I feel a little sad every time I hear stories about software startup founders who have spent their life savings or wrecked their relationships in an effort to just get up to bat in the startup game. I really mean it. I have have four startups under my belt and have fond memories of all four of them, but I really wish I could travel back in time and give younger me some key insights about how to suck less and make money sooner.
My first startup was easy. My co-founder and I used an open source system to build a business that required some configuration and technical know-how. Our startup costs consisted of a phone line that people could call into and the corporate registration fees. We bought hats four ourselves which was a splurge. I was a freshman in high school at the time and looking back on that startup, I wish that every startup could be that easy to get going and that much fun.
The truth is, it can be. If you want to build a consumer web company all you need is $50-100 for web hosting, $5-10 for a domain name and a some very basic technical knowledge. You could pick up the knowledge about how to use an open source platform like WordPress or Magento online at the cost to you of your time. There are plenty of themes and to customize one would not run you that much in learning time or dollars if you used a site like Elance or Freelancer.com. But most of us are not happy with this, we feel the need to build something really complicated and unique…preferably something that will cost us $50-100K just to get to the point where we can push the “Go” button.
The need to build some overly complicated business model and web app or mobile app is the new American Dream. For most founders these days, it isn’t enough to have just a web or mobile app, you have to have a web app with a mobile app strategy which really just means you have to build a mobile app and a web app before you can even announce your product to the world.
Before there were mobile apps, there were apps with search engines and really interesting algorithms. My second startup was a lot more complicated. There must be a rule about this as far as I am concerned. If you do something and it works out well you have to do something 10X harder the next time. This was true for me. In my second startup, I had two more co-founders and I took on a really hard to penetrate space. I was a year out of college and felt like I was armed with a lot of great ideas about how to do something really amazing. It turned out that amazing ideas involve an amazing amount of work. I was young, dumb and spent all of the money I had saved up while working as a programmer for a big company while I was in college. If you know me, you know that I frequently compare my role at that company to the role of the lead character in the movie Office Space which happened to be filmed in part on my employer’s site in Las Colinas. I can 100% relate to that movie.
I wish that I had read Steve Blank’s book, but I’ll settle for the fact that I learned some important lessons. The biggest lessons I learned were that you have to recruit the right team and keep them motivated. Fortunately for you, I’m happy to share some insights so that you don’t have to suffer as much as I did then or on my fourth startup. For the record, the third and fourth startups are both generating profits that continue to keep me off the streets.
The point of all of this is to make sure you know I’m genuine about this. I hate it when people write content for the sole purpose of helping their site’s search rank. That said, I’ll get to the point.
So you have an idea and you want to build it…
The first step is usually talking to friends, family, experts, and maybe even the people at your local SBA SCORE office. Forget about all of that. Read the first four chapters of Steve Blank’s book before you do anything: The Four Steps To The Epiphany (free ebook version). Then read Noam Wasserman’s book The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (rent via Amazon for $3.22). Once you have read Steve’s book, you will know the difference between an MVP and a project destined to put you in the poor house. You will also know how to get through many of the stupid founder mistakes that have happened to most of us at least once. You will also have a framework for how to consider your options thanks to Noam’s excellent framing of the decisions that you will have to make as a founder. After you have read these two books, but only after reading them, you can consider talking to friends, family, experts, and SCORE.
The second step is admitting to yourself that as a founder, the buck stops with you. A lot of people will offer to give you free or paid advice over time, but ultimately the consequences fall squarely on your shoulders. So when someone gives you free advice along the lines of “you should X” or “hire me to do Y”, just remember that there is no substitute for doing your homework. Another way to think about is this: being a founder is the final exam, you can’t let someone else take the test for you.
Here is one case in point from today. I had a conversation with a founder who had gone to a local counselor at a county based entrepreneurship help center that had a name that made it sound like the state’s help center. The name isn’t important, but it is interesting how entrepreneurs brand and market things so I am sharing this detail.
The counselor is reported to have suggested to the founder that he should get an estimate for the design and development of a minimum viable product. This estimate would be used to help secure funding for the startup. So the founder went out and tried to get estimates. The only problem is that the founder could not get an estimate from anyone. One software consulting firm even offered to charge $20K for an estimate. I have a feeling that I know who that firm was because I know another founder who took a firm up on a similar paid estimate recently. Truth be told, $20K isn’t that much. Another founder I is about to pay twice that for an initial concept. Maybe I’m a just frugal, but that seems like a lot of money to me. You could hire a full time senior level person for two to four months for that kind of money or a junior person for four to eight months. Keep in mind that we are just talking about an estimate.
