A hill that I am happy to die on is that if you’re starting a technology business, you need to build an ACTUAL PRODUCT, i.e. you need to build that version 1 MVP.
And there are plenty of people out there who will tell you that you don’t need to build an ACTUAL PRODUCT.
There are two types of people who do this. The most vocal people in this regard are trying to sell you something. Counter-intuitively, they are ultimately trying to sell you a service where they build your product – and it’s easier to do that if you haven’t already built one.
The other set of people are those who are struggling with the problem that having to build your product is highly inconvenient if you don’t have any money, because building a software product costs a money. Typically, a LOT of money. And you can exit that dilemma to convince yourself that you don’t NEED that thig you can’t afford.
The alternative, these people will tell you, is to sell a sort of “strung together mock-up” of what your product might ultimately do whenever it gets built properly. Often cited here is using Google Docs, or Airtable forms, or other off-the-shelf cloud services backed up with manual processes. The reason why is that stringing something together costs maybe “£50 a month plus your labour”, as opposed to £50,000 in cold hard cash.
And I’ve struggled to explain to non-technology people why this is all backwards and broken, but I’ve had a brainwave and I think I might have come up with a semi-tortured analogy to explain why it is all backwards and broken and fundamentally you’re going to need to find some money to build your MVP, or find someone who can build it and bring them into your business as a co-founder.
Ultimately, the path to building a technology business requires you having a baseline product that you can “parlay up” into a proper business. This baseline product is virtually always called an “MVP” or “minimum viable product”, but my use of the term “baseline” here is that you have to think of this is something that you build upon – it is a foundational piece of work. An MVP is not a disposable commodity – it’s a real thing that is the kernel of your new venture.
You either use that baseline product and play a game where you slowly and incrementally build up an income stream around it, or you use that baseline product to convince one or more angel investors to dump a whole load of cash into the business to accelerate that process.
You can look at either of these routes as being essentially about investment. You either have a collection of relatively distant customers who are taking a “wait and see” process dripping in cash that you reinvest, or you have two or three more closely connected angel investors that are putting in larger gobs of cash up-front. Either way, you need to have a convincing basis for investment.
And that’s the crux of the issue – stringing together some sort of quasi-manual process backed by things like Google Docs isn’t terrible convincing. Now onto my thought experiment...
This thought experiment involves thinking about an idea that you likely don’t know anything about, but with a little intuition you’ll be able to see both side of this – the founders side, and the investors side.
Imagine you have a talent for making hot sauces. You take some chilis, and some other stuff like vinegar, salt, fruit, veg, all the stuff that goes into making a hot sauce and you make it and you enjoy it and your friends enjoy and one day you think, “it’s time to go into the hot sauce making business – imma gonna sell this stuff and change the world!”
What do you need to do to get from saucepan, food processor, and random happenstance to an actual, INVESTABLE business. The reason why this thought experiment works is that most people haven’t tried to create hot sauce businesses, but will intuitively know there are a bunch of complicated and expensive steps that needs to be done.
To create an investable hot sauce business, you have to convince any investor that you are able to get bottles of hot sauce, in quantity, on a shelf in a supermarket. Because if you have anything less than that, you have some recipes in a notebook and some dreams.
The big parts in the process of getting bottles of hot sauce into consumers hands in meaningful numbers, we can bullet out, i.e.
Formal recipe development,
Sourcing ingredients in bulk,
Computer systems for stockkeeping and ingredients tracing,
Sourcing bottles,
Machines and processes to sterilising and packaging bottles or jars,
Machines and processes to affix and seal the cap or lids,
A metric tonne of every type of insurance,
Food Standards Agency ratings or whatever compliance steps are required in your area,
Premises to operate a food factory,
Fitting out an industrial kitchen for bulk food manufacture,
Staff – along with hygiene training and related processes,
Label design and production,
Complaints and returns,
Branding – realistically in a market like this, creating differentiated branding and operating a marketing strategy behind that is half of the business (half your staff WILL spend half their working lives on TikTok),
Enough traction from whatever channel you’re selling through to demonstrate market access – e.g. Tesco or Waitrose or whoever are happy to carry the stuff.
This is the MINIMUM VIABLE PRODUCT for a hot sauce business – I should caveat this by saying that I am a rank amateur in this regard, but I do happen to have an ex-wife who went far enough down this road of selling their own hot sauces for me to know what the moving parts generally are. Like I have done more research into how you do this than I care to think about.
HOWEVER, any investor needs to see that you MOSTLY have a solution to all of these points, even if you have not actually sold a single bottle yet. Because why on EARTH would then invest if you haven’t done all of this work? You would not have de-risked or understood the key components in how to actually do this. What, for example, you can never get cost-effective insurance, and never get past Morrison’s supplier due diligence as a result? What if you can’t afford the deposit on rent for the premises? etc.
An investor will not TOUCH this without all this work being done. Without the work you just have, as I said, a recipe book and some dreams. So why do people tell founders that you can create a technology business without doing the equivalent of all this deep work.
The advantage of this thought experience is that physically you can SEE it – like we know when we hold a bottle in our hands, there is a LOT of work that goes into it. Like we know that there are very high standards of hygiene in food production, and that sort of conjures images of staff in hairnets and white coats, gleaming aluminium machinery, clean tiled walls, etc. We can SEE it.
When looking at building software products though, we get hamstrung by the lack of physicality. Building software is very much like “building castles in the sky with your mind”, we all know what software looks like when we use it, but we can’t SEE it the steps that goes into its construction in the same way. Even people who’ve spent their life building software – in our minds it doesn’t LOOK like what things in the real world look like.
Like, to be completely frank with you, I understand how software works WAY better than I understand how people work…
This results in it being very easy to abbreviate matters. Because if someone is trying to tell you that to build your hot sauce business, you don’t need to sterilise the bottles that you bought from China… you know that’s bogus. Like intuitively, you know that’s bad.
With software though, because of its ineffable nature, normal non-geeks don’t have that same intuition about the moving parts that go into its creation.
Of the roughly 15 things we needed to think about to create a hot sauce business, how many of those were free, or cheap? Some of those items are easier than others, and they’re obviously expensive. Some of them are obviously VERY expensive.
Creating a software product has the same complexity as that, but again because if of software’s ineffable nature, it’s easy to assume that the equivalent list of steps that we went through before can be assigned a zero cost against each. And that’s where people get sucked in, because they are told that, and they believe that.
What’s happening is that when someone says you can just “string together some rough approximation of what the software is supposed to be”, what they are really saying is that, “you have some recipes, and we’re pretty sure we can get them on the shelf at Morrisons” – i.e. it’s all HOPES AND DREAMS unless you actually put in the graft to sweat out building the actual product.
So next time someone is trying to convince you that you don’t need to build some REAL PRODUCT to build a technology business, ask yourself if they would try and convince you that you don’t need a REAL PRODUCT to build ANY OTHER type of business.