14 December 2018
Expansion & Improvement
Getting a tech startup off the ground is an exciting time for any founder. During your set-up phase, you’re likely to hear the term ‘MVP’ being used in relation to product development. But what exactly does this MVP abbreviation stand for? And how does it relate to the early stages of founding, developing and growing your startup business?
Gary Staunton explains what the MVP stage is, and why it’s a vital concept to grasp in the birth of any successful technology startup.
What does MVP mean in relation to setting up a startup?
There are always plenty of buzzwords in the startup world, and nowhere more so than the technology sector. So why is ‘MVP’ an important term to add to your startup lexicon?
MVP is an abbreviation for ‘minimum viable product’, and refers to the initial stage of creating the first workable (and saleable) version of your new business concept. It’s a concept that comes from a book called ‘The Lean Startup’ by Eric Reis and the basic principle is relatively simple.
Rather than putting huge amounts of time into creating a detailed business plan and painstakingly carving out and sculpting the perfect product, you should put that time into determining what the minimum requirements are to get a product out there in the marketplace – something people will use and eventually be prepared to pay for.
Creating a product you can develop
This idea of an MVP phase is especially relevant to the tech sector. Whether you’re creating a new software platform, a website or some other form of digital service, what you need is user interest, usage data and feedback.
Your initial offering will be far from perfect – it will be clunky, and people will probably hate some parts of it. But getting this MVP out there allows you to test your product and use customer feedback to continue sculpting and improving.
Going through this MVP phase allows you to:
- Provide an initial product to users
- Obtain real-world user feedback and comments
- Shift your focus, based on this user feedback - and this doesn't need to mean losing sight of the overall vision for the product
- Build a community, create energy within that community and yourself, and ultimately maintain and gain momentum.
For example, if your product is a website, it’s possible to launch with just a landing page – a basic page that expresses the vision and gives interested parties the opportunity to register their interest with little more than an email address.
It’s minimal, but it works. And over time you can add your About Us page, Products page and other relevant sections, based on the comments you get from your clients and customers.
Starting your MVP phase early
The MVP phase is a productive way of moving your startup in the right direction in terms of making a product that people will actually want to use and pay for and generating initial revenue. So, if you’re entrepreneur with an idea for a brand new disruptive product/service, it’s important to define and create your MVP phase as soon as possible.
If you're spending time on something that others do not want, or couldn't be effectively monetised, then better to know sooner rather than later. A certain amount of professional experience and business capability is needed – you can’t go straight from an idea you had in the shower to planning an MVP. But, in principle, if you have the foundations in place, you should aim to get to your MVP stage operational as early as you possibly can.
A good modern example from the business world is Airbnb. The Airbnb founders had the idea of letting out spare rooms to create an income. Initially, people thought this was crazy, but they just started doing it, testing the concept with friends and family.
Eventually, people began to realise that this was a convenient way to travel without spending a small fortune on a hotel or staying in downtrodden suburban areas. The platform developed and the business grew from a small community of fearless early-adopters, to the multi-billion pound behemoth it is today.
What comes first: the funding or the MVP phase?
There is a certain ‘chicken and egg’ situation that you face as a startup. To create an MVP, you need funding. But to get investment and funding, your investors will want to see the product and your business plan. So, which comes first – funding or MVP?
One of the great things about the tech and digital industries is that there’s a very low barrier to entry in terms of cost. So if you have a good idea, good skills and a good network of contacts then you may be able to get some of the funding you need.
At Haines Watts, we want startups to come to us with business concepts that we can really get behind, as advisors. We can help you get your finances in order and get access to the funding that’s required. One online gaming client raised £10M on just on one initial coin offer (ICO) for their own cryptocurrency, and that’s starting to look like small change in the tech world. There are increasing amounts of investment coming into the sector – especially around crypto currencies, fintech, blockchain and AI.
One could reasonably argue that almost all businesses are becoming tech businesses, and so advisers that understand the challenges of scaling a business, and the technology behind it, are an increasingly critical success factor.
The value of an experienced business advisor
Only 50.3% of London startups last the first three years – and most failures come down to poor financial management and a lack of business experience. So finding an advisor that offers the right mix of support and services to grow your startup is a win-win situation.
Things that might seem basic to an experienced business advisor are not always as straightforward and simple for founders. We believe there is immense value in building a relationship with an accountant and business advisor from an early stage.
If you have a great business idea, but limited financial understanding and business experience, you absolutely need to find that trusted advisor – for many of our clients, we’re indispensable when it comes to making business decisions and getting the best from their startup.
Your ideal startup advisor
What a startup needs at the MVP stage is good advice and a great personal relationship with their advisor. Someone who can listen, understand and help provide clarity on how your MVP might look. Haines Watts can help with advice on corporate structuring, funding, business planning, strategy and lucrative tax reliefs such as Research and Development (R&D) tax credits.
Talk to one of our London Business Advisors about planning your startup’s MVP stage.