My biggest surprise is that the counselor of record was not able to help the founder figure out what the going rate for such things would be. I guess I have been around enough deals and interviewed enough founders to know such things. The street price for a web or mobile MVP happens to be around $50-80K. The price could be a lot more, but that is the base line for a firm to do the work.
While I can’t predict what advice I would give a founder in every situation, I can say without hesitation that paying for an estimate is a bad idea. Here is why: the team that creates the estimate is creating something that is convenient for them to pick up and run with, but also something that might be based on their team’s economics. Another team might be able to use open source or proprietary plugins, or have an approach that is totally different. Just say no.
Building an app is a process that starts with picking people who you trust and respect the work of. References and past performance are also important. More about that below.
But to build an app, mobile or web, or both requires funding. You have to get to the knowledge first. Hopefully this post will help you to have an intelligent conversation with whoever you talk to. If you encounter circumstances that differ from these feel free to drop me a note and I will try to help. My email is at the end of this post.
Every state is different much like every region of the country is different, but there are some constants. For starters, many states offer early stage funding products to entrepreneurs. In Maryland, there are a ton of resources that are available through colleges (ask around, there are tons), incubators, and through organizations with missions designed to help. Some are state sponsored, some are through foundations, but trust me when I say that there are tons of these resources out there. You can get as much as $250K without giving up equity in Maryland if your company fits certain criteria, demographics, etc. One such product is the TEDCO Technology Commercialization Fund which is essentially a convertible debt note available to companies in Maryland incubators or that meet other criteria. These go up to $100k and the process is fast, sometimes within 60-90 days vs. 6+ months which is the norm for similar programs in other states. If you don’t have a business model or if you do, the incubators around the state (yours or Maryland) can probably help. In Virginia, the equivalent organization is CIT GAP Funds which does seed funding for companies ranging from $25-150k. I have seen a lot of companies go incorporate in Virginia and then basically work from DC so it might be possible to work with a fund from an adjacent state provided you observe their requirements.
If you are in a particular state and have a question, send me a note and I will try to get you in touch with resources local to where you are. I am using Maryland, DC and Virginia as examples because these are fresh on my mind after having a conversation about this today.
I talked a bit about the street price for an MVP above, but I would like to elaborate a bit about what you might get for that. An MVP for your product would probably consist of a website built using Boostrap.js (optional, but popular right now) and a theme which would speed up the time to get it up and running plus your web or mobile app. You might get something that is both web and mobile, but definitely not something great that spans both for $80k. You could build a web app that works on mobile, but that is probably a really bad idea if you really want to clean up in the mobile space. to get a web and mobile app, you are probably looking at something more along the lines of $100-120K. That would include something on iOS OR Android, but probably not both. But who knows, it might. Ultimately, if you want the trifecta that is web + iOS + Android then you are probably looking at something more like $80-120K.
The website design and actual site would set you back around $2,500-10,000 (not including web application, see details below), but could cost more if you want fancy and/or bells and whistles.
A lot of people believe you need a mobile app strategy. Personally, I think you can have a mobile strategy but that it is optional. If you disagree then choose Android or iOS, but no matter how you do it go Native. You can port the app over to the other later. Parts of your mobile app could be made to work in or in tandem with the web application portion. This might lower the cost of things a bit, but the devil is in the details here. A web app by itself will probably cost you around $50-80K. A mobile app by itself, but for both iOS and Android will probably cost you around $80-90K. A web app with a mobile app for just one platform might end up costing you around $100K with a website that looks decent under good circumstances.
The price you pay for an MVP is just the beginning though. You have to remember that once you get your app built, you are going to want to change things, update things and that there will be upkeep and support costs. This is where it comes in handy to have read the two books that I mentioned above long before you start talking to people about things.
Also, be sure to factor in legal costs including incorporation, corporate governance, and trademarks, which are equally important if you want things to work out. Your bill there should be around $10-20k depending on if this is just you or if there are co-founders and other factors. My favorite business and software law firm happens to be Neelbauer Law, LLC (The firm was started by my co-founder and the host of the popular Social Matchbox Startup Launch Event Series who is one of the only startup attorneys I know who has real operating experience, which makes a huge difference as far as I am concerned.) so if you are thinking about talking to a lawyer definitely check them out.
I have seen this scenario play out hundreds of times. If you would like to chat about it or if you have any questions, I would be happy to discuss. I would be happy to make some intros or suggest further reading based on your situation. I also hope to hear feedback on this post, so please jump right in and tell me if you agree, disagree, or just share some experiences that you have had.
My email address is firstname.lastname@example.org – I check it daily.
Here are some posts that you may also find to be helpful:
How To Find A Programmer To Build Your Startup Idea
Successful Founders and the Company They Keep
Team Building For Early Stage Startups