Steve Blank is Right About the Need for Lean VCs

I met Steve Blank for the first time a few weeks ago when he came to visit the Women 2.0 group at Pier 38. As someone who has long believed in the value of engaging one on one with customers, I have long respected and admired his work in customer development. In fact, we give his must-read book, The Four Steps to the Epiphany, to all True Founders when they join the True family. In the room with the Women 2.0 group, Steve was quick to offer candid, non-academic advice, and he drew his students quickly into thinking through the issues. I can see why he is such an engaging professor as well as talented entrepreneur.

I enjoyed telling Steve about True, because we have applied many of his customer development methodologies to the venture business.  Perhaps that is why I was excited to read his blog post today describing the need and the rise of the Lean VCs.

We believe that small initial rounds designed to demonstrate initial product traction are the right approach to funding in today’s capital efficient market.  True’s first few deals of Automattic, Meebo, Sphere were tiny amount of capital that succeed in creating very large and successful products and customer ecosystems. Our portfolio is now 67 companies strong executing on this belief.

Though we initially thought that this worked well only in consumer segments, over the past few years our thinking has evolved. Our portfolio companies like Socialcast, Assistly and Syncplicity have shown us that these lean funding models apply to a new generation of web-centric enterprise software companies. Same goes for the web infrastructure related software providers, as shown by Puppet and Loggly. A few years ago we developed a thesis that devices were becoming more capital efficient, so we funded Fitbit, Sifteo, Valencell and another one yet-to-be announced startup.

The bottom line for Founders is that now is an incredible time to start a company across a wide range of industries. Capital efficiency, newer methods and approaches to product development, and new, effective, robust global distribution channels enable Founders to minimize downside but still maximize the chance to build a product that can change the world.  The good news is that the venture market is responding, and more options for capital exist now than ever.

It is good to be a lean VC.