Building an Innovative Tech Startup From Scratch Using Lean Methodology

Turning an idea into a viable business may seem magical; that’s why we call the epitome of successful ventures “unicorns.” But from my experience over the last 10 years in the tech industry, where I’ve built numerous startups, secured funding, and mentored countless young companies, there are common methods founders can adopt to not only swiftly start their innovative ventures, but also steer them directly toward achieving product-market fit and a scalable business model.

A pragmatic approach becomes increasingly important as we move through tougher times for VC funding. Influenced by the overarching economic climate and market trends, investors are currently navigating a phase of prudent recalibration and adjustment that could extend way beyond 2024. This shifting landscape underscores a vital principle for new startups: The importance of a product’s viability and growth potential in attracting investor funding has never been more critical.

Particularly when market dynamics are unstable, showing a capacity for maximizing value quickly and without wasting money will set your startup apart. The approach that has worked for me through varied levels of investment uncertainty is Lean methodology. Originating from Japanese automotive manufacturing principles and popularized by Eric Ries, it is a process-focused management method for efficiently creating and managing ventures. The primary focus is to quickly provide customers with the product they want.

By applying these Lean principles alongside lessons learned from my own ventures, founders can significantly enhance their startups’ efficiency, mitigate risks, and boost their likelihood of evolving into unicorn companies.

Choose Your Problem Wisely

Every journey into entrepreneurship begins with an idea. You spot a need, delve into its intricacies, and a solution begins to take shape in your mind. But here’s the twist: The problem you identified might not be as widespread or critical as you initially thought. Your well-intentioned solution might address a nonissue or a concern that affects only a few users. I’ve made this mistake more than once in my career, resulting in a lot of wasted time and money.

So before building a solution, be sure to evaluate whether the problem you perceive genuinely exists. You can do this by conducting surveys and discussing the identified problem with prospective users or businesses—anyone you consider your potential customer. Research past solutions within the industry, and remember, if a problem appears easy to solve, others are likely to have already tried addressing it. They might have failed for various reasons, and you need to know why.

Ask yourself these guiding questions:

• What’s the real problem your potential customers are grappling with?
• Who are you aiming to help? Think about the broader market and zoom in—which specific groups, industries, or regions are you targeting?
• How is this issue being handled right now? It’s not always about who else is offering a solution, but also about how the problem is potentially being overlooked or inadequately addressed.

You will probably miss the right problem on your first try. It’s all right to stumble in your startup journey as long as you’re willing to pivot and adapt: That’s one of the guiding principles of Lean methodology.

Define the Limits of Your Solution

You’ve successfully defined the problem and likely have a few ideas in mind to solve it. Now it’s time to assess whether you possess the necessary resources to build the solution. Estimate immediate and long-term operating and capital expenditures. There will always be hidden costs and it can be tough to spot them, so talk with industry experts to ensure you fully comprehend your potential expenses.

For my startup Laser Combat, for example, my vision was to revolutionize laser-tag gear. We developed vests embedded with hundreds of sensors that vibrated where players got hit, weapons that provided intense feedback to users’ shoulders, realistic reloading mechanisms, systems for monitoring health and ammunition, wristbands, and much more. But as rookies in the industry, we didn’t fully grasp the complexities of cost-effectively maintaining and producing such advanced gear. Looking back, advice from an industry veteran would have been a game-changer, helping us navigate the manufacturing challenges more effectively.

Crafting detailed financial forecasting for your product will not only let you anticipate possible issues and give you clarity about your pivoting margin, but it can also give a better shape to your solution if you ask the appropriate questions:

• Is the product appealing enough to attract capital? A product serving a niche market might not attract significant venture capital if it doesn’t show potential for major revenue within three to five years. Venture capitalists often invest in multiple startups, expecting only a few to yield high returns. Let this mindset shape your aspirations: Set your sights high. Achieving even a part of a lofty goal can be significant.
• Is there potential for scaling? Evaluate whether your product can scale up to serve a broader market without extensive customization. Maybe your solution has the potential to dominate or even monopolize the market, akin to what companies like Meta or Tesla have achieved.
• Why didn’t past ventures succeed? Research why similar startups might have failed. Engage with founders in your space to understand their challenges and ensure your approach differs significantly.
• Am I introducing genuine innovation? Avoid merely replicating existing solutions. Transitioning from a tried-and-true product to your new offering might be a hard sell for most users so more than a minor tweak is needed. Users are drawn to genuine innovations that effectively address their challenges and cater to their needs.

