Drew Houston, the founder of Dropbox, spent 10 years applying the Lean Startup mentality. By doing so he turned his MIT science project into a company worth $10 billion.  Here is what he did, and what you can do to go from  zero to hero in under a decade.

Dropbox was founded in 2007 at MIT by Houston and Arash Ferdowsi, as a startup company, with initial funding from seed accelerator Y Combinator. Last week the company went public through an initial public offering. At market close, the startup was valued at $10 billion.

Y Combinator ingrained in the Dropbox Founders a deep belief in the philosophy that eventually became known as the Lean Startup method, a systematic path to startup success originally created by Stanford professor and serial entrepreneur Steve Blank

Formalized by Eric Reis, a student of Blank's, the Lean Startup method is a practice for developing products and businesses based on a "validated learning" model predicated on getting customer feedback quickly and often. The goal of this method is to minimize the impact of uncertainty in the product development process. Reis iterated Blank's customer development theories into The Lean Startup, a book read by millions.

Reis coined the term "Lean Startup Feedback Loop," the key tool for developing a startup in the 21st century. His "build, measure, learn" philosophy has driven success to thousands of new ventures, including Dropbox. Like Reis, Ash Mayura stood on the shoulders of those that came before him, and evolved the "business model canvas" (a tool created by ‎Alexander Osterwalder a few years earlier) to create the Lean Startup Canvas--which has become the 21st-century business plan. 

Here's how to apply it to your venture:

1. Get out of the building.

Blank reminds founders that no answers lie inside your office. All the answers lie with your future customers. So before building, before coding, before even incorporating, founders need to get out in front of potential early adopters.

2. Replace assumptions with data.

Test everything. Reis teaches us not to rely on gut feelings and assumptions. Instead, Lean Startup pundits encourage founders to run learning experiments with customers, validating each business model assumption with quantifiable results. 

3. Launch early. Iterate early.

According to David Cohen--a co-founder of Techstars, which runs Lean Startup programs in more than 20 cities across the world--"done today" beats "perfect tomorrow." Getting to market with an MVP (Minimum Viable Product, or a bare bones prototype) helps founders learn as quickly as possible. By definition, an MVP is the least sophisticated version of your solution that can be used for learning.

Dropbox did just that, launching with a YouTube explainer video instead of a working prototype. Doing so validated the project, when 75,000 early adopters signed up after viewing the video.

4. The Lean Canvas trumps business plans.

"Business plans are dead. Business planning is not," says legendary venture capitalist Brad Feld, whose exits include Fitbit, Guitar Hero, amd MakerBot. Today, a static 45-page business plan is wrong on the day it gets printed. Instead, modern founders use a one-page business model summary, called a Lean Canvas. This tool helps founders dynamically and systemically turn their assumptions into a viable, sustainable, scalable business model.

How to get started today:

  1. Print a Lean Canvas. I prefer to get it from its source.
  2. List your assumptions around the nine elements of the business model (Customer Segment, Problem, Solution, UVP, Channels, Unfair Advantage, Revenue, Costs, Key Metrics).
  3. Design an experiment. Turn assumptions into knowns, by proving each through the science method. Start with the riskiest assumption and work from there.
  4. Follow the feedback loop. As you turn your ideas into experiments into answers, you are feed the results back into the system. This Lean Startup feedback loop iterates the business toward finding a working business model.
  5. Rinse and repeat. Smart startups, like Dropbox, see startup evolution not as a goal but as a journey: a process that can be repeated over and over again, until the riskiest assumptions are now useful learnings and the path to success is clear.

Drew Houston turned his MIT class project into a business worth $10 billion. He did so using cutting edge Lean Startup methods that you can use at your business--just start today, and get out of the building.

Correction: An earlier version of this column misstated Dropbox's valuation. It is $10 billion.

How the Lean Startup Works
Published on: Mar 27, 2018