How I bankrupt my first startup by not understanding the definition of MVP - Minimum Viable Product

in programming •  2 years ago

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3 years ago, I realized that I had a dream - I wanted to build something important and significant on my own. I wasn't sure whether I was ready, but I decided to quit my dream job at Opera Software and create my own startup - a search engine and price comparison website for books and ebooks. I found people who decided to help me.

With the limited resources that we had, I was sure that the effectiveness of our work would be crucial for whole project. I wanted to build something, what at the same time could:

  • prove that my product is better than existing solutions
  • persuade a lot of users that this project is cool and useful
  • help me find investors for faster growth

I was sure that I understood what Minimum Viable Product is - I was wrong!

This seems to be straightforward, right?

Let's start with a definition. The first one is very simple:

A Minimum Viable Product is the smallest thing you can build that delivers customer value

The second definition is from Eric Ries, an entrepreneur and author of The Lean Startup, which explains:

The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.

Those two definitions suggest that your first version of a product - which will help you test your idea - should be as simple as possible and at the same time should provide users maximum customer value. There is some problem with those definitions - they suggest, that you have to build something, but the truth is that at the beginning you should avoid building a product at all, because you can and you should test your idea without that.

Validation of your idea without building anything

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If you want to be a business owner, then you should be at the same time very skeptical and very optimistic. You should be prepared for the worse, but you should hope for the best. Skepticism is important because you should test your every assumption that you can make money on something, but optimism is needed to find a way to prove that your skepticism was in this particular case unnecessary.

I can recommend you an article "15 ways to test your minimum viable product". There are 8 items from article which could be used in an MVB instead of MVP:

  • Customer interviews
  • Landing Pages
  • Ad Campaigns
  • Fundraising
  • Explainer videos
  • Manual-first (aka “Wizard of Oz”) MVP
  • Digital & Paper prototypes
  • Pre-order pages

Those techniques can save you months of unnecessary work and tons of money. If you want to build a business, you should first validate your idea with at least one technique described there.

Minimum Viable Business - first, MVP - later

MVB is a new term. For me it is helpful because it helps me split the idea of building a company into: "research & planning" - MVB and "actual implementation" - MVP. I am a software developer, and most of the projects I've started because I wanted to learn something about programming in the process of doing that - how to implement this functionality, how to use that library, etc.

It would be a great outcome, if one of my projects just took off, and became very successful. But this would assume, that I had really great idea in first place, and that I had implemented this flawlessly - sadly this scenario is very unlikely to happen. You don't know what the market wants.

Businesses are not born automagically. If you focus on building a product, you can build one, even a great one... but this does not necessarily mean that you will be able to earn anything from that. If at some point you will decide to create a business, then you have to start thinking as a business owner, not like a developer, who loves to learn new things.

If you know the product which you want to build, you will need funding or a business to be able to exist and grow. Then before building a product you should focus on building a business. Don't get me wrong - this doesn't mean that you have to create a company. You should focus on validation, whether your business actually has a chance to be a successful business or at least will be able to support the development of a solution which your product is supposed to solve.

Being sure that there is demand for a product like yours

In the case of our startup I was sure that there is demand a for a price comparison website like ours. Why did I think so? Because just in Poland I already have 4 competitors, which like me, focused on a niche - books and ebooks. According to me, each of them were doing great, but I was sure that I could do something better.

I have to admit, I didn't conduct proper research. I didn't check exactly how many customers they have, and I didn't even try to ask them about their profits. I was sure that if someone else is doing this, they have to be earning some money from that. That wouldn't make much sense if that not were true, right?

In the 90's a lot of companies were sure that Virtual Reality (VR) is the future. The giants like Nintendo, Atari, Sega invested tons of money in VR because their competitors were doing the same. No one wanted to be left behind. Even right now, we are not 100% sure that there is demand for VR, which companies can offer to customers.

So, before you invest most of your assets in the development of your product, check one more time whether there is demand for that, and whether your product will be able to make money for own development.

Then and only then, you can start thinking about how to build the first minimal version of your product - which one more time, will confirm that your assumptions wereactually correct. Do you see the pattern?

What MVP is not

what MVP is not

I can agree that it is necessary in the process of creating an MVP to discuss the importance of particular features. Some teams that try to prepare an MVP, after a lot of time spent on arguing about which features are worth to include or exclude from their minimum viable product, having such list defined, finally decide to start building a product.

There are a few problems with this approach. First of all, MVP is not a strict plan for the first few months of development. It is also not a list of chopped out features, and for sure it's not a demo with a bunch of cool features which would present how awesome your project is.

