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Lean Startups: $500,000 is the New $5 Million

In a New York Times article on lean startups, Steve Lohr describes how VC-scale money (say $5M) can isolate a startup from potential customers. The idea of a lean startup is to get a minimal viable product in the hands of customers as quickly as possible, learning as you go and adapting the product to find what customers really value. Agile software development practices support doing exactly that, and are a key component of the lean startup approach.

This is the approach Atomic has been preaching and applying for years with our startup customers. When you live and work in the Midwest you don’t often meet VC-funded startups. Our entrepreneurial customers are self-funded or angel-funded. The Common, Circle Builder, Realius and most recently Bloomfire are Atomic customers that exemplify the lean startup approach.

Reducing the cost of a startup from $5,000,000 to $500,000, assuming similar success rates, should ultimately create 10x the value. That would be significant for our economy and the pace of innovation. It makes me wonder… is there another order of magnitude improvement possible here? Can we take the next step to the $50,000 startup? Does first building a $50k application increase the success rate of $500k startups? Or does $50k just get you a prototype, not a company?

I don’t know all the answers to these questions, but I do know we’re wrestling with them every day. Maybe I should be smart this time and think of some good branding for the $50k startup. How’s “shoe-string startup” sound?

Carl Erickson (84 Posts)

Carl is the president and cofounder of Atomic Object. Learn more about Carl.

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  1. gvb
    Posted April 27, 2010 at 1:45 pm

    Bootstrap startup? At that point we will have come full circle. :-)

  2. Posted April 27, 2010 at 1:45 pm

    Considering the success of seed accelerator programs like ycombinator, you can absolutely build a company for under $50k.

  3. Posted April 27, 2010 at 1:45 pm

    Good point, Steve. But I believe this works because the founders who go through Y Combinator are technical founders putting probably thousands of hours into developing their product. For the non-technical founder needing to hire software development, that’s way more than $50k of value.