Lean Venture Development

"Simplicity is the ultimate in sophistication"-  Leonardo Da Vinci

In technology development, the lean venture start up model has been the basic model employed by entrepreneurs throughout history until the post dot com bubble burst when venture finance became institutionalized as a result of deep pockets forming pools of investment funds geared mostly to IT start ups, but also with boutique firms specializing in other technologies. Since that time the world experienced a tectonic shift to financial engineering catapulting innovation to market rather than product engineering.

There is no question that organic business development is better for customers, the economy, and businesses that are attempting to create real long-term value rather than the flip -- aka corp outsourcing of R&D, which has essentially been the primary exit the past few years. (Mark Montgomery, Initium VC)

Two common denominators of all lean venture innovations (apart from innovation itself) is constrained spending power and brain power. Sufficient spending power can always pay for brain power but very seldom as in the case of lean venture (low budget) development.

Quest for capital. Internal - and consequently low budget - innovative product development requires deep value creation that is difficult to do or fund when all players in the venture capital industry pool of funds is using the same financial modeling tools, albeit in different ways. In South Africa in particular very few of the so called venture capital funds actually fund start ups, and organized pools of angel investor capital are almost non existent.

Just as innovation is by definition "thinking outside the box"�, so the financing of the development of innovative concepts needs to be sourced through innovative process and business model structures using all the arrows in the quiver to seek far and wide for innovative financial solutions that is complimentary to the technology. The few funding sources in South Africa with relatively small pools of funds means that business structures should also innovatively use all of the tools and instruments available through a combination of grants, tax planning and government incentives in a sophisticated yet simple financial business plan. Many of the world's better mousetraps are lying dormant in the patent cemetery, more due to lack of funding rather than lack of viability.

Brain Power. In the rare case where outside capital is made available to lean ventures the institutional funder will almost always require outsourced R&D from so called independent experts and institutions as part of the financial modeling due diligence verification process and may even shop the idea around only for the entrepreneur to eventually see the idea copied by deeper pockets and institutions with more money than ethics, and may be fortunate to receive a finders fee for the idea. Very seldom does a lean venture entrepreneur have the luxury of time to have a university professor's students spend a year on R&D.

The lean venture therefore in modern times needs to look for collaborative co-operation for finance and technical skills, not in the office buildings or campuses in his hometown, but in the virtual space of the internet for like minded willing and qualified participants who would eagerly collaborate under terms reasonably acceptable and affordable to the lean venture than in an institutionalized semi coerced relationship.

It pretty much turns a search for capital and talent into a marketing exercise. If the lean development concept is marketed to (say) a thousand pre-qualified "leads"�, chances are that 10% of those leads may be interested in finding out more or be inquisitive and 10% of those may actually discuss terms, and that 10% of those (just one) may jump on it and voila! Problem solved!

Marketing. Pioneering new creative and innovative ideas with a lean model should not ignore a natural extension of the lean model principals in the quest for resources such as capital and skill's where innovation and creativity is actually essential in order to stand out amongst the crowd. Entrepreneurs should also convey this methodology of thought to the outside world through innovative and creative branding and internet marketing strategy very early on as to identify the idea with a logo and website. A well designed logo and simple, easy to use quick loading website will create a lasting impression. There is nothing like the ultimate in simplicity of the picture that paints a thousand words.

However, a website just sitting out there in cyberspace is like having a thousand business cards sitting on your desktop" useless. Internet marketing can be very effective, and again, applying the lean venture principals, could be done very cost effectively. For example, the Vurbine website is hosted for free on powerful servers with great basic features, the domain name http://Vurbine.uni.cc was registered in real time for free and the website was created and uploaded with free software.

Relational input. One of the best sources of lean venture rapid prototype development of a technology is through relational input such as with potential customers, manufacturers or distributors since the ultimate user must find it usable (viable) as well as user friendly (feasible) which these entities inherently provide. This is the ultimate shortcut to R&D and marketable feasibility studies and can almost always be gotten for free or bartered. A strategic relationship with a large potential customer, manufacturer or distributor who likes the idea and sees valuable potential business from it can also shortcut the R&D effort or compliment it with know-how, experience and capital.

Competition. Seeking capital for established businesses is a walk in the park compared to finding capital and resources for a start up venture. It is a very difficult, expensive and time consuming undertaking for a lean venture. It competes with many other investment opportunities from large well established firms who offer competing investment products marketed though brokers such financial planners, advisors and stock brokers with more capital and commission payments in the marketing budget than the entire amount of seed capital the venture may need.

There is no such thing as ignorant money and it would be wise to remind oneself that inventors are generally sceptically perceived to be the crackpot looking for a jackpot. Don't assume that your farmer father in law as a potential investor does not have a sophisticated smart lawyer and accountant who would not comprehend simplicity as an ultimate form of efficiency.