Technology

Minimal Viable Product (MVP) – how to make an idea tangible and raise money for a startup

If you are not a millionaire but decided to become one by launching a startup that, with the proper care, may grow into a real unicorn, the only way proven to start a business is to find venture capital investors.

The science of creating an MVP: to show the main features and not spend money on the secondary

Foremost, you should decide what exactly in your project you want to demonstrate potential and test in real-time. It can be one unique function, or vice versa – a comprehensive solution to a long overdue problem that no one has undertaken to solve before you. Obviously, your funds are limited at the start. Still, you need to show others and understand how viable your idea is and whether it is as original and potentially profitable as you think. Therefore, you should draw up a Proof of Concept (PoC) when pondering an MVP development for startups. Sometimes, those who have not previously dealt with ordering and building an MVP consider this term synonymous with a Minimum Viable Product. However, even though these two concepts are strongly interconnected, they are still not identical.

  • Proof of Concept (PoC) is a kind of technical task or description of your concept. Its purpose is to give an intelligible algorithm of processes, with the help of which the practical expediency of implementing the software you have invented or any other idea for the sake of which you decided to create a startup will be clarified.
  • Minimal Viable Product (MVP) is, in fact, the tangible model through which your Proof of Concept will be tested.

Of course, the vast majority of startups today take off in the IT field. In particular, a record number of so-called “unicorns,” startups that received billions of dollars in funding in a short time, fall into the Fintech sphere. However, it would be a mistake to think that MVP is needed only for projects related to software development and high technology. Many of the most famous companies, such as the worldwide accommodation booking service Airbnb, Zappos, and Groupon marketplaces, also started with an MVP. Below, we will review the options for creating minimum viable products, and you can try these models based on your own realities.

What are the MVPs?

There is no general list in which all types of MVP would be systematized. Their division into categories is very conditional, as well as the names of these categories. It’s likely that Nick Swinmurn, the owner of a $2 billion online shoe retailer, didn’t even use that phrase when he found out how to test how profitable such a business could be. In 1999, when he started, the concept of MVP as we know it now merely did not exist. However, today his experience is considered a paragon and appeared in all textbooks on business.

Before choosing the most suitable model for you, you should use the RAT (Riskiest Assumption Test) analysis of your idea, proposed in 2016 by Rick Hayam.

The essence of this method is to understand at a very early stage how justified even the minimal costs of your idea are. In other words, this is a way to look at it with the soberest, devoid of optimistic expectations look, and thus develop the most accurate Proof of Concept.

First, consider your idea from these angles:

  • Payback. Will ROI (return on investment) remain the same as your project scales? Will it turn out that it will no longer pay off when the business expands? If such a danger exists, how big is it, and can it be prevented?
  • Target audience and demand for your product or service in this group. Are there similar or similar offers in this field? How capable are you of defeating such competitors, and what will it cost you?
  • The solvency of the target audience. Will it be that those who are intended for your product will not be able to buy it or will not want to spend money on it?
  • Trends, needs, and market capacity. How urgent is the need for your proposal? What is the relationship between demand and your ability to meet it?

Now that you have a better understanding of the various non-obvious aspects of your idea, you can move on to planning the MVP development for startups that will make you millionaires.

So, let’s look at three conditional MVP groups

  • MVP, “on the fingers”. This method involves simulating the presence of functionality that so far exists only in your imagination.

Nick Swinmurn, already mentioned, posted photos of various shoe models on the Internet, announcing the opening of a speciality store. When orders began to come to him, he just went to the store, bought what his customers liked there, and sent it to the specified addresses. Thus, he understood whether to open such an online store.

  • “Bellboy” MVP. This approach mainly applies to the service industry and the creation of applications that automate the execution of such orders. For example, if you came up with a program that will quickly and accurately fill out tax returns using internal algorithms, it makes sense to study the demand for such software. You can create a landing page that looks like an automated form and, at the same time, perform the necessary actions yourself. For example, using good old Excel. You can find out how much this service is in demand, how many customers you get, and how much they are willing to pay. In the course of work, you will be able to clarify the terms of reference for the company to which you entrust MVP development for your startup.
  • “Step-by-step” MVP. Let’s say you decide to enter the market with a complex solution. Test each of its elements piece by piece to understand their priority and relevance.
  • “One feature” MVP. This method is most applicable to finding out the target audience of a fundamentally new product. For example, after the Metallica group buried Napster, no one dared to enter the market with an offer to receive music over the Internet for many years. Today’s leader in music streaming, Spotify, tested its idea with just such a model.

Summing up

Everything suggested in this short article is by no means dogma. However, based on the examples given here, you will surely be able to create your own optimal Proof of Concept and get an MVP that will ensure your long-awaited success.

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