If your answers to these questions point in a promising direction, it’s the right time to start working on a minimum viable product (MVP).

Build and Test

The MVP is a major milestone in a startup’s product journey. It represents the initial step in bringing the product to market, and is designed to test hypotheses about the product and its market fit with the least effort. The MVP is essentially the simplest product version, allowing the startup team to learn from real user interactions.

Staying close to the product roadmap is crucial while building and testing an MVP. Many startups need to pay more attention to this step. While founders might implicitly understand their ideas and objectives without any written plan, this approach becomes problematic as the company scales. A product roadmap outlines the vision, goals, and critical steps to develop the product. It serves as a guide for what the startup aims to achieve in the short and long term. The roadmap also provides a structured approach for creating the MVP. It outlines key milestones, including MVP features, how and when to test it, and the criteria for measuring its success.

However, after getting feedback from the real world, it may be tempting to stray from the original path, potentially leading to unexpected expenses and delays in delivering and iterating on an MVP. Abide by Lean’s mandate to maximize value while minimizing waste by taking into account the following practices:

• Focus on core functionality: Identify the most essential features that solve the core problem you’re addressing. The MVP should be as simple as possible but still functional and capable of delivering the intended value to your users. Avoid adding extra features that don’t directly contribute to the core value proposition.
• Build using rapid prototyping: Embrace the concept of rapid prototyping: quickly creating a workable version of your product to test and iterate. The goal is to get feedback as soon as possible, which will inform further development. Remember, an MVP is not a final product; it’s a starting point to learn from the market.
• Validate with real users: Once you have your MVP, testing it with real users is crucial. This validation process is not just about confirming that your product works technically but also that it solves a real problem for your customers. Gather feedback, observe how potential customers use the product, and understand their pain points.
• Use iterative development: Continuously improve and iterate your MVP based on feedback. This may involve adding new features, refining existing ones, or even removing elements that aren’t working. The key is to remain flexible and responsive to user feedback.

You’ve identified a pressing problem, devised a solution, developed a new product, tested it with potential customers, and integrated their feedback. Now it’s time to take everything you’ve learned and refined to scale up, launch more widely, and start making an impact with your product.

Launch (and Pivot)

As LinkedIn founder Reid Hoffman said: “If you are not embarrassed by the first version of your product, you’ve launched too late.” Founders should be ready to embrace failure, rapid learning, and adaptability. While philosophies on product launch strategy differ, I am a firm believer that it is fine for a product to be flawed at launch, because quickly iterating based on real-world feedback is critical. This approach helps avoid overinvesting in a product before confirming its market viability—a key strategy in effective and cost-efficient startup development.

Many founders mistakenly think they’ve made it after this step. In reality, this is where the real work begins. Some of the feedback you receive will be tough, but it gives you a chance to enhance your product.

My current startup, KLIPY, faced a complex path to product-market fit. We launched this app to enable users to create and share short clips and GIFs from movies, TV shows, and viral videos. While our users loved the product, they wanted to see the service integrated as a feature within popular messaging apps and social networks. Messaging apps showed interest in the idea but favored revenue-generating features over those focused on engagement. Based on this feedback, we proposed running ads on behalf of the messaging platforms and sharing the revenue. However, our app had low demand from advertisers and our ad strategy wasn’t scalable because it had to be deployed manually, which made the platforms skeptical about getting on board.

The breakthrough came when we pivoted again, developing an adtech solution that enabled programmatic ad insertion into the GIFs, eliminating manual intervention. This scalable model appealed to all parties involved, leading to more than $1.5 million in commitments and an oversubscribed seed round with high interest from big VC funds.

Funding and the Road Ahead

While many startups opt to raise funds before creating a product and gaining validation, I advise taking the reverse route. Your primary focus should be on traction, which will then guide your next steps.

At the pre-seed stage of your startup, you typically face two primary routes: Join an accelerator program like Y Combinator, 500 Global, and Techstars, or directly approach VCs. Based on my experience, you can waste a lot of time on applications and pitch decks for accelerators when it’s considerably easier to secure investments from VCs directly.

No matter the course you take, one critical component is often overlooked: communicating value quickly and persuasively to investors, potential clients, or stakeholders based on user research data and your predecessors’ failures and successes. Spotting a market gap or designing the perfect solution just scratches the surface. The real challenge lies in ensuring your target audience grasps the value of what you’re offering.

Remember, iterative learning, adaptability, and a relentless focus on delivering value accelerate the journey to becoming a unicorn. No magic is required, just a steadfast commitment to Lean startup principles and a keen understanding of market dynamics.