In the technology startup world, lean is a way of life.
Being lean is not just a mantra, to many technology startups it’s how they operate day to day.
“Running lean is a systematic process for innovating from Plan A to one that works before you run out of money,” said Ash Maurya, founder of Spark59 and author of Running Lean.
Most startups fail just like most products fail, Maurya told about 50 people gathered Thursday afternoon for a Lean Startup meeting at Geekdom, a San Antonio collaborative workspace at the Weston Centre downtown. Many of the entrepreneurs in attendance belong to the TechStars Cloud, which kicked off on Jan. 9 and is based at the Geekdom.
“The odds of success are really stacked against new products,” Maurya said. “I would suggest not focusing on the failure rate but focusing on this statistic: 66 percent change their product along the way. What separates a successful company is not finding that perfect plan but perfecting that plan along the way.”
Eric Ries coined the term Lean Startup and trademarked it. His 2011 bestselling book has a similar theme of Running Lean. Ries teaches about how to use build, measure and learn cycles to identify what customers really want.
Lean comes from lean manufacturing or lean thinking, Maurya said. The key there is eliminating waste.
Companies fail because they fail to find markets for their products and they fail to find the right customers, he said.
First, entrepreneurs need to ask themselves if they have a problem worth solving. They can do this by interviewing potential customers. Next, they must create a demo to put in front of a customer as quickly as possible. It’s also important to stay focused.
“We have this myth of the visionary entrepreneur,” Maurya said. “The most visionary of our times is Steve Jobs who recently passed away.”
But Apple has a string of innovation behind its successful products like the iPod, iPhone and iPad that goes back to the first Newton, a tablet computer that Apple built that failed twice.
But Maurya said that product development actually gets in the way of learning. The best way to learn is from customers and markets in the earliest stage.
“We get some learning at that point, but the real learning occurs when we release the product into the market,” Maurya said. “Lots of companies build something hoping there will be a market for it. That’s where they go astray.”
The Running Lean process shortens the time from idea to product release. The key to success is building a product people want and knowing how to listen to customers to adjust the product.
For example, if Henry Ford asked people what they wanted for transportation they would have said faster horses, Maurya said. But Ford was able to identify the hidden problem embedded in there. People wanted faster transportation and he was able to create an alternative.
“All the customers can do is tell you what their problems are,” Maurya said. “Define what that ideal solution is for them. That’s what running lean can be boiled down to.”
One of the most important parts of Running Lean focuses on the activities entrepreneurs do to engage with customers.
“You need to get out of the building and engage with customers throughout that development process,” Maurya said. “The answers don’t lie on your computer or in the lab. You have to engage with customers and talk with them.”
Startups need to run small experiments and find ways to do 10 to 20 releases in six months to refine the product and path to one that works.
“Business plans fall short,” Maurya said. “It goes from critical thinking to fiction writing. You start making up stuff. The format for a business plan is a bad one. We call it a form of waste in the lean terminology.”
So Maurya created a shorter version to distill down the most important concepts behind a startup. He calls it the Lean Canvas format. It’s a one-page adaptation of the original business model plans. To date, more than 8,000 startups have filled out a Lean Canvas format on his site. He’s also sold 15,000 copies of his book in a combination of PDF formats and traditional publishing. The second edition will be released in March.
“Because it’s a single page it gets conversation going whether it’s good or bad,” Maurya said. “ If you put it in front of someone they can’t help but read it.”
Startups are about risk mitigation initially. If an entrepreneur is trying to raise funding, it’s not about solutions yet, Maurya said. Investors look at your business model from a completely different lens.
“What we are doing here is taking a very complex product like building a company and breaking it down to its components in manageable sizes,” Maurya said.
Tag: TechStars Cloud (Page 3 of 3)
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Jason Seats, managing director of the TechStars Cloud, says hundreds of companies applied to the program. In the end, TechStars choose 11 companies. All of them are from outside of San Antonio. Seats is not revealing the company names until April 6th at TechStars Cloud Demo Day.