MVP is more like a process, which can save your business

With a list of top reasons why startups fail I will try explain how MVP could save your project from failing.

But how can one single MVB or MVP do so much? The truth is, it can't!

No Market Need

It is extraordinary that as many as 42% of startups fail because of a wrong assumption at the beginning. Inexperienced founders have a tendency toward wishful thinking. They are so sure that their idea is good that they tend to ignore a need to do a proper research.

MVB/MVP tests are designed not just to answer technical questions about the product, but also to test fundamental business hypotheses about the viability of the market it exists in.

MVB as a cure for the "no market need" problem should be like a bait - it should check how many users your product will be able to attract. Not only that, you also have to be sure that those users are your target (with specific needs and funds that they are willing to spent on things that your product can provide).

Ran Out of Cash

This also happened to us. Right now I think that running out of cash is always an outcome, not a reason itself.

I wanted to build a product for myself, so I started only with my own savings and my own time. I didn't validate whether anyone would be interested in funding my work in advance (investors, crowdfunding, FFF)

I consider myself as a customer, so I decided to build a few features, because I thought that they were cool. I wasted too much time on the development of things that were not crucial, and spent too little time on features that could help us monetize a service.

I spent too much time and money which was required to implement some features that should not have even existed in the first version of our product. I decided that to outperform our competitors we were going to integrate more bookstores than others. Because of that we needed to spend:

  • much more time on integration of those bookstores
  • much more time on performance optimization
  • much more money on servers that were needed to handle updates from those bookstores

Get Outcompeted, Poor product, Ignore Customers

If your startup was outcompeted, probably you did something wrong. Of course, you can always say that your opponent had the "first move advantage", but that would be an excuse only in case that either of you did not make any mistakes.

You should not try to build a perfect product just at the beginning. If this is even possible, for sure it is too expensive. Most mistakes can be corrected, so success at the end depends on speed, performance, and good research about things which are not perfect. In all this cases to make progress you need to work closely with your customer. You should make your product iterations as short as possible, and after each iteration, you should check feedback from your users.

This means, that you should have a separate MVP of each feature! Even if you think that you already know, that specific feature is needed and desired by customers, you should first implement a small part of it - 20%, and at the same time try to bring 80% of feature value to the table.

MVP is different for each industry

I think one explanation for why there is so much confusion with MVP is that it looks quite different for different companies.

If you want to build a great restaurant, it is obvious that a location in the city center can be too expensive at the beginning. Antique furniture probably will also be out of your reach. It is a better idea, to start with something smaller. In theory, a food truck could be ideal, but I would recommend something smaller, like inviting your friends for a dinner.

But if you are a software developer, you don't want to rebuild your product over and over again from scratch. You want to start with a foundation...

MVP for software developers

First of all, if you are a programmer, that means that you are probably a very technical person. Even if your target market is other programmers, who can understand the meaning of returned errors, you should make your MVP reliable and usable.

You have to remember that there is still a very high probability that your users actually need something slightly different than you initially had in mind. This means that you have to be flexible, and, more importantly, your code also has to be flexible!

I will not argue that each project should be covered by unittest with a 100% rate, but if you are wondering how to build a flexible code, unittests are the answer.

Each software has some kind of core. In most cases this is the most complicated part of the system, where a lot of optimization and tweaks will be added later. Your core does not have to and in fact should not be perfect, but you should cover all cases handled by your code with unittests. Only with a bunch of well-written unittests you will be able to completely rewrite you code to meet new business criteria... without destroying everything in the process.

Don't be afraid to find the right wall

MVP in theory is an easy concept, but in practice it is extremely difficult to master. We want to take action and build great products! It is very difficult to convince ourselves that we all should inititially research more because we are afraid of giving up on our initial idea...just like all those naysayers saidthat we may end up like all those naysayers said - by giving up an initial idea.

But the truth is, your idea didn't came from nothing. You are a deep well of experience and unique knowledge. Even if, by your research, you realize that your idea business is not possible, you gain ever more unique knowledge that your competitors will not have. But if you are able to listen to what smart people say about your product, even if your initial idea was terrible, you will find out what you will have to do to make their life better. Don't be afraid to find the right wall, especially after learning about tool which will help you find it.


During the creation of this article I realized how many things about MVP I want to describe. I decided to split everything into parts. In the next part I will describe a few ways of how you actually can plan and design your own MVP.

If you want to learn how to build your own MVP or if you are interested in one of #programming #startup #entrepreneur, you might want to follow my account. I post one article on every Monday :)

Note: Article was liveblogged and after that was corrected by profesional English teacher hired on italki - Nikki and James.

