Eric Ries, the Face of the Lean Startup Movement, on How a Once-Insane Idea Went Mainstream

7/6/11Follow @wroush

(Page 2 of 5)

get people to pay you to do stuff, but on the Internet no one knows you’re a dog. That was very cool. But at that time, entrepreneurship was not a concept I was even aware of. It wasn’t until I got to college and the dot-com bubble just swept through everything that the idea even occurred to me.

I was [at Yale] from ’96 to 2000. By ’98, things were just crazy, the stuff we were reading at magazines. The magazine stories were like, two college kids walk into some VC’s office and say “I need $10 million,” and they get it, and a year later they have something worth $100 million. My friends and I were like, why aren’t we doing that?

The failure of Catalyst Recruiting, and the lessons learned:

We had this idea to have college students create online profiles for the purpose of sharing. So it sounds promising, right? Except that our idea was that you would create those profiles and share them with employers, whom we would then charge for access to the best college students. On the face of it, it was not a crazy idea. It was certainly in the vicinity of things that turned out to be really valuable later, but we had no idea what we were doing. The idea of building a company—they don’t cover that in the magazines. Entrepreneurs only fail at one speed, which is full speed into the wall, leaving a startup-shaped cutout. That was us. The proximate cause was when the dot-com bubble collapsed, we couldn’t raise more money. All of a sudden [our investors] wouldn’t take our phone calls. They were just gone. And we had built a company that had the expectation of further funding. We didn’t have any revenue. We just didn’t know what we were doing. It was a very dot-com-style failure.

I didn’t understand until later what a good learning experience it was. At the time, it was hard, it was really depressing. I was very upset. I felt very embarrassed. I had put all of my social and political capital into this thing. I had promised all kinds of people that this was going to be a big success. My roommates were employed there. We always joke—we had the first two-thirds of The Social Network experience. It was just like the movie. But the part where anything good happens, we never had that. But this was actually a good experience, because so much of what I work on with entrepreneurs now [is similar]. When you are on the brink of failure, it often looks just like the movies. You always expect that that customer will walk in magically, just in the nick of time, just like in the movies. But hey, you know what? They don’t.

Ries’s years at There, founded by Will Harvey in 1998 to build 3D social virtual worlds:

I was hired as a regular software engineer. My very first job was about the coolest job you could ever have. Literally, on day one, my first assignment was to build a jet pack. I was in heaven. I started out building objects and content but pretty soon I was helping to build the core system. But [There] is such the classic Silicon Valley failure story. A ton of money, stealth R&D, years of development, an amazing product with the biggest-bang launch you can imagine. I mean the company had 200 employees by the time it launched, so it was really maladapted to the results that followed, which was a vigorous early adopter response but zero mainstream adoption. Early adopter success was judged to be a failure and the company was in real trouble.

Every company has to cross the chasm. We didn’t believe in the chasm. We thought we could just start with mainstream customers. There were actually no products in history that had the kind of response we were looking for. We used to say stuff like, “We want to be the next Microsoft, the next AOL.” And we were building the kinds of products a mature company might build. But if you go back and look at version 1 of AOL, every product goes through its adoption phases. There is no skipping a grade. It’s not like we debated this internally, we just had these beliefs—I call them “shadow beliefs” now—that we never spoke out loud.

There was a perfect science experiment for disproving the hypothesis that if you just have a strong enough vision, a cool enough product, and smart enough people, everything will work out. Because it didn’t. That was a high profile and embarrassing failure. If you can cast a reality distortion field onto the press and onto the influencers to tell everyone this is the future, then they move on to a new thing if it turns out that was wrong. But you were the guy who said this was going to be the future. That’s very embarrassing.

The founding of IMVU, and the first inklings of the Lean Startup method:

If you look at the failure of Catalyst Recruiting and the failure of There, they are very different. There were two orders of magnitude of difference in the amount of money that was lost, the size of the company, the level of technology. But in the heart of hearts, it was kind of the same mistake. It was working forward from the technology instead of working backward from the business results you’re trying to achieve. So we said let’s just not do that again, let’s do something different.

So I was really primed to be thinking about new ideas. And to want to change the culture, change the values, change the system of the company. My co-founders believed in me enough to say … Next Page »

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

Single Page Currently on Page: 1 2 3 4 5 previous page

By posting a comment, you agree to our terms and conditions.

  • Pingback: Eric Ries, the Face of the Lean Startup Movement, on How a Once-Insane Idea …

  • Concerned Reader

    Sick of this guy those who can’t do….teach.

  • http://www.xconomy.com/author/wroush/ Wade Roush

    @Concerned Reader — Ries may be overexposed, but I don’t think you can write him off as a practicing entrepreneur so easily. IMVU is a pretty successful company, with $22 million in revenues last I checked. Ries has constructed a *very* successful one-man business around his speaking, writing, and consulting work. And he surely will be able to raise as much venture funding as he wants, once he decides to get back in the game. I’d say it’s important for those who *can* to stop *doing* occasionally and share what they’ve learned.

  • http://www.chasminnovations.com Robert DiLoreto

    Wait…now that we built it leveraging Lean Start-up principles…”THEY WILL COME?”

    I understand the “Customer Development” component of Lean Start-up…but am still missing ideal strategies to generate new customers and users, especially for B2B startups providing a “disruptive technology/solution”

    It sounds like all you now need to do next is implement a sales/marketing 2.0 tool, add a “PRICING AND PLANS” section on your website and hire some internal telemarketers?

    Possibly a single point of potential failure to rely only on this strategy?…Should these start-up’s also target big company “C-Suites” and communicate their value prop towards “C-Suite” sponsored initiatives? Should a “top down” sales approach be ignored? “Bottoms up” / viral approach only?

  • Pingback: From Yalie ‘disaster’ to startup guru « 06520

  • Pingback: Steve Blank Hands A New Owner’s Manual to Startup Founders | Xconomy

  • Pingback: Lean Startup | Stephen Darori Early Stage Threshold Curve Model

  • Sam J

    Arm yourself with decades of business wisdom within 2 daysChk out http://www.TheBillionairesBrain.com