Talk given at Webstock 2010 in Wellington, New Zealand Feb 19, 2010.

1. The Lean Startup#leanstartup Eric Ries (@ericries) http://StartupLessonsLearned.com

2. Entrepreneurship = Awesome It is the best time in the history of the world to be an entrepreneur Costs are falling in all industries Barriers are being destroyed Disruption and chaos are everywhere

3. Why build a startup? Only entrepreneurship combines these three elements Change the world Build an organization of lasting value Make customers’ lives better

4. Most Startups Fail

5. Most Startups Fail

6. Most Startups Fail

7. Most Startups Fail But it doesn’t have to be that way. We can do better. This talk is about how.

8. What is a startup? A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. Nothing to do with size of company, sector of the economy, or industry

9. Entrepreneurship is management Our goal is to create an institution, not just a product Traditional management practices fail “general management” as taught to MBAs Need practices and principles geared to the startup context of extreme uncertainty Not just for “two guys in a garage”

10. The Pivot What do successful startups have in common? They started out as digital cash for PDAs, but evolved into online payments for eBay. They started building BASIC interpreters, but evolved into the world's largest operating systems monopoly. They were shocked to discover their online games company was actually a photo-sharing site. Pivot: change directions but stay grounded in what we’ve learned. http://startuplessonslearned.blogspot.com/2009/06/pivot-dont-jump-to-new-vision.html

11. Speed Wins if we can reduce the time between major iterations we can increase our odds of success

12. A Tale of Two Startups

13. Startup #1

14. Stealth Startup Circa 2001

15. All about the team

16. A good plan? Start a company with a compelling long-term vision. Raise plenty of capital. Hire the absolute best and the brightest. Hire an experienced management team with tons of startup experience. Focus on quality. Build a world-class technology platform. Build buzz in the press and blogosphere.

17. Achieving Failure Company failed* $40MM and five years of pain Crippled by “shadow beliefs” that destroyed the effort of all those smart people.

18. Shadow Belief #1 We know what customers want.

19. Shadow Belief #2 We can accurately predict the future.

20. Shadow Belief #3 Advancing the plan is progress.

21. A good plan? Start a company with a compelling long-term vision. Raise plenty of capital. Hire the absolute best and the brightest. Hire an experienced management team with tons of startup experience. Focus on quality. Build a world-class technology platform. Build buzz in the press and blogosphere.

22. Startup #2

23. IMVU

24. IMVU

25. New plan Shipped in six months – a horribly buggy beta product Charged from day one Shipped multiple times a day (by 2008, on average 50 times a day) No PR, no launch Results 2009: profitable, revenue > $20MM

26. Making Progress In a lean transformation, question #1 is – which activities are value-creating and which are waste? In traditional business, value is created by delivering products or services to customers In a startup, the product and customer are unknowns We need a new definition of value for startups

27. Traditional Product Development Unit of Progress: Advance to Next Stage Waterfall Requirements Specification Design Problem: known Solution: known Implementation Verification Maintenance

28. Agile Product Development Unit of Progress: A line of Working Code “Product Owner” or in-house customer Problem: known Solution: unknown

29. Product Development at Lean Startup Unit of Progress: Validated Learning About Customers ($$$) Customer Development Hypotheses, Experiments, Insights Problem: unknown Data, Feedback, Insights Solution: unknown

30. Minimize TOTAL time through the loop IDEAS LEARN BUILD DATA CODE MEASURE

31. How to build a Lean Startup Let’s talk about some specifics. Continuous deployment Five why’s

32. Continuous Deployment IDEAS LEARN BUILD Learn Faster Customer Development Five Whys Build Faster Continuous Deployment Small Batches Continuous Integration Refactoring DATA CODE MEASURE Measure Faster Split Testing Actionable Metrics Net Promoter Score SEM

34. At IMVU time from check-in to production = 20 minutes

35. Tell a good change from a bad change (quickly)

36. Revert a bad change quickly

37. And “shut down the line”

38. Work in small batches

39. At IMVU, a large batch = 3 days worth of work

41. Everyone has a complete sandbox

42. Continuous Integration Server (BuildBot)

43. All tests must pass or “shut down the line”

44. Automatic feedback if the team is going too fast

45. Incremental deploy

46. Monitor cluster and business metrics in real-time

47. Reject changes that move metrics out-of-bounds

48. Alerting & Predictive monitoring (Nagios)

49. Monitor all metrics that stakeholders care about

50. If any metric goes out-of-bounds, wake somebody up

54. Ask “why” five times when something unexpected happens.

55. Make proportional investments in prevention at all five levels of the hierarchy.

57. Get Started Today You are ready to do this, no matter who you are what job you have what stage of company you’re in Get started now, today.

59. http://StartupLessonsLearned.com/

60. In print: http://bit.ly/SLLbookbeta & at the Webstock booth

61. Getting in touch (#leanstartup)

62. http://twitter.com/ericries

63. eric@theleanstartup.com

64. Lean Startup Wellington Meetuphttp://www.meetup.com/Lean-Startup-Wellington/@davemosk @joshuavial @maximonos @andrewfantastic

66. Split-testing all the time A/B testing is key to validating your hypotheses Has to be simple enough for everyone to use and understand it Make creating a split-test no more than one line of code: if( setup_experiment(...) == "control" ) { // do it the old way } else { // do it the new way }

67. The AAA’s of Metrics Actionable Accessible Auditable

68. Measure the Macro Always look at cohort-based metrics over time Split-test the small, measure the large