3 lessons learned from building a software startup

We’re excited to bring back Transform 2022 in person on July 19 and virtually from July 20-28. Join leaders in AI and data for in-depth discussions and exciting networking opportunities. Register today!


On 90% of startups fail, and of that staggering number, 10% fail in their first year. Which means that for every unicorn, there are plenty of gray mules that litter the path to startup greatness. Building a business from the ground up, especially operating stealthily, is a high-tension act that takes courage and an incredible amount of hard work.

Like co-founder and CEO of a startup myself, I have experienced first-hand the sometimes grueling, but always rewarding process of bringing a software startup to market. The lessons we have already learned during this process have proven invaluable.

1. Embrace product-market fit as if your life depends on it, because it does.

If a startup’s solution is truly innovative and disruptive, it’s unlikely that another company is already doing the same. Yet it is estimated that 35% of startups fail due to weak market demand – demonstrating suitability and market demand is crucial during the funding process and beyond, especially in the highly competitive software market. Much has already been written about the value and definition of product market fit, but an additional lesson I learned is that a crucial part of market fit is developing a strong business case for defend the purchase.

This means demonstrating not only how the product will deliver on the customer’s promise or need, but how it will justify their purchase and fit into their work plan. In a world of skilled labor shortages, funding or product desire may not be enough to create an optimal sales environment. The people who need to implement the product will likely need budget justification and time to integrate and deploy the solution. So when considering scaling and timing, it’s essential to understand and frame for your prospects how your product will fit into their budget commitments and work plan.

Startup founders should ask themselves:

  • Who in the company will be responsible for implementation and day-to-day use?
  • How much effort does it take — in terms of finances, personnel, and time — to implement this solution?
  • Will it disrupt prospects’ budget cycles?
  • Is the ROI impressive enough to make any adoption hurdles worth it?

When the product-market fit is there, the answer to the final question will be a resounding Yes.

2. Expect to make mistakes, but be ready to move past them quickly.

A huge challenge for founders is being right too often. A software startup founder can make 100 good decisions in a row, but this pattern can help hide one bad decision along the way. Being blindsided by early successes has led to many major problems in many management teams. Better to recognize a mistake and correct its trajectory quickly than to persist in being right.

Thus, the process of creating a software startup can be summed up as a two-step cycle that repeats itself continuously: validate, then build. This is true for all aspects of a startup; building can refer to your team, your product, your pricing, your marketing strategy, etc. And the ensuing validation can come from peer advisors, design partners, investors or prospects.

This commit-then-build strategy is perfectly reflected in the sprint process that has taken software vendors by storm. By committing to release new product releases every two weeks rather than quarterly rollouts, companies can quickly evaluate these releases successfully to expedite required updates.

By oscillating between building and validating, you are constantly improving, innovating and refining – and yes, you make mistakes. Startups need to be flexible enough to scale and pivot when needed. This flexibility is crucial, as is the need to quickly overcome missteps. The past is the past, and those decisions shouldn’t weigh heavily as startups debate new information and receive incremental feedback.

3. You have a chance to get out. Be ready for it.

Research shows bad timing was the final nail in the coffin for 10% of failed startups. Timing really is everything, and sometimes the best decision you can make as a founding team is to stay in stealth mode even in the midst of market pressure. This forces founders to put their pride aside, even if it means potentially giving up on being first to market. Properly sizing your stealth period allows founders to be incredibly judicious about their behavior, allowing them to deliver a polished product to market.

Another value of not automatically going out of stealth on a predictable, early schedule is that it gives you time to understand your market, your message, and your approach. All startups inevitably have to adjust their messaging during their infancy, but it’s best done outside of the public spotlight. A fast-changing message straight out of stealth sends a red flag to prospects and investors that there is a lack of clarity and commitment to a powerful vision.

And in the end, people are interested in the mystery. Staying in stealth mode for an extended period creates intrigue that can be incredibly valuable from a PR and branding perspective.

Software startups can change the world.

As the founder of a startup, you will inevitably receive a lot of advice – some excellent, some less so. But if you have a clear strategy for how you intend to build your early days, not just the product, but the whole approach to becoming a business, you can easily figure out which tips to follow and which to bypass. When you’re guided by the feeling that you’re doing something special and you’re hyper-intentional about building the right foundation, you can position your startup for an exciting launch. More importantly, you can increase the likelihood that your start-up is built to last.

Mike Fey is the CEO and co-founder of Island.

DataDecisionMakers

Welcome to the VentureBeat community!

DataDecisionMakers is where experts, including data technicians, can share data insights and innovations.

If you want to learn more about cutting-edge insights and up-to-date information, best practices, and the future of data and data technology, join us at DataDecisionMakers.

You might even consider writing your own article!

Learn more about DataDecisionMakers