A lot of people have asked me how much will it cost to build my startup app MVP lately so I decided to take a shot at answering this question based on my own experiences while pulling together some extremely useful resources on the subject.
This is very similar to questions that received a few years back: ‘How To Find A Programmer To Build My Startup Idea?
Some Key Definitions from Thought Champions
There are many similar, yet distinct ideas about what an MVP actually is so let’s get this right before considering actual costs:
A temporary organization designed to search for a scalable and repeatable business model. -Steve Blank (We are not considering services firms as startups here.)
Minimum Viable Product (MVP):
“that product which has just those features (and no more) that allows you to ship a product that resonates with early adopters; some of whom will pay you money or give you feedback.” – Eric Ries
“You’re selling the vision and delivering the minimum feature set to visionaries not everyone.” – Steve Blank+
A lot of founders get lost chasing a huge product vision thinking it is an MVP when what they are really trying to do is build a full scale product. This is especially true for first time founders. Your MVP should be an experiment/research effort in search of a scalable business not a product (i.e. photo sharing service, SaaS product, mobile messaging app) that people will use, buy, etc. If you are doing things right you will probably reject at least one initial hypothetical business or product and re-focus or even change focus.
A Few Examples
I started out planning to build a job board. I used WordPress and a bunch of different job board engines to see if things would work as I had imagined they would. I learned a ton of lessons including the fact that job board economics are really bad. Not only are they really expensive, but to achieve density of job seekers is mission impossible. Before that, I tried out every major job board, niche job board (including Craigslist. and sites like Craigslist. I’m not saying it was impossible, but it was a lot harder to make money in the early stages despite low costs for testing my MVP hypothesis. In this case, my cost was around $85 including domain registration and hosting plus money spent on targeted ads and printing on my color printer for events that I promoted it for. WordPress is free and so were the job board engine services that I used. Next I chased a recruiting tool for helping companies keep track of all the places they posted their jobs, helped them to post their jobs, and helped them keep track of applicants and candidates they were pursuing. This started out as something to help us recruit people for our own efforts. We quickly figured out that it was a crowded market that would be expensive to acquire and keep customers in and pivoted to a hybrid model that combined some insights and angles from job boards and recruiting tools. Suddenly we had a great product-market fit then we started building our product. I really wish I had done more experimentation and less building in the early stages – that would have worked out better which is part of why this post is so important for early founders to read.
I was personally influenced by The New New Thing by Michael Lewis. I found a copy of it on a bookshelf at a friend’s house. Can you imagine how different the world would be if Marc Andreessen and Jim Clark had started a Nintendo online game service instead of Netscape? They considered it.
Next, let’s create a slightly narrower definition of what we are talking about when we discuss the idea of what an MVP should be.
My friends from Webs.com that sold to VistaPrint.com for $117 Million started out like a Geocities. Their concept was to make a website publishing platform so easy that their mom could use it. They were really successful and raised money to carry out their vision, but they hit a wall at one point. They were selling ad campaigns. Along the way the team created two top 5 Facebook platform games (early on) that lead to the spinout of the Social Gaming Network (SGN) which later got acquired by a co-founder of MySpace, acquired Pagemodo a really popular Facebook Page builder), and took a new path that involved small business websites and Facebook pages. They even developed a light weight CRM product. While their example is at a much later stage, imagine how different things would have been had they figured this out early.
I haven’t met him personally yet, but I listened to a talk by Nat Turner in Philly a few years ago. He said that he and his co-founders started out in an apartment that they worked and lived in. By day they chased their MVP ideas and used air mattresses to block the light coming in from windows. By night they slept on those same air mattresses. They rotated through 4 different businesses until they got the validation that they were looking for with Invite Media which later got acquired for $70 Million by Google.
One startup that I advised built that bordered on a social network for business people. The founder is a great salesman, but he did not do the kind of early MVP hypothesis testing that we are talking about today. He is now in the hotel category, has raised money and has some great paying customers.
Cost of MVP vs. Cost of Product
My last post, ‘How To Find A Programmer To Build My Startup Idea?‘ covers building an early product, but does not really address how to build an MVP or what one is. I plan to update that article because it has great suggestions on how to negotiate and find a developer, but it is missing a few important steps and considerations which I plan to cover here. Most early founders fail after they take on more than they can handle. They either run out of passion, stop having fun, or they burn up their savings or funding or both. Once you have your MVP and what you feel confident is a scalable business then, and only then, should you really set out to built out your product.
