Smart Startups Are Frugal at First: Maximize Your MVP but Minimize Cost

Written by Marcia Otto

Photo by Alexander Mils on Unsplash

As an early-stage startup, securing investor funding can make or break your success. However, most venture capital investors (VCs) like to see at least a Minimal Viable Product (MVP) before investing. An MVP is a product with just enough features to satisfy the needs of early customers. An investor also wants to see data that supports that your customers want to buy your product. 

Set success with smaller, attainable wins

When building the requirements for your MVP, don't think about all the bells and whistles akin to a luxury vehicle like a Lexus or Tesla; instead, think about your product as a more basic form of transportation like a skateboard or scooter. Your target market can make do with riding a skateboard initially – and that’s all the transportation they may need to want to buy your product. You should focus on identifying the key features that are critical to building and maximizing your product’s value. And, for you, obtaining skateboard funding is more feasible than funding a Lexus — it’s the frugal path. But, frugal shouldn’t equate to a “cheap” or a low-quality product: be sure to find a product expert experienced in building strong MVPs with smaller budgets.

Start with a strong, simple foundation and build towards increased complexity

Early-stage startups often overestimate how much money they need and how much investors will give them at an early stage, which leads to a disconnect during fundraising. For example, remember the fictional HBO show about startups called Silicon Valley? There’s a great lesson in Season 2, Episode 1: Monica, the associate partner for Raviga Capital, tells Richard, the startup founder, not to take the $20M investment; instead, take the lowest investment of $5M. 

Why did she recommend taking the smaller round? Bigger rounds mean more management, more VC oversight, and more reporting. In other words, more time spent making investors happy, and less on your product vision. Keep early rounds small and valuations reasonable. If you follow this mantra, you can still build an amazing MVP with a smaller investment and the right focus — you stay in control of your product’s destiny.

Get further faster with scrappy fractional resources

Having a smaller budget doesn’t mean you have to ignore any of the steps in the product management process. Experienced fractional product managers know how to be scrappy with research and still have meaningful results. Many tools provide inexpensive market research and usability testing like SurveyMonkey, AYTM, and Lyssna (formerly UsabilityHub). Some even have access to user panels like Qualtrics market research panels. Still, nothing is as good as having your product manager pick up the phone and call customers/potential customers to get feedback on the real issues they need to solve. 

Smart product managers will also prioritize working with a user experience (UX) designer who can perform rapid prototyping. A skilled UX designer is money well spent: they can work closely with your product manager to ensure your prototype is polished, interactive, and informed by market research from your product manager. This ensures you have a clear vision of your final design that’s based on real customer needs. It is also cheaper, and faster, to fix a prototype as feedback comes in, rather than pivoting and fixing issues after product development. 

Your product manager plays a crucial role in defining, prioritizing, and executing the MVP. By building a strong initial MVP, you lower development costs and accelerate the development process by focusing resources on essential capabilities that provide real value for your customers and cut down on over-engineering or additional features. 

Spending buckets of funding isn’t always the best way to develop a strong product foundation. Starting with a solid, well-informed MVP is frugal and smart: it helps you succeed by using funding you’ve secured wisely, and obtaining customer and investor success that builds towards the next phase of your journey. 

Ready to build a winning MVP? OakBloom Marketing offers fractional product development Contact us here. #producttipsforstartups #womenintech