How to Prevent Your Software Startup From Running out of Gas
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Launching a software startup has become as irresistible as an all-you-can-eat pizza buffet in a kindergarten classroom. Indeed, software startups are the "it" factor all entrepreneurs think of when they imagine becoming the next unicorn or amping up their traditional business's valuation.
This infatuation is no joke. App Annie has reported that app downloads increased last year by 15 percent, to more than 90 billion downloads, across Apple's and Google's stores.
Let's get one thing straight, however: While few things are better than a fresh slice of pizza, it's easy to get excited and bite off more than you can chew. In short, you don't want to rush into building your new software startup. Apps might be setting the world ablaze, but it's important to exercise caution to avoid being burned by the most common killer of new software startups. And that killer? Running out of gas, a.k.a. cash.
Yes, software startups are the hot new thing, but far too often, startup/small business owners often blow through piles of cash, give up equity and waste time with nothing to show for their effort.They also shell out for hefty CTO salaries and pay obscene costs to outsourced tech firms to develop apps that might never materialize.
So, if this sounds familiar, consider that a little caution could help you avoid sweating out months -- or even years -- in app development hell (yes,that's a technical term).
Next, take a deep breath, and step back from that tantalizing app buffet and its figurative sea of cheesy options. Before you dig into the app equivalent of Little Caesars' finest, first get a little perspective on the situation.
The app conundrum in a nutshell
Come gather around the virtual campfire for a spooky story of app ambitions gone awry.
The star of the story was a Phoenix-based startup I crossed paths with that had been spun out of a successful service-based company. The founders wanted to pivot to become a tech-enabled company, because, they assumed, this shift would improve their corporate margins and scalability.
Naturally, a software startup seemed like the perfect solution. The founders identified the bells and whistles they wanted in the app, sought developer-team estimates and partnered with a high-quality development shop.
Everything was great -- until suddenly it wasn't.
The sands of the hourglass fell,however, and little progress was made. Then the call came from the developer: "We're a little behind. We're going to need more development sprints." Everyone knew what that meant: The cash-strapped startup had to fork over yet more money to keep things moving. Three weeks later came another, similar call.
The cycle continued until the company had spent nearly $200,000 without anything to show for it. The founders still don't know whether their customers will even be able to use the platform when it finally launches, and they don't have any money left to pivot if it flops.
Instead of brainstorming features and outsourcing bids from the start, take a step back to make sure you have the right goals in mind. Your first release should be designed to validate your core underlying business and product assumptions; you should have already determined whether consumers even care to use what you've created.
In addition, a simpler build will be less expensive and take less time to execute -- and likely come with fewer bugs, fewer unknowns and less code.
To move napkin ideas to unicorns, you need to take some tools out of the lean startup toolbox.
Five ways to avoid software stumbling blocks
Tech-enabled companies with apps at their core are taking over almost every vertical. To get your own piece of the pie, be smart about how you start.
1. Do your homework. As an entrepreneur, you probably already burn through audiobooks at chipmunk speed. Add some material to your reading list. The Lean Startup and Value Proposition Design are great places to start immersing yourself in the proper way to drive product development efforts. Consider them your weapons against the dragons that destroy early product-development stages. You'll get leaner in your thought process, and you'll understand how to balance innovation and practicality.
2. Embrace manual automation. Manual automation should be your best friend in your early stages. Users will feel that your app is automatic even though you might at first be using manual processes (behind the scenes) . When Uber launched in 2010, its first app was incredibly simple -- the company built its MVP in less than three months. The experience was on point for end users, but a lot of manual automation was handling things behind the scenes. The rest is history.
Risk profiles for new software startups are absurdly high. A whopping 90 percent of startups fail, according to researchers at the Free University of Bozen-Bolzano, and Gartner expects less than 0.01 percent of apps to be financially successful by 2018. It makes sense, then, to start simple before you dish out serious cash.
3. Don't worry too much from the get-go about scale. Rebuilding is part of the product development life cycle. If you try to make your creation perfect from the start, you'll invariably waste time and money. A software startup is a journey that involves hundreds of little experiments to validate assumptions.
As you conclude your experiments, you can examine the results and learn valuable lessons. These experiences should drive your product development road map and features.
Building to scale from the beginning could also cause you to focus on the wrong elements. There's no need to be flawless at this point -- you'll rebuild your creation once you reach product-market fit. Airbnb didn't build its app to scale when it initially hit the scene. Even Amazon went through several major rebuilds.
4. Target a simple start. Why make life more crazy and stressful than necessary? The first iteration of your app should validate your core underlying business assumptions (and only those assumptions). Before you ever write a line of code, test the app and its messaging to see whether it resonates with customers.
You might also build a landing page that explains the purpose of the app and features mock-ups of the design. Run Facebook ads to drive users to the landing page, and ask for email addresses to create a list of potential beta users. Before writing any code, you'll know whether your idea is resonating. If you fall flat on your face, you can start over, with plenty of money left. When you do build your app, you'll have a built-in group of volunteer testers ready to provide feedback.
5. Ditch launch parties. Everyone wants an excuse to celebrate, but it's better to abandon "final product" soirees. These shindigs were a blast in the 1990s -- back when software came in a cardboard box. Back then, companies needed to raise millions of dollars to create, test, package and ship a final product. Uber never saw itself as "finished," and your startup shouldn't seek an endpoint, either.
Your app is a series of miniature experiments with controlled -- and hopefully increasing -- sample sets of users, rather than a destination.
Related: Embrace the Soft Launch
Starting a new software startup can become a money pit if you aren't careful. Instead of shooting for the moon, go for a more realistic win. Try to finish your first iteration quickly, knowing you can always change things. A more measured approach will ensure you have money to spend in other areas, and your startup won't run out of gas before you hit your stride.