Congratulations! You have a working prototype that’s solving a problem. Things are about to get real, really fast. It’s time to take the leap and build your Pilot Release.
The Pilot Release phase is where you fund and build your MVP, bring it to market, learn what works and what doesn’t, and start gaining real market traction.
This is the third post in a series about the Startup Product Roadmap.
Step 5 – Outside Fundraising
Building custom software is an expensive game and an interesting dynamic. Unlike durable goods, custom software has a high fixed cost and a low variable cost. That means providing a high-quality solution for your first customer is very expensive, but the variable cost to deliver that same product to each future customer approaches $0.
It’s highly likely that you’ll need outside capital at this point to fund the required MVP development.
Investors envision your product as a black box. They want to see proof that if money goes into the box, more money eventually comes out. This money will be used to develop your high-quality MVP solution and fund your marketing effort.
Hopefully, your prior work will help prove that the investment risk is worth it. Now it’s time to identify angel investors and make your case. You’ll likely be looking to raise around $500k.
Most startups choose the high-growth approach, which gives a lot of control to investors. If you’d rather be a slow-growth, sustainable business, you need to lay the groundwork now. Be clear about your goals, and find investors who are happy with the slow approach.
Key question
Is someone else willing to invest in solving the problem with your solution?
Activity/experiment
Find local angel groups or smaller funds. Most mid-size and larger cities have these groups. Reach out to a bunch of them. It’s good to get a lot of irons in the fire. Angel groups are amazing because most are happy to provide both capital and mentorship.
Budget
A bunch of your time. It’ll take a lot longer than you think.
Outside involvement
Since you’ve done so much pre-work, there will be lots of experienced business and technical folks who are happy to review and critique your pitch. Search them out and leverage their feedback. They likely won’t charge you for limited amounts of their time.
Step 6 – Quality MVP Solution
You’ve done an excellent job defining, refining, and testing your solution. It’s now time to build a high-quality release. This production code base will be the technical foundation for your product. During this phase, it’ll also be a good idea to start building your own internal technical capability. After all, you’re creating a software company—you’d better have some in-house competency.
Key question
Does your generic solution work for many people?
Activity/experiment
Find a high-quality design and technical partner. Look for a team with a solid process and proven track record. Request that they help technically vet potential developer candidates for you, and that they are willing to augment their team with your developer.
Finding a firm with a strong and open process is extremely important. It’s likely that you’ll model your eventual internal product development process after this partner’s process. Your high-quality partner will provide you with more than the UX and technical solution. They’ll help define the foundation for your company.
Budget
~$X00,000 (use your outside fundraising dollars).
Outside involvement
Leverage the services of a high-quality custom software design and development firm. Also, begin your search for your own internal hire.
This is where I’ll shamelessly plug my company Atomic Object. We’re an ideal partner to help with this step.
Step 7 – Tweaking and Honing
Your MVP is live, and now things are starting to get interesting. At this point, you’ll want to slow down the burn with your high-quality technical partner because their cost will be too high to sustain as you learn how people use your product. You’ll also want to ramp up your marketing efforts. During this time, it’ll be valuable to collect lots of information, personally connect with users, and gather as much information as possible.
Your user base will likely still be small at this step—so-called “overnight” success stories generally happen over the course of many years. Look at your limited user base as a great opportunity to learn, and really nail the experience for them before you scale it.
Future investors won’t care about how much money and energy you’ve invested. They care about 1) lifetime customer value, 2) cost of acquisition, and 3) the ratio between these two.
Key questions
How long can I get existing clients to stay with the platform? How low can I make my per-customer acquisition costs?
Activity/experiment
Ramp down your team, ramp up your marketing, and engage with your customers. Now that people are using your product, you can watch their real behaviors and gather their feedback. Leverage this information to:
- Lower acquisition costs – Figure out why prospects leave your pipeline before buying/subscribing, and tweak your process/marketing to get more customers.
- Improve lifetime value – Figure out why clients leave after a period of time, and improve your product to better meet their needs (or identify and prioritize improvements for future funding).
Budget
~$X0,000 on platform tweaks, ~$X0,000 on marketing (use your outside fundraising dollars).
Outside involvement
Depending on your go-to-market strategy, consider engaging with a marketing services firm.
The Startup Product Roadmap
Read more about the software startup journey:
Need a reference? We’ve summarized the Startup Product Roadmap into an infographic:
You can also download the Startup Product Roadmap infographic as a PDF.