Back from a hiatus… I’ve recently had a chance to observe a few startups at close quarters… In all these cases, the start-ups have involved a team of two people trying to build a product. I’ll probably blog about each of these separately in detail but thought I’d comment on one aspect of start-ups – the slow burn to potential success. The issue here is how long does it take for the start-up to be something that stands on its own and can support a couple of people full time (expenses and all)?
I make no excuses for promoting much of Eric Ries’s excellent Lean Start-up philosophy – as Isaac Newton said, “If I have seen further it is by standing on ye shoulders of Giants”.
There are obvious points to make e.g. how long does it take to get the product to a Minimal Viable Product (MVP) stage – there are costs involved in this, including the founders’ time and infrastructure/marketing costs. In the case of the projects I mention, they are all ‘side-hustles’ i.e. being done as ‘spare-time’ projects while the founders earn their crust doing a day job. Here, there is a real opportunity cost to the time working on the project. People often undervalue their time away from work. If an employer is willing to pay you $75/hr to work for them, why do you not consider every hour of your leisure is worth the same? Boy, if only we could invent a solution to the problem of needing to sleep, I could double my income :)! In a strict cost of goods sense, we should include/amortize this development time as a cost otherwise, we may grossly underestimate the payback period for an MVP.
In the case of the projects I’ve observed, all Internet tech projects, the infrastructure/marketing costs are relatively low. It is amazing what you can get for free on the Internet – sure you probably want to pay for a domain name but that is fairly cheap (under $10 for a year). Hosting costs which I always assumed would be uber expensive are actually cheap/free for many MVPs, take a look at Google App Engine, BizSpark/Windows Azure, Facebook/Heroku. It is amazing what you can do at the free tier e.g. you can get a MySQL database, web server/CMS, email sender – just mind-blowing. If you are a seasoned developer, you can go from zero to having a public-facing Facebook app in under two hours – okay this is not an MVP, just a ‘hello world’ but improvements in tools/infrastructure should be part of you Ninja belt :).
So what does that leave? Well, there is building the actual application and marketing/reaching customers. Clearly, there is a question that any app writer should ask themselves first, is there a need or pain point for real customers that this application solves? Also, an associated question is, will anyone be willing to pay for it? These are critical questions to ask before building anything. If you read the Beermat Entrepreneur, I think of this step as the initial validation of an idea the day after its inception in the pub with your co-founders.
Some good steps, actually ask people, do a mock-up, look for the existence of existing products out there that do what you propose (competition should not universally put you off building an alternative product, take note that there is an existing market and think about your differentiating unique selling points). There are some great tools out there to help, again mostly free. For running surveys, consider online survey tools like Survey Monkey, for testing landing pages with text blurb on your app with a ‘sign-up if interested’ button consider Kick-off Labs and Weebly (start building a mailing list of potential customers even before you’ve built the MVP). You can drive traffic to your market research site using social media e.g. Faceboook/Twitter (consider using tools like Buffer to tweet about your app and build a following – potential advocates/customers/feedback forum) but also consider running ad-words campaigns on Bing Ads and Google AdWords, just putting down $50 on keywords related to your app that point to your site will start getting some data as to whether there is interest.
So by this stage, hopefully, you have ascertained there is a market need and have a sense of how much people are willing to pay for a solution (pricing is a whole separate blog article, I recommend Neil Davidson {RedGate Co-CEO}’s excellent short book on software pricing).
Perhaps you have already built this solution. Time to get it out there. One thing that can make the slow burn even slower is if you spend ages building features that you do not need for an MVP. I think it is key to really pare down an MVP to the minimum set of features that satisfy the pain point – the key is in the name “minimum” :). The same goes for beautifying your UI/website – sure important but it is wasted effort (at this stage) if you really do not need it to test the product with a few customers. So, that is the next step – get your MVP out there in beta with a few selected customers/prospects.
The key here is to listen to their feedback and incorporate it if it makes sense for the target niche. You should love these first customers to death, they will really help you separate the wheat of your product from the chaff (i.e. what is good/bad/missing). It is interesting to note in my observation of the aforementioned start-ups, at this stage ideas came in from customers that caused some of the start-ups to pivot (i.e. change direction from the original product plan). Pivoting is potentially painful as it means you have spent time building a suboptimal product or exploring a market that is not ideal. These are sunk costs, you cannot get the money/time back – accept the experience/journey has helped you hopefully learn something new and move on. If you are too wed to your idea then you may miss this pivot opportunity completely and end up building something that few people need when there is a bigger opportunity out there. Still, there is time involved in the pivot as you inevitably go round the loop again with market research and building a new/different MVP. A start-up I worked for (ATM Ltd) pivoted 2 times before IPO, this took about 5 years from inception but in hindsight, the ditched business models would not have achieved the success that the final one did. The reason, the market was not there or was not large enough for the products being developed. We could have carried on blindly with the original business model but we would have run out of funding and been just another boot-note in the list of failed start-ups. Consider your business model an organic, living, adapting thing.
Continued in Start-up Slow Burn – Part 2
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