How To Start A Tech Company Using Lean Startup

Launching a tech company of any type is an intimidating process. First-time entrepreneurs often have no idea how to start a tech company, they just have a great idea and a desire to win. Unfortunately, a great idea isn’t enough. There are many steps between the idea stage and the rapid expansion stage; and if you aren’t clear on what those steps are, you can quickly become overwhelmed with the process and give up.

While not making it to launch sounds like the worst thing that can happen when developing your startup, there’s actually something worse that can happen. You can spend tens of thousands (or more) on app development, only to launch your tech and find out that nobody wants it. A tech startup can be a major success, but if launched without covering the right bases, it can also be a major waste of time, money and effort.

Fortunately, there is a process for building a great tech company, and it follows the principles of Lean Startup. Ready to launch your software business? Here’s what you need to know about how to create a tech company using lean startup.

What Is Lean Startup?

Lean startup allows a tech company to constantly advance the development of their software, while rapidly learning more and more about their customers, their challenges and their desires.

If you thought the only steps to creating a successful software solution was to build it and launch it, your strategy is hugely flawed. There are many really cool and interesting apps in every app store that no one ever downloads and no one ever uses. Those who know how to start a tech company know that a company isn’t successful because they have a cool product; they are successful because they have the right product for the right audience, and are backed by the right people.

When you launch a full-scale software solution, you inherently make several assumptions. Even with secondary industry and customer research, you are still only making an educated guess as to:

• Who your consumers really are.
• What problems your consumers are actually facing.
• What type of solution your consumers are searching for.
• How much your consumer is willing to pay to solve their problem.
• Whether enough people experience the problem to make a successful business.

The true intentions of a startup is to answer these questions using real consumer data, and to validate each and every assumption as you build your product. Instead of figuring out that you built the wrong thing after you built it, the right strategy will help you identify weaknesses and errors in your startup plan before making serious investments into the wrong areas.

This is the value of adopting a lean startup process, and why those who know how to start a tech company often adopt this strategy. Lean startup incorporates a build-measure-learn feedback loop – launching software in small iterations, testing it with real consumers, analyzing the data and proving the concept at every turn. What’s the major advantage? If at some point during the measuring process you learn that consumers aren’t responding as you assumed they would – you can pivot immediately instead of continuing to develop something that they don’t want.

As much as we’d like to think that our idea is the perfect idea, this is often not the case. Facebook in 2018 is incredibly different than it was in 2006. If they built the perfect product, why would they continue to change; adding new features, changing features, and deleting others? Because people change, the market changes, the competition changes, needs change – and when they do, your startup better change with it if you plan to stay in business. When you know how to start a tech company using lean startup, you can adapt and remain flexible with the market – using data to lead you. Lean startup allows a tech company to constantly advance the development of their software, while rapidly learning more and more about their customers, their challenges and their desires. As you learn exactly what your customers want, you can more accurately serve them and always ensure that you are delivering the software product that they are most likely to adopt.

How To Start A Tech Company In 6 Steps

Launching your first-version software doesn’t have to be a long and difficult process. Sure, developing technology can be challenging and there are many variables; but with an agile development and lean startup process, you can minimize the time and risk associated with launching a startup. Here are six steps to launching your tech company the right way.

1. Minimize It To The Core Features

Rome wasn’t built in a day, and the whole city didn’t have to be built for a few families to make it their home. Likewise, your software doesn’t have to include every feature under the sun before you launch it. In fact, launching a feature-filled software solution is the most risky approach to software development. Instead, minimize your concept to just one or two core features – the features that you believe will help users solve their specific problem most effectively. Typically, users aren’t going to adopt every feature a software offers – the ones that they don’t use will ultimately become a waste of the effort it took to build it. The better approach is to test the market with only a few features, prove the concept, and then build the next set of features after validating exactly what the market is demanding.

However, when you have your mind set on what you want your software to look like, it can be challenging to decide which features are actually “core”, and which ones are additional frills that aren’t necessarily critical to the functionality of the software. Follow these three steps when seeking to minimize your technology to its core features:

1. Define your target market: Your technology might serve multiple customer types, but initially, it’s best to focus on just a single target market. Selecting a narrow audience will allow you to intensify your focus on a specific consumer sector and penetrate that particular niche – instead of going head on against more established solutions. Draw out your ideal user – How old are they? What do they do for a living? What do they read and watch on television? Where do they live? What is their income? Most importantly, what problem are they facing?
2. Create a storyboard: Plot out how individuals will use your technology; each step that they will take as they journey through your solution. Think of how they will use each feature, and how each feature will help them solve their problem. Consider the primary goal of your technology, then write out the user flow – this will help you determine all the features of your tech concept. Prioritize these features – which are truly necessary to meet the primary goal and which could be eliminated without really affecting the user’s end goal?
3. Remove non core features: Once you’ve determined which features are low priority, remove them. Your solution should now only include a few features that make up the entire user flow; but if it still has too many, create a new storyboard and prioritize again to see if there are additional steps that can be eliminated to create a true minimal and viable product.