Nicole Glaros, one of the founders of TechStars in Boulder, will also move to San Antonio for the 13-week program with her family. Seats says the program will serve as the catalyst San Antonio needs to ignite its high-tech startup community. All of the companies will be located at Geekdom, a collaborative workspace at the Weston Centre in downtown San Antonio.
So many central Texas start-ups have taken off recently and some of them may need a boost to get to the next level.
This list of Austin and San Antonio incubators and accelerators help companies with a leg up in the marketplace.
Some of them have rigorous application and screening processes. Check them out to find the one that’s right for your venture.
Tech Ranch is a for-profit incubator founded in 2008 by Kevin Koym and Jonas Lamis. It offers co-working space for start-ups, consulting services and specialized programs to help entrepreneurs launch their ventures. Its flagship programs are Camp Fires, which are informal gatherings on Friday, Venture Forth, an 8-week program, and Pioneer Program, a weekly meeting coupled with monthly rent for office space.
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Capital Factory, founded in 2009 by Joshua Baer and Bryan Menell, is a seed-stage technology accelerator for startups. It runs a 10 week program that begins in May and runs through August. It ends with a Demo Day in September in which the companies pitch to potential investors, media and others.
TechStars Cloud is the newest accelerator for high-tech startups in the Silicon Hills area. It’s based at the Geekdom in downtown San Antonio. The inaugural class of TechStar Cloud companies kicks off in January. Each company receives $18,000 and access to another $100,000 loan. The 12-week program ends with a Demo Day.
Austin Technology Incubator, founded in 1989, has helped more than 200 companies. It’s part of the IC2 Institute at the University of Texas.
Texas Venture Labs at the University of Texas helps accelerate startup companies in central Texas.
SXSW Accelerator 2012 – this is the fourth year for this competition which features 48 start-up companies pitching to an audience of investors and experienced entrepreneurs. The judges then choose 18 finalists who give a final pitch and then the winners are chosen.
One Semester Start-up at the University of Texas debuted this fall. The companies will pitch to investors and others on Thursday. Professor of Innovation and Murchison Fellow of Free Enterprise Bob Metcalfe, Joshua Baer of Capital Factory and John Butler, Director of H.K. Entrepreneurship Center at the University of Texas head up the program.
This Friday, Ash Maurya, founder of Spark59 and author of Running Lean, is putting on a one-day workshop at Tech Ranch Austin. The program, which costs $249, starts at 9 a.m.
Other programs designed to spur innovation among the entrepreneurial mindset include:
The TechStars Cloud could serve as a catalyst to ignite 
San Antonio’s startup technology community.
That’s because ten new startups will locate here for the 12-week program, which kicks off in January. Also, Nicole Glaros, TechStar managing director, will move here with her family. She will run the TechStars Cloud along with Jason Seats.
On Saturday, about 120 applicants, mentors, funders and others gathered at Rackspace’s new collaborative workspace downtown, called Geekdom. The 15,000 square foot offices on the 11th floor of the Weston Centre will host the TechStar Cloud companies.
At TechStars for a Day, applicants listened to speakers and panel discussions about what it’s like to be a TechStars entrepreneur. They also networked. The program ended at 4 p.m. but many stayed until past 6 p.m. to drink Dos Equis and Shiner beer and chat.
Seats ran the TechStars for a Day program. People sat in bright red, black and white stools and chairs or on large red bean bags in front of a giant screen on which Seats projected the images of Glaros and TechStars Founder David Cohen, both located in Denver, via Skype. Glaros is in the last trimester of her pregnancy and can’t travel right now. But she gave sage advice and insight into the program.
“TechStars’ secret sauce is its mentors,” Glaros said, which include some of the best and brightest minds nationwide, she said. “These mentors are giving freely of their time to make sure these companies get to the next level.”
