How to Get Started With Minimum Viable Product (MVP): A Conversation With Techstars and OneSeven Tech – Part 2

Even early-stage tech startups require a saleable product. That typically begins with MVP, or minimum viable product. MVP is a fast, cost-effective product — typically an app — to attract early-adopter customers by solving a problem, thus validating your product idea early in the product development cycle.

How can your company cut through the clutter and make the most efficient use of its resources for the best chance at a successful MVP and beyond? JP Ferro, vice president in Bridge Bank’s Technology Startup Banking group, spoke with James Sullivan, founder of OneSeven Tech, and Malte Witt, managing director of Techstars Boulder, to find out.

BRIDGE BANK: When a company thinks they are ready to build a product, where should they start? 

TECHSTARS: Generally, my advice to founders is to focus deeply on customer discovery and be very targeted about not biasing the way they answer. It’s essential to learn how to do effective customer discovery. Most founders fall into the pitfall of guiding potential customers in the direction they want to hear. Some of the earliest KPIs I’m going to be curious about are, “How many customers have you met in the last week? How many in the last month? What sort of a process are you running around your discovery?” Typically, you’ll know you’re ready to start building when you start hearing the same answers over and over in those conversations.

ONESEVEN TECH: Once proof of concept is validated, there are a few things you need to think about. There’s a moat when you start to build a software product — where you invest a large portion of your company’s money into upfront development costs before the product makes any kind of money for the business. 

To generate revenue, you’re relying on that software to accomplish a job for your users that’s worth paying for, and so you need some funding to get across the first tranche of development. We’ve seen some founders try to bootstrap this themselves, or they go through an accelerator program that gives them a little bit of capital — but to me, that capital should go toward validating the problem, doing all the business formation and then setting out to create the MVP.

BRIDGE BANK: What are the benefits of an MVP, and what should you spend on it? 

ONESEVEN TECH: An MVP is a cost-effective and quick way to test the market and test your theory before you invest hundreds or thousands of dollars into a tech stack and team. An MVP should cost anywhere from $5,000 to $50,000 maximum — anyone who builds over that is investing way too much (space tech aside!). I think you should keep it very lean and tight. 

BRIDGE BANK: When is the right time to invest in an MVP? 

ONESEVEN TECH: This goes back to having a solid understanding of the problem you’re solving for customers. The problem statement needs to be scaleable through technology like an MVP, but if you can’t solve your problem with a proof of concept, it’s not worth pursuing. An app is great, but if you can’t solve the problem for customers with a spreadsheet (for example), you’re not ready for the MVP.

I like to break the experimentation process up into three tiers before even getting to the MVP: 

1. Proof of concept: As an example, if you believe you have a proprietary algorithm — for example, a forecasting tool for startups — that may change an industry, you should start by trying to build the first version in a spreadsheet. Then, try manually onboarding and working with users in the form of a service. Once you get to a point where you’re confident you are solving the problem for your users, see if they are willing to pay for your time using the solution, which will turn those users into customers.

2. Prototyping: A prototype is a visual design of how the solution would look in an ideal state (i.e., full app). You might create some low-fidelity or high-fidelity wireframes and designs, which is what the software product could look like in the form of a web or mobile app.

3. Minimum viable product: This is where the development begins. It’s the most basic version of your proof of concept but a little bit more software-enabled. Maybe it has one feature, and it’s built using a React front end and an Airtable back end — it’s not over-architected; you’ve just upgraded your proof of concept from a spreadsheet to an app. If your MVP starts to sell in its new form, you can begin to work with your customers to figure out what other problems this new software tool can solve. You can always add to the MVP, but that MVP should be based on the core problem that you first defined and proved with that proof of concept.

Before they invest, accelerators like Techstars want to know, are you solving an actual problem that an entire business can be built around? For OneSeven Tech, we’re also asking, “Has this business clearly validated a problem for real, paying customers?”

BRIDGE BANK: What does an MVP creation tend to look like? Any best practices you can recommend? 

ONESEVEN TECH: As you move forward, it is important to identify who will build the product. Are you going to outsource? Will you fill some technical roles yourself while your day job is paying for it? There are pros and cons to both. If you decide to build it yourself, you go through that technical learning curve of being a one-person product team working on multiple roles from frontend to backend to DevOps to QA. That time could be spent getting deeply involved with your customers. With a vendor, they are primarily building the requirements you define upfront, so it’s important to find a vendor like OneSeven Tech who will build and think with you. Businesses these days are being built on those low-code, no-code tools, and I think it’s a significant first step. However, if you first build it custom, with scalable architecture, you own that intellectual property and software, which is another asset that makes your business a little bit more valuable.

