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Entrepreneurs often conduct experiments and interactions with potential customers to advance early concepts for a business venture to improve its likelihood of commercial success. Both approaches figure prominently in the currently popular Lean Startup Method, which has been designed as a deliberate process to overcome the founders’ confirmation bias. We empirically analyze survey and performance data of 248 teams in an annual accelerator program where entrepreneurs apply technologies to global social and environmental problems. We find that customer interaction conducted by itself increases venture performance, perhaps by improving the selection criteria for modifying the initial concept beyond the founders’ biases. On the other hand, experimentation alone has no significant direct effect on venture performance. When these two activities are conducted together, venture performance shows diminished improvement; experimentation dampens the positive impact of customer interaction. Instead of complementarity between these two activities as predicted by the Lean Startup Method, we find evidence that they are substitutes. It is possible that the solicitation and incorporation of customer feedback through both of these activities exhibits an inverted U effect where too many interactions distract entrepreneurs from more fruitful activities. This conclusion questions the efficacy of concurrently employing multiple Lean activities. Additional research is invited to develop more reliable scales of customer interaction and experimentation and to specify conditions and the mechanisms by which they impact business start-up performance.
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