2. Get To Market With An MVP

Now that you have a first-version software concept that is minimized to only it’s core features, it’s time to prove your concept. Getting to market quickly is key, and it’s not always necessary to even build the technology fully before launching it. There are several different types of Minimal Viable Products that you can consider, but the one you choose should be based upon the goal of your test. Here are the most popular minimal viable product types:  

• Smoke Test: Build a landing page, send traffic via ads, and measure how many people sign up.
  • Goal: To test user interest.

• Pre-sell: Launch a crowdfunding campaign and measure how many people donate.
  • Goal: To gauge user interest and raise funds.

• Concierge: Perform services manually; giving clients a hands on service before automating it with technology.
  • Goal: To create new ideas, generate feedback and collect data about consumers.

• Wizard of Oz MVP: Make it look as if the features are automated, when really they are manually performed behind the scenes.
  • Goal: To test assumptions about product and customer behavior.

• Piecemeal MVP: Take a pre-built technology and customize it to perform the necessary functions.
  • Goal: Prove concept before making a larger investment into product development.

• Single-Feature MVP: Develop solution with one or a few core features and launch it to the market.
  • Goal: Gain traction and validate feature assumptions

3. Attract Early Adopters

Once your minimal viable product has been launched, it’s time to start attracting users. You don’t have to go all out and spend tens of thousands of dollars on advertising your app – but instead, send a limited number of users to the application in testable numbers. A couple hundred users can give you incredible insight into whether you are on the right path, or whether you are building something that the market doesn’t want. Even a small amount of users can give you humongous amounts of information. There is no point in sending tens of thousands of people to your solution if you haven’t even proven that you have built the solution that they want.

• Self Promotion: You’d be surprised how many startups gained the first handful of users because the founder simply just put in the necessary hands-on work to acquire them. Tinder’s founders for example, posted flyers around campuses and told people about the app at local campus bars. If you can identify individuals that would benefit from your technology, contact them – tell them about your solution and explain to them how your solution would solve their specific problems. One hundred handshakes could be the first domino in locking in your first one thousand, one hundred thousand or even one million users.
• Communities: Becoming active within online communities can provide great access to early adopters and industry influencers. Platforms like Reddit offer categorized sub-channels where you can communicate with other individuals that are interested in a specific subject. The key to succeeding in any online community or forum is to not go in with an attitude of selling something. Instead, be helpful and showcase your expertise about the subject to assist others with their questions. Become an active part of the community. That way, when you do post about your software, people will know who you are and you won’t seem like a greedy self-serving startup that is spamming the network.
• Influencers: You don’t always have to convince a million people to try your software. Sometimes, you can convince one person who has a large audience, and let them do the persuading for you. Part of knowing who your consumers are is knowing who they follow – authors, blog writers, YouTubers, industry experts and etc. Try to build relationships with these individuals. Allow them to test your software for free, and ask them to review it. Keep in mind however, your competitors are probably also contacting them asking them for the same thing. Just like when dealing with communities, figure out how you can offer something that benefits the influencer – before asking them to do something that solely benefits you.

4. Evaluate Data

There is nothing that will tell more about your solution, strategy and user than cold hard data. Everyone pays attention to the number of downloads and the amount of revenue the software is generating, but these aren’t the only app metrics that matter. There are many other metrics that should be analyzed frequently, including but not limited to:

• Active Users: It doesn’t really matter if you have 1,000 users if zero are actively using it. Both Daily Active Users (DAU) and Monthly Active Users (MAU) are important to analyze. DAU tracks how many users actually open up and use the software in a single day while MAU tracks how many use the software over the period of a month. Unlike total sessions, each user is only considered a single time, as opposed to counting the same users over and over if they sign in multiple times throughout the day or month.
• Average Visit & User Behavior: These metrics allow you to analyze how long users are staying on your software and what they are doing while they are there. Average Visit gives an average of how long a user session lasts, while user behavior tracks what pages they visit and how long they stay on each of those pages. To learn more about user behavior, it is a great idea to use heatmaps and screen recordings. These tools allow you to see exactly what users are looking at, focusing on and clicking on while using your software.
• Retention Rate: Just because you’re able to get people to your app, doesn’t mean that they’ll continue to use it. Retention rate lets you know how many users you’re able to retain over a set period of time and how many you lose or ‘churn’. Retention rate helps you identify the relationship between your marketing initiatives (how well you are attracting people to your software) and your engagement strategy (how effectively you are getting people to engage with your software).
• Ratings & Reviews: Solutions that are able to sustain over the long-term are those can maintain great ratings and reviews. Software and app solutions operate in a very competitive space, and no matter what great things a company says about their products; it will never have the same effect as what other users say about it. Ratings and reviews are subjective metrics that can have a major influence on how successful a software solution becomes. You may be getting a great deal of traction today, but if you aren’t receiving a bad rating average – you may find it extremely difficult to get even a single new user in the future.
• Cost Per Acquisition: Attracting customers to your app may not be worth it if it’s costs an insane amount to acquire them. If your per customer acquisition cost is more than your customer spend; you’ll operate at a loss and may find it extremely difficult to continue to sustain your business.

