Lean and Bootstrapped are not the same thing
When I first learned about Lean Startups I assumed the term meant running a company lean and spending as little money as possible. The first image that came to my mind was a small team making a trip to Costco for Ramen and and bringing it back to their garage/office. As I continued to read about Lean Startups I realized that being lean, and bootstrapping, were actually completely different concepts.
Since first learning about the Lean Startup methodologies almost five years ago I’ve gone on to become a mentor at Lean Startup Machine, helped countless other entrepreneurs learn the lean startup methodologies, and currently practice the principles as the co-founder of a venture-backed startup.
What I’ve found is that there is a lot of confusion between the term “lean” and “bootstrapped” and I understand why. The problem is that when most people hear “Lean” they think of spending less money or running on a shoestring budget. This is not what it means to run a Lean Startup but given how much confusion there is over this term and how many times I’ve seen people get the two concepts confused, I thought it was time for me to put together an article to help articulate the differences between the two.
So let’s start with the definition of Lean Startup:
A Lean Startup is a company that focuses on quickly creating prototypes with the goal of testing assumptions. Customer feedback is used to drive each iteration allowing for much faster evolution than a traditional development process.
Notice there’s nothing in this definition that talks about spending very little money or eating Ramen and using a cardboard box as a desk. The Lean Startup Methodology is a process, it doesn’t have to do with spending a little or a lot of money, it has to do with quickly building prototypes to test your assumptions with real customers. One of the most common graphical illustrations you’ll see of the lean startup process is this one:
Now let’s look at the definition of Bootstrapping:
Bootstrapping means starting a company with little or no money, but utilizing the resources readily available to you. This means keeping your budget low, not taking a salary, working with your team to develop your product for sweat equity or outsourcing some functions altogether. (Source — Mashable)
You’ll notice that this definition is not so much about a process of quick iteration or a focus on following a “build, measure, learn” process, instead it means building your company with little or no money. At its core Bootstrapping means doing everything you can to cut costs and run financially lean. This is where the confusion comes in — when someone says they are running financially lean this means “Lean” in its general dictionary definition as in running economically or with the bare basics.
When you’re using “Lean” to discuss startups you could be talking about a company with thousands of employees and millions of dollars in funding. In Eric’s book he talks about a 7,000-person Lean Startup, a little company you may have heard of called Intuit.
As you probably know, Intuit is not bootstrapping, in fact they have plenty of money, but they are following the Lean principles to iterate quickly and make products and services that customers love.
While I could go on longer I wanted to keep this short and sweet. I hope this helps to clear-up one of the common points of confusion when it comes to Lean Startups. If you want to dive deeper into the Lean Startup methodology Eric’s book it really is a must-read along with his blog Startup Lessons Learned.
If you liked this article, you can find more like it on my blog at www.morganlinton.com