Software Startups: How To Increase Your Chances Of Success by 3X

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Software Startups: How To Increase Your Chances Of Success by 3X

 


Apologies for the traffic-magnet nature of the title of this article (it’s early and I haven’t had my coffee yet).  Hopefully you won’t feel like I misled you too much.

Here is my sure-fire recipe for increasing the chances of success for your software startup by 3X – where X is some value between 0 – 100% (inclusive).  For purposes of this discussion, I’m going to assume you’re a software developer looking to start a company.  This makes it easier for me, because that’s the model I know and somewhat understand.

Recipe For Software Startup Success

Step 1:  Pick the right customers.  These are customers that have problems that you are very good at solving.  The problems they have should be something they’re willing to spend money to solve.   These problems should be shared by other customers.  They (the customer) are smart enough to know that it is in their interest to help you create a reusable solution.  (Corollary:  Avoid customers that are demanding solutions that are simply so specific that it is impossible to leverage the result for anyone else).  You want customers that will work with you to solve a market problem while simultaneously solving their problem.  These customers are not easy to find, but you’ll know them when you talk to them.  Better yet, you may already have a relationship with them from a prior company.  [Observation:  Companies started by people that already know where/how to find these “right” early customers are much more likely to succeed].

Step 2:  Let these customers direct your product development.  Your job is to stay on top of their feature requests and needs.  Listen, respond, repeat.  Your job is to solve 100% of these customer’s needs while simultaneously being mindful of how the product you are building can be used more broadly.  This is not easy.  But if it were easy, any schmuck could start a software company.  You’re not just any schmuck.  The goal is to have a product that emerges from these early customer collaborations.  If you picked the right customers (see Step 1), then you’ll find that you are continually moving down a path that makes finding future customers easier.  [Note:  Don’t use this as an excuse to create bloat-ware.  You know better than that.]

Step 3:  Repeat Step 1 and Step 2 as often as possible.  Use the resulting revenues to recruit people that are also good at Step 1 and/or Step 2.  

That’s it.  It really is that simple.  The biggest advantage of a software startup (vs. other types of businesses like a consulting company) is high gross margins.  You build it once and sell it (hopefully) thousands or millions of times.  That’s why folks like you are attracted to the software industry.  The trick is figuring out how to build that “right product” on limited resources.  Most software startups die because they’re never able to find that “right product” idea that takes off in the market.  My advice:  Don’t try to figure this out.  Get good at finding the right customers.  Then, good get at solving their problem in a way that’s useful for others.  The rest are details.

Posted by on Mon, Jul 03, 2006

COMMENTS

The one thing I've seen become a pitfall is when a software company invests too much specialization capital into keeping that first customer. I recommend that the company give their first customer exclusivity for a year or less.

posted on Monday, July 03, 2006 at 10:46 AM by Tim Taylor


Not to pick nit, but I think you mean where x is between 0- and 33.3%, elsewise you would be claiming that there's a possibility of your tips making a software startup three times as likely as a dead-on certainty to be successful.

posted on Monday, July 03, 2006 at 11:42 AM by Mary Moocow


Everybody needs are different. If you are building a product company (not a consultancy), trying to solve 100% of every customer needs is utopia and will end up in an unmanageable product that solves nobody's needs.
So yes, ask for and listen to feedback, but make sure to add new features only when it makes sense for the product itself.

posted on Monday, July 03, 2006 at 1:31 PM by Jean Moniatte


Reads like golden advice. I bet one can apply these tips to other industries as well.

Can you elaborate more on STEP 1, how do you find those customers that have good, generic and commercial problems?

posted on Tuesday, July 04, 2006 at 4:24 AM by Kingsley Tagbo


Great article. I completely agree and speak from experience. In one of the first companies I helped start 6 years ago, we worked in a vacuum for the first six months. Big mistake. When we finally took the product to market, we learned a ton about our prospective customers... and saw a major gap with what we put together and what they needed.

At the same time, I agree with Jack Button's post above. Customers are not going to dream up the "home run" product for you. I say let customer needs drive your product roadmap but you, the entrepreneur, translate those needs into killer features using cutting edge technology.

posted on Tuesday, July 04, 2006 at 4:02 PM by Mark Roberge


Actually, there is no reason to nitpick. His statement about the X being in [0,100] is fine.

It is possible to "increase the chances of success BY 300%."

It would be wrong to say "increase the chances of success TO 300%."

posted on Friday, July 07, 2006 at 4:07 PM by rob


Comments have been closed for this article.