Business ideas for 2013: Lean start-ups

“This year is not about the big investments, it is about the small investments,” says Alliott Cole, member of the Ventures team at Octopus Investments, which manages £250m of assets and focuses on fast-growing entrepreneurial businesses.

“The ‘lean startup’ methodology has become a buzz word in the East London Tech City scene. It comes from a recognition that for many businesses it is possible to develop, test and adapt a product or service for very little cost.

He adds: “We think there will be a growth in peer-to-peer funding, micro-investing sites and angel investing – where the term ‘angel’ will describe a much wider swathe of society than ever before.”

This won’t be news for those familiar with Crowdcube, Seedrs, Kickstarter and others. There is the Start-up Loans scheme and Seed Enterprise Investment Scheme (SEIS). And then there’s the rise of accelerators looking to attract sector-focused start-ups. Expect this all to continue apace.

And if ambitious, but lean, start-ups are looking for inspiration, they should look no further than business services marketplace blur Group, which last year joined the junior market of the London Stock Exchange, AIM (or the Alternative Investment Market to give it its full name), raising £4m. Upon listing, the company was valued at £20.1m, despite following lean start-up ‘rules’.

Finally, one thing lean but ambitious start-ups and growing smaller companies are likely to need as they scale is access to enterprise-level functionality without the cost. It’s a trend Vodafone’s Kenneth De Spielgeleire recognises.

“Business apps are being adopted by small businesses to manage aspects of their businesses such as sales or procurement. They don’t want or can’t afford to acquire enterprise systems so are looking for software that offers 60-70% of the functionality delivered from the Cloud at a fraction of the cost.”

Published Mar 2013