The numbers tell the true story of your business. If you don’t know the statistics, then you definitely don’t know how your business is actually performing. One could assume that they are on track because they see new downloads coming in each day, but they may miss other numbers that tell the real story – like a high customer acquisition cost or an extremely low retention rate. Most of all, the numbers behind your business tell you whether you’re on the right path, or whether you’ve made a mistake in your assessment.

5. Pivot Or Persevere 

In the optimal and ideal situation, you will look at the data and everything will be going as expected – acquisition costs will be low, everybody that downloads the app will use it for months and months, you’ll get fantastic reviews, and your tech startup will become the best solution in your industry within a month’s time.

Does this sound too good to be true? It is.

What will most likely happen is that some of your assumptions will be validated by the data, and it will be proven that some of your assumptions are flawed. Discovering that some of your initial assumptions are incorrect is to be expected, and it’s not a bad thing. Each time you are unable to validate your assumption, you are given an opportunity to make a shift and find exactly what your consumers are looking for. Each time you prove or disprove an assumption, you have the opportunity to do one of two things – pivot or persevere.

When the data shows that your assumption was correct, the only move that makes sense is to persevere or stay on course with what you are doing. To know whether your data proves your assumption, you should have goals set in place – what conversion rate you expect your marketing campaigns to convert at, which features you believe users will use the most, how long you believe users will use your app during each session, how many weeks or months you believe they will continue to use your software before they churn, and etc.

On the other hand, when the data shows that users aren’t responding to your software the way you assumed they would, a pivot is likely in order. A pivot simply means to adjust to a new path, and hopefully, a more successful path. Let’s say for example, you find that you many users download or trial your software, but that they only stay on the software for a minute or two before exiting. In a case like this, there is likely a reason for this behavior. Some possible causes of this could include:

• Users were interested in the marketing message, but the solution did not meet their expectations.
  • What can you do to fix it? Change the marketing message to better reflect the actual solution, or change the solution to match the marketing message (which may reflect what users really want).
• Users found it too difficult to use or navigate the software and left in frustration.
  • What can you do to fix it? Work on a better user experience or provide better education on how to use your software.
• Users ran into a bug and weren’t able to perform the intended actions.
  • What can you do to fix it? Identify the bug and fix it.

The whole idea of a startup is to find out what solution your consumer is really looking for. By running tests and choosing to pivot or persevere based on real data – you can ensure that you are building software that really has the potential to succeed.

6. Scale Everything

After testing and testing, using data to make the right pivot/persevere decisions, and building a solution that is a hit among early adopters; it’s now time to scale it to the masses. Since your marketing plan has already been tested and validated, you should be able to amp up your campaign and draw in more and more users.

In many cases, it’s at this stage where startups will begin seeking initial seed funding. With user data in hand, startups with a validated solution have a much stronger investing position than startups that are only coming to the table with ‘cool tech’. These startups not only prove that they know how to create innovative technology, but also that they know how to start a tech company with a strategic and well-planned approach.

The Most Important Step in Launching Your Startup

In essence, these six steps will help you build the perfect product with an agile and lean approach. Putting them all in action however, can be much more difficult in practice. Actually, building a lean tech startup is much tougher than simply just writing a list of features and having a developer build out. Launching a lean tech startup means slowing down the development process, releasing in small iterations, testing each iteration along the way, and bringing on customers in small increments. The upside is, at each iteration, you strengthen the potential for success of your concept and decrease the risk of failure.

The most important step – is taking a step. You can research how to start a tech company, and come up with an awesome software concept; but if you never commit yourself to taking the first step, you’ll never see it through to fruition.

We’d love to help you bring your tech company to life. Our startup consultants have worked with hundreds of app startups around the world. Ready to take the first step in bringing your app idea to life? Contact us today to schedule a consultation with one of our tech startup experts!