Yesterday I spoke with lean startup guru Eric Ries who is hosting the Startup Lessons Learned conference this Friday in San Francisco and at live simulcasts around the world. Ries says he considers entrepreneur turned educator turned public servant Steve Blank to be his mentor in the startup world, and Blank will be among Ries’ lineup of speakers at this week’s conference. Blank will give a talk he’s titling, “Why Accountants Don’t Run Startups,” (or Customer Development 2.0 on the conference site) which details the major differences between startups and large companies – a speech whose slides Blank posted to his blog via SlideShare late last week.
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According to Blank, the line he draws between smaller startups and larger companies is based around the business model. Startups, he says, exist in the state where they are searching for a business model, and large companies are the result of finding and executing that business model. The reason he calls out accountants in the title of his talk is that as startups transition into larger companies, their less conventional methodologies become more traditional, and that’s when accountants are needed.
Early on, startups, in his opinion, should rely on such metrics as customer acquisition cost, viral coefficient, customer lifetime value, and monthly burn rate. These types of measurements become de-emphasized in larger companies which focus on balance sheets, cash flow statements and income statements, Blank says.
Parallel ways in which startups transition into larger companies include customer development giving way to product management, and agile development becoming engineering. Early-stage companies, searching for a business model and for customer traction, will test hypotheses, discover their minimum feature sets, and pivot their focus if things don’t work out, he says. Product management takes over once a viable model is found.
One of the major stepping stones toward becoming a successful larger company, Blank says, is discovering the winning model or process and focusing on making it work over and over. Entrepreneurs begin their startups with a hatred for processes, but learn to love and implement processes as the company grows into a profitable business. Passionate focus transitions to focus on the company’s mission, and ultimately to the execution of that mission.
Blank wraps up his presentation by drawing the same lines between two types of education, business school and entrepreneurship school. Business school, he says, is far better suited for teaching students to run larger companies, while startups need founders with better entrepreneurial training. These ideas merely scratch the surface at what Blank is likely to dive into during his 45 minutes presentation Friday afternoon, so be sure to check out the event if you’re in San Francisco, or find a live simulcast to attend in your area.
Photo by Flickr user dux_carvajal.
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