3 lessons learned from building a software startup

About 90% of startups fail, and of that stunning figure, 10% fail within their first year. Which means that for every unicorn, there are a whole lot of gray mules littering the path to startup greatness. Building a company from the ground up, especially while operating in stealth, is a high-wire act that takes nerve and an incredible amount of hard work.

As cofounder and CEO of a startup myself, I’ve experienced firsthand the sometimes grueling, but always gratifying, process of bringing a software startup to market. The lessons we have already learned during that process have proven to be invaluable.

1. Get to product-market fit as though your life depends on it, because it does.

If a startup’s solution is truly innovative and disruptive, the odds that any other company is already doing the same thing are unlikely. Yet it’s estimated that 35% of startups go belly-up due to poor market demand — demonstrating market fit and demand are 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 additive lesson I have learned is that a crucial component of market fit is developing a robust business case to defend the purchase.  

This means demonstrating not only how the product will deliver on the promise or needs of the customer, but how they will justify their purchase and fit into their work plan. In a world of skilled worker shortages, the funding or desire for the product may not be enough to create an optimal selling environment. The individuals who need to implement the product will likely require budget justification and the time required to onboard and roll out the solution. So as you consider scaling and timing, understanding and framing for your prospects how your product will fit into their budget commitments and work plan is essential. 

Startup founders must ask themselves:

• Who in the company will be tasked with implementation and day-to-day use?
• How much of a lift is it — in terms of finances, personnel and time — to implement this solution?
• Will it disrupt prospects’ budgetary cycles?
• Is the ROI impressive enough that any obstacles to adoption will be 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 prepared to move past them quickly.

A massive challenge for founders is being right too often. A software startup founder might make 100 right decisions in a row, but that pattern may help hide a poor decision on the journey. Being blinded by early success has led to many big issues in numerous leadership teams. Better to recognize a mistake and course-correct quickly than dig in your heels for the sake of being right.

As such, the software startup creation process can be boiled down to a two-step cycle that repeats continuously: validate, then build. This is true for any aspect 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 sales prospects.

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

By fluctuating between building and validating, you are constantly improving, innovating and refining — and yes, making mistakes. Startups must be flexible enough to evolve and pivot when needed. This flexibility is crucial, as is the need to move past missteps quickly. The past is the past, and those decisions should not weigh heavily as startups debate new information and receive progressive feedback. 

3. You get one chance to come out. Be ready for it.

Research shows poor 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 amidst market pressure. This requires founders to put pride aside, even if it means forfeiting potentially being first to market. Right-sizing your stealth period allows founders to be incredibly judicious with how they behave, enabling them to bring forth a refined product to the market. 

Another value of not automatically coming out of stealth on a predictable, early timeline is that it gives you time to understand your market, message and approach. All startups inevitably have to adjust their messaging during their infancy, but it’s better to do so outside of the public spotlight. A rapidly changing message right out of stealth sends a red-flag signal to prospects and investors that there is lack of clarity in and commitment to a powerful vision.

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

Software startups can change the world.

As a startup founder, you will inevitably get a lot of advice – some of it great, and some of it less so. But if you have a clear strategy of how you intend to construct your early days, not just the product, but the whole approach to becoming a company, you will be able to easily figure out which advice to heed and which to bypass. When you are guided by a sense that you are doing something special, and when you are 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 young venture will be built to last.  

Mike Fey is the CEO and cofounder of Island.