Before jumping into the creation process, it’s important to say to yourself, “All right, maybe I have some money set aside for this, and I am willing to potentially lose this money without ruining my life.” I think it’s always better to raise a little bit, whether from an angel investor or a friends-and-family round. I highly recommend against tying your personal assets to the success of the business. If you’re taking out a loan against your house, there’s a lot of anxiety tied to that. We’ve had to reject some customers who have tried using their personal funds for their startup because we believe this stress will cloud their judgment.

BRIDGE BANK: Why is it important to create a waitlist before or while building your MVP?

ONESEVEN TECH: A waitlist is important because you want to see that people are actually going to sign up for the startup you are building. During the Techstars programming is a great time to build your waitlist. While you’re beginning to build up the hype around your startup on the marketing side, you can push people to an email form or a tool like GetWaitlist to store and manage the emails of interested users. Through that tool, you can send updates to those waiting, before onboarding them to your alpha/beta. It also gives you real numbers/metrics to use as benchmarks to see the demand for your software product. If you have a waitlist of 800 to 2,000 people, that’s great. Those will be the first people that you should be conducting those user interviews with.

BRIDGE BANK: How do you establish pricing for your MVP?

ONESEVEN TECH: To me, pricing your product comes from user interviews. Personally, I ask a bunch of questions to first understand their problem. At the end, I say, “All right, so if there is a software solution tomorrow that fixes the problems you defined, would you buy it?” And they’ll say, “Yes! Of course.” Then I ask, “What would you pay monthly or yearly for that solution?” The customer will literally tell you the price right there. By asking the right questions, people will tell you what they believe to be the value of your solution. From there, you aim for the median price point of all your user interviews. You try to position your pricing on a fine line where you might lose customers if it goes higher — it takes a lot of experimentation. There are also AI landing page builders like Mutiny that can make small changes to the pricing on your website, based on first-party data.

TECHSTARS: A lot of founders leave a lot of money on the table. Some of the fundamental questions a founder needs to answer are: 

1. Does the pain point that you imagine actually exist?

2. Does the customer or potential customer realize the pain exists?

3. Do they know exactly how much this pain costs them by not having it solved today?

4. Are they going to do something about it, whether they have your product or not?

5. How frequently do they experience this pain?

Much of the pain that excites early-stage founders falls into a category where customers can live with it. And if there’s a deep pain once, a customer might sign up to solve it once, but if the frequency is low, it’s hard to build something really sticky. But if a founder is super aware of how much a recurring pain is costing and how much not solving it costs, it’s an easy way to determine how much you should be charging for it. For example, if there’s an inefficiency that costs a company thousands of dollars per month in waste, you can probably charge a premium for that product, and they’d be happy to pay a premium if you save them that cost. 

BRIDGE BANK: Once you have an MVP, how do you measure success and get user feedback to improve?

ONESEVEN TECH: You can use lots of different tools and systems. Some of my favorites are: 

• Frill sets up customer feedback loops with its feature voting tool and provides customers a place to view roadmap announcements and share their opinions before having to build.
• UserTesting.com or Userbrain conducts unmoderated user interviews. It’s essential to talk to your customers every single week, maybe even every day. They’re going to tell you what the problem is. But don’t lead them — you want to ask very general questions, and these tools are great for that.
• Mixpanel for mapping user trends and behavior.
• ChartMogul for subscription analytics.

Ultimately, you want to open up the pipeline, and not just through email. Nothing really beats just getting on the phone or Zoom.

 

With 40 accelerators across the globe, Techstars is one of the world’s most active pre-seed investors, with a portfolio comprising over 3,600 companies and a market cap of more than $100 billion. OneSeven Tech is a Digital Product Studio for startups. Empowered by a global team, it helps companies plan, design, build and support high-quality digital products. Its portfolio of clients has raised over $55 million from top VCs and accelerators like Greycroft, Techstars, Visible Hands and Lerer Hippeau.

Missed Part 1? Read When Is Your Startup Ready for an Accelerator?