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"no market need"

I think that is the biggest one the blockchain world is seeing. We think everyone wants and needs immutable data, but most people just want to consume the widget not know how the tech works. Which is where I think steemit is doing a good job.

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I agree. Steemit has not invented social networks nor the block chain, but putting the 2 together is very powerful.

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Yea, agreed. My only qualm with steemit is the very very strange distribution. But hopefully in time that will get better.

How long did it take before you realised your product wasn't viable? Was there anything you could have done to salvage it?

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How long did it take before you realised your product wasn't viable?

to the end of our funds... and after that I also needed few months to figure out that.

Was there anything you could have done to salvage it?

I think I should listen more carefully my wife which had kept saying that we should have more validation. But I didn't listen to her, because I was sure, that my hard work will solve all problems!

I think If we would have more resources that would only make things worse... we would waste them also. There was one event which helped me a little bit with understanding how many mistakes we have made - some 2-days workshops for startups, where we had a chance to speak with our potential investors.

The interesting part is, that they didn't say anything about MVP, our other problem was scaling. If you are building a product for Polish market, then you are limiting your potential profit... and because in other neighbor countries Amazon is the lead bookstore, that would be very difficult to introduce our service into those countries.

But I started thinking again about MVP, when I realized that among 10 teams on workshops, there were only 2 teams (we and other guys), which had complete product. 3 teams had "just an idea", which they wanted to validate. I was surprise how much useful feedback they got without implementing single line of code.

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Your last paragraph there. That will save so many people a lot of time. Who would have even thought of that..... great thing to learn though.

This person sent me a DM in steem chat to this post, so I have flagged it.

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I don't upvote every article that is sent to me via DM, but this is well written and I may have missed it otherwise.

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Personally I don't care if it's a good article or not, if somebody I don't know sends me a link in a DM in chat. That's just me though, I respect some folks don't think that's an issue.

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So promoting your own post is a reason for downvote? Good you upvoted your own comment.

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Spamming via DM in chat is not promoting your post, it's a junk email equivalent. I upvoted my comment so folks could see it quicker before deciding if they want to reward this person with their vote or not.

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Did you even read this article? Or you don't care about it in your private revenge?

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Dude, why would I read an article somebody sends me as a spam link in a DM in chat, who I don't even know? Revenge? C'mon. I flagged a junk email link, thats all. Have fun flippn out, bye bye.

Hello noisy, we would like to inform you that you have been chosen as a featured author by the @robinhoodwhale initiave. We are currently in alpha testing, if you would like more info join robinhood chat on steemit.chat or pm @repholder.

Nicely MVP article - Keep on Steeming!

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That is honor! :) I hope my article will help at least one person avoid my mistakes and save months of development and even more important things! My wife almost left me because of my startup ;) Fortunately right now everything is great :)

Great work, thank you for the sharing, you sure get my upvote and namaste :)

viable-lovable

though :D

How far should someone go for getting potential customer feedback? Should someone create mock ups, previsualizations, etc? I mean, I think you would need that for crowdfunding at least.

Also, it seems to me, creating a mailing list would be really useful for measuring interest. I've seen it on many future product sites, where a website will offer to keep you informed of product development or when preordering will be available if you give them your email.

Knowing all of this in past would you start same company again?

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For sure I would try. But I would do a lot of things differently. People are afraid that their idea is so revolutionary that everyone want to steal it from them. The truth is, that idea i 1% and 99% is execution. I would talk more with people and potential customers. I would probably even talk with my competitors about cooperation.

But to be honest.. even that I made so many mistakes, I am sure, that at the at I was very happy that I tried. I learn a lot of things in the process, unfortunately in the hard way, but still I learned a lot :)

Interesting approach, I see the parallels to my article about pre-development research
https://steemit.com/engineering/@engineercampus/the-other-kind-of-research-put-your-idea-into-the-world

Now I'm thinking how this can be applied to physical products.
While preorder might be a way, customer satisfaction is also important to monitor after purchase. The amount of preorders doesn't show me if people will be satisfied with the product and recommend it.
But you probably know this already that it is the same with software too, as can be seen with a lot of preorder games.

That statistic is real that 75% of businesses fail in the first 5 years due to lack of capital. I stress it all the time that its easier to build from the bottom up than build from the top down. Before I create a business: I am already building business credit on that company in case of a cash crunch. Not only that: I am investing some of that money i received from business credit in other viable business for those lean years...That's how the big boys do it: If you look at Wal-Mart for example; they are invested in shares of other companies. How do you think they survive :-)...Also just an added tip in case you didn't know: when you apply for business credit with a personal guarantor of course as being required now: the business credit do not show up on your personal credit report. The inquiries do but with a little know-how you can get those removed in 45 days top ==> Wash, Rinse, & Repeat. Excellent post by the way :-)

Good testimony. There all a bridge between dream and reality, between specialty and general public.

