If there had been incubators and accelerators in the late 1600s, merchants with money likely would have been standing in line to invest Sir Isaac Newton’s groundbreaking invention — the reflecting telescope.
After Sir Isaac convinced the scientific world that light is composed of particles not rays, he went on to write his Mathematical Principles of Natural Philosophy, which includes his three laws of motion, which have served as the underpinnings of mechanical engineering for hundreds of years.
Newton’s second law* explains how an object changes when you push it.
- It accelerates in the direction that you push.
- Acceleration is directly proportional to the force — if you push twice as hard, it will accelerate twice as much
- Acceleration is inversely proportional to the mass — if one object is five times heavier than the next, it will accelerate at one-fifth the rate.
We can take away two things from this: 1) the heavier something is, the harder you have to push, and 2) All my college physics classes did not go to waste.
In entrepreneurial parlance — it’s easier to drive revenue when costs, debt and operating complexity aren’t bogging you down.
Some tips on the practical application of “lean.”
1) Manage marginal costs as if the dollars you are spending are your last.
- Add Suite 2013 to your home address and avoid paying rent for as long as you can.
- Join a co-working space as a go-to place with Internet connections and access to conference rooms.
- When you absolutely need office space, move to a business incubator or co-locate with another company.
- Share office services and equipment.
- Postpone capital purchases for as long as possible.
- Use the computers and servers you have and consider cloud computing. With cloud computing you rent servers only when you need them.
- Lease time on test equipment or expensive machines.
- Postpone capital purchases.
- Negotiate fees and terms with service providers.
- Barter when appropriate.
- Travel as seldom and cheaply as possible. Enforce strict travel policies for employees.
- Eric Ries, author of The Lean Startup teaches to only cut costs on things that speed you up…and to make sure not to cut costs on things that speed you up in one area but slow you down in another.
2) Avoid debt.
- Secure a line of credit, but don’t use it unless absolutely necessary.
- Make use of public sector and incubator funding – grants, state or federal tax credits, proof-of-concept awards.
- Build relationships with economic development organizations.
- Make collecting receivables a priority.
- Consider micro-lenders.
- Build relationships with local angel investors and VCs through participation in community groups such as the Chamber of Commerce or local civic organizations to.
3) Keep it simple.
- Set up timely procedures for bookkeeping, customer tracking, government reporting, and human resources. Follow them. It’s easier to start out right than to go back and fix a mess once you begin to grow.
- Create an online due diligence room early on and keep it current.
- If you accept friends and family money, don’t create a cap table that will give you headaches later on.
- Seek advice from mentors, Board members, other entrepreneurs, and customers.
- Don’t be in a hurry to hire; outsource where it makes sense.
So the next time you think you can’t live without the latest and greatest or that you have to make a business trip instead of using Skype, remember Sir Isaac #2.
It’s science behind the enduring principal of bootstrapping and the math behind why the best startup companies operate lean.
* Acceleration = mass/force