Product Development as a startup

Question

I am throwing puzzle of my mind towards community leaders for some answers.

We friends decided to build products which already have some big names in the industry. Our motto is not to beat all those players (As we can't), but to develop basic product which is cost effective for some segment a customers.

What we are trying to achieve in first step is cheaper option, as we all knows product grow over the time period, not at once.

Now our catch-22 part-

1. Should we start building the product as there are already big names?
2. Price is a right option for USP (unique sale point).
3. As we all are dependent on jobs, what would be the best option to move forward.
4. As we also have some customers through verbal confirmation, should we go ahead?
5. What all major principles we should keep in mind during product development.

Answer 1

If you think you can build a better product than the ones already on the market, sell it a fair price, and reach your target audience with a limited marketing budget. Absolutely, Go for it!

Answer 2

1. If by doing so you can satisfy your own requirements (e.g. for risk+cost-versus-reward)
2. You might want another USP as well: for example, ease-of-use
3. Work on this in your spare time, or have a part-time job
4. ?
5. If you don't finish, or if customers don't want what you offer, then you don't get paid

Answer 3

Please brain storm yourself on the definition of Product. It's not just a CD that get shipped, but support, and trust.

Using this extended definition, if you can still beat existing products, go for it.

Also, don't forget the amortized development cost of product has probably been recovered by existing company already, so they can reduce cost any day.

All said, don't let this analysis paralysis stop you ... go for it.

Answer 4

Write up a proper business plan. Be sure to include critical risks and defensible barriers to entry. If no one on your team knows how to do that, then you can stop now as you don't have the right team in place yet.

The business plan is not just another marketing brochure that targets VC. Tell the truth. After you are done, turn it over to people you trust and ask for money. If they wouldn't invest in it, then why should you?

Answer 5

Our motto is not to beat all those players (As we can't)

First, change your motto. There isn't a product in existence that is perfect for everyone all of the time. There is always a niche to exploit. How can the current products be improved or simplified?

Second, don't focus on price. Customers expect to pay a fair price for a quality product, but they won't buy poor software at any price.

Answer 6

Have you identified a market for a reduced feature (and hence reduced price) product? It sounds like you have not.

Does your group have a passion for a particular product? It doesn't sound like you do. It might be difficult for everyone in your group to really inspired by just some program. Especially if you haven't done the market research.

I wouldn't count on the 'verbal confirmation' customers. Of course, it depends on the amount of money involved. The larger the price of the product, and the longer it takes you to make it really work, the less chance they will actually buy when you have it ready. Do you have reason to believe that there will be many more people that would be interested and would actually buy your product?

If you have enough market research, and a marketing plan, you may be able to get some venture capital, quit your current jobs, work on this full time, get paid, and hopefully make some big money when it goes big.

Best of luck.

Answer 7

Big Names on the Market

I'm in the eve of such a startup, sometimes being small is a definitive advantage. If you believe you can use that not only price-wise but being agile, doing the core job maybe even better than the big names. If you up for that, I think you can easily infiltrate the market.

Job Dependency

Depends of what you do? If you are opening a next-digg or YACW2A (yet another cool web 2.0 application) then stay in your day job, because generally you can do both, especially if you got your friends with you. If it's a bigger scope you might want to stick with your day job until you got a almost there product.

Don't forget, also you can find an investor, sometimes it's best way to go. So you can just quit and still have a salary in your own job.

Verbal Confirmation

It's great that you already got couple of potential clients, now you need to look into and make a business plan. Understand your monthly cost including salaries, and see what percentage of it you can get out of these clients. If it's good then get some more certain answers from these clients and go ahead. If possible establish the company beforehand and get them buy the product. (one of your friends can do it, not all of you need to leave your day job straight away)

Product Development

Being the big market means do the core functionality perfect, it should just work, and it should be easier. Price by itself can not justify a buy unless you get the core functionality right. Ignore useless enterprise features, or any useless feature. You need to be aware that you got so much more limited resources than your competitors therefore 20/80 Rule (Pareto Principle) is for you. Do not try to satisfy 20% of the market by including crazy features, stick with 80%'s requirements. Big players can satisfy or can try to satisfy 100% of the market, if you try to do the same thing you gonna fail miserably.

Finally

Read Getting Real, Do not follow religiously but this book will give you good ideas and will explain advantages of being small.

You didn't mention, but I wanted to write. Make a proper agreement between you and your friends, ensure everything is in the paper before doing anything! I've seen so many similar startups fu*ked up before even start because of this.

Answer 8

Well. Me and my fellows from our current company having the similar aims.

Here's few our ideas about it:

1. We are developing (web-based) product that we will use too. This is important for us and hope will help to improve our own performance in some areas and will give inspiration for new features.
2. We are going to develop product in stages. Not just sit and code silver bullet for industry. Going to start with core and minimal feature set.
3. Pricing. We are going to give options: use product on our hosting or purchase own copy and install it on own server. Additional and obivious things are different feature sets (technically -- different plugins integration).
4. Even more, think we'll make the core (as framework) and some plugins public. It'd be good (even neccesary in our case) to create community.
5. We already have few customers that would like to have highly customised versions of product. If this will have progress, we're going to focus on such activity and provide community with more and more free basic plugins.

That's just general ideas set. Hope you'll find some of them useful.