|Estimated Reading Time: 🕘 8 minutes|
At Eastern Standard, we get a lot of requests and phone calls from people who want to build the next killer app or launch a startup around a website idea they have.
Overall, this is a great thing. In fact, I like that I live in a time when technology has broken down barriers to entry and allowed ideas to become reality more practically than ever. And it gives me a sense of pride to know that I’m in a position to facilitate that kind of “dream-to-reality” process.
That said, I find myself having the “sorry to burst your bubble” conversation with a would-be technology mogul about once a week. And that’s not to say that I completely steer folks away from embarking on their startup journey or developing their app. Rather, I simply want to align their expectations with what the early-stage development process really looks like, and get them thinking about potential pitfalls that might be overlooked amid dreams of yacht ownership and vacation homes in secluded Italian villas.
Obviously, there are entire books written on this topic, but here are what I consider my five most valuable pieces of advice for new tech entrepreneurs, based on my personal experiences.
|1. Be Connected to Your Market, or Be Partnered With Someone Who Is|
|Image Source: https://www.pexels.com/photo/city-traffic-people-smartphone-2120/|
|Maybe you were at the hospital recovering from your tonsillectomy when it hit you: an app that would make the lives of doctors and nurses much simpler! You began scheming before you were even discharged, and were ready to hit the ground running just as soon as you could speak again.
But there’s a problem here: You’re an insurance agent, and you don’t know the first thing about requirements and regulations surrounding the medical industry, let alone how you might market an app to the medical community. You could be in possession of a game-changing idea, but no one will ever see it because you have no way of connecting with your market.
Hope is not lost here, though: If you do enough networking, you can find someone who has the experience you need. Maybe you can partner with them or offer them equity or a commission, but you’ll need a bridge to your market if you hope to make any real headway.
|2. Building an App and Building a Company Are Two Very Different Things|
|Image Source: https://www.pexels.com/photo/white-laptop-female-hand-note-pen-phone-desk-6471/|
|Building a production-ready app is difficult enough, but it’s only part of the story of success. There’s an entire ecosystem of other variables that often surround success, and it’s simply not the case that “if you build it, they will come.” (Recommended reading on these topics: Outliers by Malcom Gladwell and Contagious by Jonah Berger.)
Once you’ve got the app, you have to market it. Unless you have a platform already — a successful blog or YouTube channel, for example — you’ll need to find a way to create awareness of your app. Then, you have to support it and continually enhance it. You’ll need the resources and the wherewithal to nurture it through the tough introductory period.
|3. Is the Market Big Enough/Can Your App Scale?|
|Image Source: https://www.pexels.com/photo/people-crowd-concert-show-31257/|
|How big is your market, really? Imagine that you’re targeting universities, and that your product is only valuable when applied university-wide (i.e., it’s not something that each department would purchase separately). A quick Google search reveals that there are about 4,000 universities in the United States. If you were able to sell to 1/3 of them (an incredible feat), that’s about 1,300 U.S.-based customers. Now, if your pricing model is set at $9.99/month, does 1,300 customers, or roughly $1.5 million per year, cover your costs and leave room for profit? Remember, $1.5 million is a lot of money if someone hands it to you in a briefcase full of unmarked bills. It’s not a lot of money to keep a company operating when you have to account for taxes, salaries, and other overhead.
Now, this isn’t to say that a “small” market isn’t worth targeting; your price point and expectations just have to be in line with the size of the market. If you’re selling a piece of software that solves a critical business problem, and you can charge $50,000 per year in licensing fees, then you’ve got something worth pursuing. Just make sure that your actual market size is in line with your expectations on revenue.
|4. If Your App Is Social, How Will You Conquer the “Critical Mass” Problem?|
|Image Source: https://www.pexels.com/photo/people-coffee-meeting-team-7096/|
|I was once a co-founder of a dating website that ultimately failed, and I learned several valuable lessons from that failure. We had all of the right technology, a nice UI, integration with Amazon, Twitter, and Facebook, and a big-data number-crunching engine that let us match users based on some pretty impressive algorithms. Our first mistake was taking too long to get to market — OKCupid was already in the market, and they were already doing a lot of what we planned to do by the time we were ready to launch.
The second mistake, and the one I want to describe here, was related to marketing. For social-based sites, the value of the site is the other users who are on it. So, how do you provide value to that first cohort of users who are essentially inhabiting a ghost town? Long story short: We didn’t answer this question well enough. We hadn’t budgeted for the kind of marketing required to get over the critical mass problem. We spent all of our time on the technology and not enough time thinking about whether we could convince folks to actually use it.
|5. This Is All Probably Going to Cost More Than You Think It Will|
|Image Source: https://www.pexels.com/photo/numbers-money-calculating-calculation-3305/|
|With the right resources and a realistic minimum-viable-product, you might be able to get to a proof-of-concept app by spending a few thousand dollars. Most of the time, however, that’s not the case — the development of even a prototype is likely to take a lot more time than you think, and that translates to cost.
Even if you are able to get to a prototype on a shoestring budget or build it yourself, prototypes are generally very far from being consumer-ready products. There’s a lot that needs to happen between “OK, this seems to work,” and “This is ready for mass-market consumption.”
As discussed above, there’s also the marketing question. Once you’ve got the app, how will you market it? How will people find out about it? And then how are you supporting it if there are problems, questions, or even feature requests?
This post is in no way meant to dissuade anyone from pursuing a startup or a great new app idea. It’s just a reminder to be measured, realistic, and practical in your approach — and to make sure your expectations are in line with what’s actually possible.