helps to de-risk the main elements of the business model and dramatically reduce the risk of startup failure.

Wrapping Up

The Lean Startup method is a framework that helps you raise money for your business. This method is a complete rigor and methodology that helps you eliminate waste, produce real value through validated learning, and develop a minimum viable product to test your idea in the market.

The Lean Startup gives business owners of all sizes an alternative to wasting time on time-consuming business plans by giving them a mechanism to continuously test their ideas and make changes before it’s too late. This step-by-step approach can also help investors to de-risk the startup and evaluate, based on key metrics, whether it is ready for investment or not.