Picture this: your tech startup is finally ready to build its first software product that will blow everyone away and put your company on the map. But there's one problem: you're bootstrapped, which means you have to develop and launch the app on a tight budget.
Although you may prefer to have a few million dollars in venture capital as a safety net, it can actually be beneficial for your company to build your product without funding.
"It's a tough position to launch from when so many tech startups raise capital right out of the gate, but it forces you to constantly look at the return on investment for every decision you make." said Angel Rutledge, COO and CMO of SignUpGenius.
Although building product on a bootstrapped budget is challenging, it's far from impossible--especially if you follow a few key guidelines. Pulling from my own experience and the expertise of several successful tech entrepreneurs and advisors, below is a list of best practices that will help you launch your tech product without breaking the bank.
1. Dive Deep on Market Research
A thorough examination of your market should be the very first step of product development. There's no quicker way to waste money than to spend months building a product that your customers don't want.
Learn everything you can about your customers and competition before you start development. Who is your target customer, and what kind of product will best address their needs? Who are your competitors, and how will your product stand out from theirs?
"You have to get outside of your bubble as soon as possible," said Luke Freiler, CEO of Centercode. "Start by defining your target market and then find strangers (not friends, family or employees) from those markets to act as your sounding board. You can leverage these voices every step of the way to from idea to release."
2. Lock Down Your Financial Model
Once you've validated your idea, figure out how you're going to make money from it. Start creating a financial model early on so you have a concrete understanding of your company's monetary needs.
"One of the keys to amplifying early stage dollars is architecting a financial model that allows you to make rapid decisions confidently. Investing in a detailed model means you'll be able to get immediate feedback into whether your experiments are returning or not," said David DeRam, co-founder and CEO of greenlight.guru.
Knowing your financial model will help you decide how many customers you'll need and how much you'll have to charge them to keep your business afloat. Recouping your product development costs as quickly as possible will be a huge priority, and a good financial model will enable you to track your progress.
3. Utilize Low-Cost Development Tools
During product development, keeping costs down will be a major priority. Fortunately, there are many free or inexpensive tools available online that you can use to your advantage.
"It's impressive how much you can do with a small software product budget," said Robert Harris, founder and CEO of MVP Launch Partners. "With all the open source libraries, marketplaces, crowdfunding options, Cloud hosting options and prototyping tools, you can get to an MVP and start figuring out product-market fit faster and cheaper than ever."
Open-source code snippets can help cut down on your programming time, and Cloud hosting makes it easy and relatively inexpensive to run web-based software without owning physical servers. You can even outsource some of the development work through freelancing marketplaces rather than pay additional employees.
4. Launch Before It's 100% Coded
Writing, testing and tweaking code is a huge upfront investment for bootstrapped companies. If any of your planned product features can be performed manually in the short term, you can save time and money by launching the software before it's fully coded.
"Make your offering available to the public with, for example, five key value props. Maybe two or three of those value props are automated, but the other two, behind the scenes, are still done by humans," said Mike Kelly, Managing Partner at DeveloperTown.
This strategy works well if your product features algorithms for matching, information retrieval or analysis. Launching with incomplete code lets you gauge the product's performance and reception while avoiding some of the upfront cost and makes changes cheaper and easier to implement.
Despite the stressful nature of bootstrapping a product, many successful entrepreneurs have been able to pull it off with some careful planning and a keen eye for cost sensitivity. Above all else, be open to questioning your initial assumptions and adapting your product to fit market conditions.
"Ruthlessly challenge your priorities, prove the need for your product before you invest in technology to scale your solution, and plan on needing multiple releases before you really get it right," Harris said.