Hi!

Interesting article. Couple of years ago I wrote similar article and it went viral on twitter. I think you might have seen the pic too. I like that your article offers new fresh perspective from a market and failure point of view.
https://blog.fastmonkeys.com/2014/06/18/minimum-viable-product-your-ultimate-guide-to-mvp-great-examples/

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could you give a tip what to do to make article viral on twitter. I have twitter account, but I do not used it very often. I think that would be a good opportunity to promote Steemit among entrepreneurs and whole startup world. People in these area are very open minded, so they should be interested to learn more about something like Steemit :)

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Hi! It took 2 weeks to write, so the article was really good quality, but I think pic made it all. It just explains concept very well, it clicked with so many ppl and was shared tens of thousands of times. This article's pic with car most probably came from pic in my blog(I not bragging, was just super lucky. And no, original pic was not even my.. I just refurbished for mvp concept). But really pictures are everything. What about simple infographics? I was really lucky I think , i still hope my advice helps.

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I do not believe in luck :) You simply did a great job.

I'm normally not a grammar nazi, but when you have this note:
Note: Article was liveblogged and after that was corrected by profesional English teacher hired on italki - Nikki and James
It makes me want to correct the word professional. It's not really good advertising for your profesional English teacher.
It is a good read and worthy of an upvote however.

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There were some parts, which I added afterwards, note was one of such thing. Fortunately I talked with one of me teachers and we agreed for different model of our cooperation - result should be better next time, because we won't be longer limited by a italki schedule :)

Thank you for your feedback! :)

This is a useful article for me, as I'm working on setting up a software startup. I'd identified the needs more-or-less correctly, but I was utterly stumped on what to actually do about them. It's extremely difficult to identify what is "added value" when, a lot of the time, the customer knows objectives from their perspective but not what is needed to achieve those objectives.

Two, maybe three, entire courses at university were dedicated just to this one problem, of analysing user behaviour in order to infer user requirements, because the user is often the last person to know what they require from the perspective of a software or hardware engineer. What users believe they want can end up being something the user hates and loathes because it gets in the way of what they actually need.

On the other hand, you can't disregard the user either. Giving them exactly what they needed but not what they wanted has been disastrous for many products down the line. Even when it hasn't been catastrophic, it hasn't done the product much good either. Linux and OpenBSD are technologically superb products, best-of-breed without fear of doubt or contradiction, but there's a reason why Microsoft can have disaster after disaster for the best part of a decade and lose only 1% of their desktop marketshare to these two systems (and why Microsoft can have essentially equal marketshare in the server market) - the user is only getting what they need and not what they want.

At university, the courses considered contracted businesses going and engineering a complete solution for one individual customer. That market is dead, Netcraft confirms it. Seriously, though, you can't use that approach when you're trying to sell to a lot of people. You can't visit each one and try to engineer something that works for everyone. Too many people, most of whom are unlikely to welcome door-to-door systems engineers.

I still don't understand how to conquer this problem, but (a) I now know I'm trying to solve the right problem, and (b) I now have key terms and vital explanation for how to go about solving it.

Great in-depth & detailed article and advice! I like the idea of the MVB vs MVP and yes you can do a lot even before building anything!

good info @noisy thanks for share that! 8]

good posting
upvote.
invite my blog
@yongyoon

Interesting idea / concept! :)

It seems you are confused about what a MVP is supposed to be. It's not supposed to be the first thing you are making that will allow you to test your idea and raise funds. The first thing you are supposed to do is a Business Plan. And that involves doing market research, pitching your idea to investors, interviewing customers and eventually (maybe) doing a small mock-up / proof-of-concept product but that is not a MVP. The MVP comes once you have got your seed funding, whether you are bootstrapping with your own funds or not. The MVP is an actual product. It's just the absolute minimum and most basic yet functional product that you can get away with. If you didn't have a business plan and went head down into developing your MVP then that more than explains why things didn't work out the way you thought they would.

Thank you very much for the valuable information

Let's build that wall!

lol no let's not...

Great post! Thanks!

steempixel test

steempixel test

This is easily one of the best presentation on MVP I read in a long while. I work with a lot of companies, young startups and big multinational corporations alike and these concepts are not always easy to grasp for either of them. If you don't mind I'll spread your article to my clients and my network. Good work!