Glaros told the room to “put down your smart phones and start talking” and to “participate actively” to get the most out of the day. She also told them to “nail your elevator pitch. It should be two sentences and less than 30 seconds.”
“Don’t hog too much of anyone’s time,” Glaros said. “Keep conversations to five minutes.”
And on that note, Glaros’ broadcast froze. Seats tried to fix the connection, which prompted Rackspace Chairman Graham Weston to say “This is the only production in town where the guy running the show is also the audio and visual guy.”
The lean production speaks to the culture of the TechStars startups to do as much as they can on strict budgets. But all of the TechStar Cloud winners get money. They receive $18,000 and access to a $100,000 loan. They must relocate to San Antonio for the duration of the program, which culminates in April with a TechStars Cloud Demo Day, in which they pitch their companies to investors. Weston, Rackspace Founders Pat Condon and Dirk Elmendorf have provided the funding for TechStars Cloud for the next four years.
Cohen, also spoke to the group via Skype because his mother was visiting him. TechStars has already funded 100 companies of which nine have been acquired by larger companies and 14 have failed. Collectively, the startups have raised $100 million. Anyone can apply for the program, including foreign companies, as long as they obtain Visas. The program is about “a community” of expertise around funding technology startups, Cohen said. Successful entrepreneurs serving as mentors, combined with alumni and TechStar’s network of 75 venture funds and angels nationwide help to make the program a success, Cohen said.
“A large focus is on quality,” Cohen said. TechStars provides 10 mentors to one company, he said.
“Our goal is to make every single company we fund successful,” Cohen said.
The two biggest startup killers are lack of a market for a product and issues with the team, Cohen said. TechStars mentors can help with those issues because they have faced them before in their own startups. To succeed, the companies need to “be the best in the world at what you do,” Cohen said.
Trying new things, failing and learning from the mistakes are some of the biggest advantages startups have over large and well funded companies, Cohen said.
In response to a question from the audience, Cohen said the biggest misconception about TechStars is it’s “only for very young companies or 21 year old white dudes.” The average age of a applicant is 31 and the age range of TechStar entrepreneurs is generally between 22 and 42 years old, although they’ve had older entrepreneurs, he said. Lots of companies are already established in a market but need help getting to the next level, Cohen said.
“Many companies come into TechStars with $1 million in revenue or $1 million in funding,” he said.
The inaugural TechStars Cloud program focuses on “companies that are building the cloud and not building on the cloud,” Cohen said. The cloud provides companies the ability to deliver computer services online.
After the overview of the program and advice from Cohen and Glaros, Seats introduced Weston to the crowd.
“The legacy of this man is going to be all about this town,” Seats said. “Graham Weston has done more for this town than any single man since Davy Crockett.”
Rackspace knows how to help startups because it was one not too long ago.
At a San Antonio hamburger joint in 1998, Weston and his partner Morris Miller met with three Trinity University students, Elmendorf, Condon and Richard Yoo, the founders of Rackspace, a startup hosting company. Rackspace has since evolved into a publicly traded hosting giant with $1 billion in revenue and nearly 4,000 employees. It is San Antonio’s largest technology company and Weston, Elmendorf and Condon want to create more like it.
Weston, referencing the book “The Coming Job’s War,” said most of this country’s net new jobs are produced by companies less than five years. Startups are fueling the country’s economic growth now and into the future, he said.
Then Weston gave a pitch on the city’s shining attributes that would have made the Greater San Antonio Chamber of Commerce proud. He mentioned the city’s low unemployment rate and huge medical and biotechnology industry, which is larger than the tourism industry. He touted the city’s rapidly developing urban life with thousands of apartments and condos being built in the downtown area and the city’s 68 miles of bike trails and 11,000 acres of urban parks. San Antonio has affordable housing, Weston said.
“You can buy a great house for less than $200,000,” he said.