An Idea Should Not Be An Anchor
Most people approach their startup idea with the notion of building the founders’ vision into something that can be sold, but should that something be a product or just an experiment? For a lot of people there are two major blockers: ideas that are inflexible and ideas about competition. Founders feel like they are Albert Einstein when they have an idea. We lock onto the idea like it is a life or death challenge to ship that idea to everyone in the world and that it will make us rich and famous. This is fatally flawed. You should not treat your commitment to your first idea like a marriage.
I have met and listened to stories from many of the most successful founders of our time and read extensively about founders that came before them and us. An idea is a starting point. Sooner or later we all have to realize that our initial idea is not the right one to pursue. Sometimes we can fork the idea, but other times we have to simply file it away. Perceived competition is a similar challenge. The reality is that we have to be a lot more like Tiger Woods or Michael Phelps.
There will be competition and challenges along the way that we have to conquer. Paul Graham agrees. In a post following a talk that he gave, he said:
“One reason people overreact to competitors is that they overvalue ideas. If ideas really were the key, a competitor with the same idea would be a real threat. But it’s usually execution that matters…”
Ultimately, an idea should be flexible.
Product vs. Experiment: Breaking Down Pre-Conceived Notions About The MVP
Here is a one quote from Eric Ries that you should read and burn into your pre-MVP memory bank:
“What we should have done, and what we did for a lot of features thereafter, is started with a landing page that promised people that product. Then we should have taken out the AdWords we were planning to take out, drive traffic to that landing page, and offer people to buy the experience that we are talking about. What we would have found out if we were doing that experiment is 0% of people would have clicked through, which means it doesn’t matter what is on the second page. The first page is so bad, not because it is badly designed, but because the features are wrong that you don’t need to go through the effort of building out the product. So we wished we had done that, and we did make that mistake really.” - Eric Ries
This early approach is echoed by lean startup advocates as well as influencers in the early stage startup community:
Marc Andreessen would add that “The #1 company-killer is lack of market.” and that the market should pull the product out of the startup.
Dave McLure‘s Startup Metrics for Pirates is useful for extending, framing and planning and practically applying Eric’s landing page experiment that I just mentioned and a lot more. This stuff should also be burned into your pre-MVP memory bank.
It isn’t that you should throw up a test page and see if anyone will click on an ad to it then sign up or express interest and call it a day. You need to identify a problem that needs to be solve or at least mitigated and this is the first step towards developing what Eric Ries describes as “the build-measure-learn feedback loop” for your MVP.
By contrast, the number one item on Steve Blank’s list is: “There Are No Facts In Your Building, So Get Outside”.
Steve Blank’s (early) Customer Development principals (that he developed with the help of Bob Dorf) sound a lot more like something that a sales team would engage in.
Just in case you think that means that he is suggesting that you just go out and meet with customers, his second is “Pair Customer Development With Agile Development”. Steve’s approach is slightly more relevant to B2B (Business to business) startups while Eric’s approach is slightly more relevant to B2C (Consumer Facing) startups. Make no mistake though, they are both relevant.
In case you are not aware of the relationship between Eric Ries and Steve Blank, Eric was a student of Steve’s. Eric took Steve’s first class at UC Berkely. They do take different approaches and have very different backgrounds, but they agree on quite a bit. Steve is a also bit more of a big company type of guy and Eric is more of a scrappy startup kind of a guy. If you are building an MVP you should get a copy of Eric’s book: ‘The Lean Startup‘ as well as Steve’s Book: ‘The Four Steps To The Epiphany‘ either way.
Something else that Steve says in relation to your MVP is that “the minimum feature set is 1) a tactic to reduce wasted engineering hours (code left on the floor) and 2) to get the product in the hands of early visionary customers as soon as possible. You’re selling the vision and delivering the minimum feature set to visionaries not everyone.”
Having read this post, you should have a clearer picture of what a minimum viable product (MVP) should be. The subject of cost will be covered in detail in this series, but not in this first installment.
Part 2 is Coming Soon so check http://www.socialmatchbox.com or follow @socialmatchbox for updates.
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I shared this (work in progress) with many of the founders I know as well as on Reddit and Hacker News. This lead to a ton of feedback and keep it coming. Thanks! I plan to incorporate this feedback in the form of edits to the original post (this is a playbook/guide that I hope will last years, much more than a regular post).
One suggestion was that I should add formatting enhancements and visuals.