Much has been written about building lean startups. It's certainly possible today for many startups to get to a minimum viable product and early customer validation with a lot less than was possible 10 or even 5 years ago. But ultimately if you want to build a significant company versus having a flash-in-the-pan that you sell quickly, it takes time, work, and more than a few people. All of these resources take money.
The world has changed for many an aspiring entrepreneur. No longer do they have the largest market in the world to themselves. With the secret out, Silicon Valley entrepreneurs now have to compete against extremely capital efficient startups from the many other "Silicon Valleys" around the world. They also have to contend with a significantly higher cost of capital driven in part by the shrinking amount of capital being committed to venture firms. Simply put, there are too many companies chasing too few venture dollars. It's no longer good enough to be just a lean-startup. To be globally competitive, and confident you can raise the capital you need to grow, Silicon Valley entrepreneurs need to focus on building lean companies.
Thankfully the rise of the social internet, globally ubiquitous broadband, and the always-connectedness provided in the new era of smartphones is enabling many Silicon Valley startups to start with the necessary foundation to grow into lean companies. Collectively these advances minimize the importance of geographic proximity in establishing, building and sustaining relationships that are at the center of any business. These virtual and remote interactions don't provide the same level of high-bandwidth communication that face-to-face interactions do. But the disruptive innovation they provide is giving an important edge to a new generation of leading-edge startups.
The Rise of the Social Internet: In Silicon Valley, businesses are started and built on relationships. Startups are famously a relationship business going all the way back to the Fairchild Eight. Like the Fairchild Eight, many a Silicon Valley company was started by a small group of engineers who worked together at a previous company. With the rise of the social internet, more and more people are comfortable building and sustaining these types of relationships virtually. When I talk to young entrepreneurs, the people they describe as their friends, co-workers, and partners can just as easily be someone they met and developed a relationship with online. We are already seeing teams assembled in this way. More than one company has come in whose initial product architect was someone the entrepreneur "met" through his or her contributions to an open-source project at the core of their offering. The fact that he or she happens to live and work in another country is largely irrelevant.
Globabally Ubiquitous Broadband: Much of the innovation in Silicon Valley has been created by small teams working on crazy ideas in very close quarters. This type of environment facilitates "high-bandwidth" communication between team members which is necessary to enable a startup to get a minimum viable product to market as quickly as possible. Ten years ago startups began dipping their toe in the water with outsourcing. For the most part, this was through contracting with or hiring entire teams that were located in a single remote location. Co-located teams were necessary because the only way to get the desired level of "high-bandwidth" interaction was to have the team members sit side-by-side. Over the last 5 years, services like oDesk have taken advantage of the myriad of communications technologies enabled by globally ubiquitous broadband to enable "high-bandwidth" communications to individual remote end-points. This has allowed startups to build and manage remote teams where each member of the team can be in a different location. Today it is quite common for me to meet with a startup team that has a couple of local people and 5-10 people on their remote team from around the country or around the world.
The Age of the Smartphone: Finally, in the age of smartphones we are all always connected. This means we can have "water-cooler" conversations with our co-workers at any time. We can exchange ideas, thoughts, questions, or opinions from anywhere. With smartphones and other similar mobile computing/communications tools our work is untethered to a physical desk and less impacted by timezones.
These disruptive innovations promise to change the way organizations are built. We are seeing that change already happening among the startups we meet with regularly. They realize that for many of them, the cost of capital is too high to fund a startup team of 20 - 30 people in Silicon Valley. This means fewer Silicon Valley located jobs in the short term. But in the long term, being more capital efficient and globally competitive will enable these "lean companies" to become the next generation of locally based global-market leaders - the HP's, Apple's, Oracle's, Cisco's, Google's and Intel's - that are at the heart of Silicon Valley.