San Antonio has the benefits of a large city, but the feel of a small town, Weston said. It’s kid friendly and a great place for families, he said. He also mentioned the city’s 31 higher education institutions and 100,000 students and its thriving arts community.
The city also has five Fortune 500 companies and a few large private companies like USAA and HEB. The startup community in San Antonio is poised to take off, Weston said.
“The founders and I are determined to create the next Rackspace over the next 20 years,” Weston said.
Weston then introduced Seats, who founded Slicehost, which Rackspace acquired in 2008. Rackspace’s cloud revenue has grown from zero to $200 million since that acquisition, Weston said. One of the requirements of the acquisition was that Seats move to San Antonio, Weston said.
“He’s the sort of entrepreneur San Antonio needs more of,” he said.
Seats has an office in Rackspace’s Geekdom and is looking forward to helping other entrepreneurs succeed with their ventures.
In addition to the entrepreneurs, Ned Hill, a venture capitalist with DFJ Mercury in Houston, gave the audience advice on how to seek funding. DFJ Mercury provides investments ranging from $50,000 to $1 million and has $110 million under management. One of DFJ Mercury’s hot portfolio companies is Austin-based Game Salad, which allows anyone to create a game for a variety of devices without knowing any coding.
Hill often gets asked “How do I choose the right VC?” He says “The right VCs are easy to spot. They are the ones writing the checks.”
He told the entrepreneurs to be flexible and persistent.
“You’ve got to be really good at telling your story,” he said. VCs invest in ideas that make sense and have value and in people who are passionate and know their market better than anyone, he said. “Vision, passion and drive,” Hill said. “Let it shine though. Don’t give up, make it happen.”
Deals can take only a few days or up to a year to get funded, he said. DFJ Mercury likes to own at least 20 percent of the company upon exiting the investment. VCs like to see the opportunity to earn ten times their investment when they give a company money, but most deals don’t earn anywhere near that, he said.
He advised the entrepreneurs to always be thinking about their exit strategy, especially if they receive funding.
“You can’t be in it for the lifestyle,” he said. “If you’re not able to sell a company in five to seven years then you’ve got a problem. Try to exit your business within five years.”
Elmendorf told the group that one of their greatest strengths was not knowing a lot.
“You literally have no idea how hard it is what you’re trying to do,” he said.
But that’s ok, and failing is also Ok, he said.
“As long as you keep doing this, it’s a learning process,” he said. “Failing is totally awesome as long as you don’t stop. If you stop and go get a real job, then you’re a failure.”
Starting a company is a “messy, hard endeavor,” Elmendorf said.
Startup companies need to know what problem they are trying to solve. It’s easy to get sidetracked, so entrepreneurs must constantly focus and ask themselves what they’re trying to work out, he said.
Entrepreneurs often play multiple roles in the organization early on, but they’ve got to spin those off and hire more people as the organization grows.
“I was HR because I had the most jobs,” Elmendorf said. “I slowly carved off the other things that weren’t related.”
Other panel discussions and talks featured former Techstars entrepreneurs, some who succeeded and others who did not.
Don’t be afraid to try something that doesn’t work out, said Josh Fraser, founder of EventVu and Torbit. He shut down EventVue after three years in February of 2010. EventVue created an app that allowed people to network at conferences. After closing up shop, he started getting calls from Facebook and other large companies that wanted to hire him. He also got calls from former investors who wanted to know what he was working on next. He’s now founder of Torbit.
Donning a brown stetson and cowboy boots, Lance Walley founder of Chargify and a TechStars Cloud mentor, talked about customer acquisition and pricing.
“Pick a niche and charge enough for your products,” he said. “If you know who your customer is, you can acquire them.”
In a later panel featuring other TechStar mentors, Rackspace Founder Condon said that narrowing the market and focusing the product on a specific customer is the best way to succeed.
“You have to say no to a lot of folks,” he said.
The application deadline for the Rackspace TechStars Cloud program is Monday, Nov. 7.