Categories
All Topics Prototypes and MVP

What is the difference between MVP and Prototype?

The simple answer is ‘no’ and many of you are aware of it. But still these terms are sometimes used interchangeably by people, even when they know that they are different. One reason could be that MVP is often built according to a prototype and they both look the same. Now let’s look at the differences and why we need both of them.

Prototypes are, particularly in the software field, visualization of the end product, explaining how it looks like, how the flows work and how the various components are connected. The completed product may look exactly the same, as it’s the early approximation of the final product. Prototypes usually include screens, user flows, wireframes and mock-ups and the workflow is mimicked by using some tools. So, prototypes provide the visualization of the end product for user interface and backend developers. They have to develop the product supporting and implementing the prototype.

Whether you add some functionality or just mimic the application behaviour, prototypes provide a good idea of how the product looks and works from the end user perspective. A prototype explains the product’s design and behaviour to the on-technical stakeholders and becomes the model based on which the end product will be built. So, prototypes are shared with stakeholders and developers to obtain their feedback and consent. There are 4 types of prototype modelling.

  1. Throwaway prototyping – to find if a feature can be implemented or to obtain just feedback
  2. Evolutionary prototyping – Refining prototype based on the feedback
  3. Incremental prototyping – Large prototype is built from smaller prototypes
  4. Extreme prototyping – A web application is built that is close to the real application.

The prototyping may be necessary for complex systems where confusion might arise leading to difficulty in using the application. Based on the degree of complexity and feature requirements, you may adapt any of the above prototyping methods to get the feedback from stakeholders to refine the prototype to meet the desired user experience goals.

There are several tools (including free ones) to help you build your prototypes fast and collaborate with stakeholders. You can start building a low-fidelity (paper sketching or wireframe tools) or high fidelity prototypes using software tools.

MVP, on the other hand are the working software that fulfil requirements of end users, but only at a basic level. MVP is limited in functionality and features but are real working software components. Ideally MVP should implement the core functions of the product, so users are able to use it. MVP is the tool used to obtain user feedback and test product market-fit.

While conceiving the product, we make some assumptions and assume everything works as per our understanding. MVP is the base product that tests If our assumptions are correct or not and learn about our customers. It helps us not only to get the product validated by real users, but also to assess market demand. This helps you in understanding your target users and product market-fit even before you heavily invest into developing the full product.

As you can see, your MVP doesn’t have to be any complex nor a fully functional application. It could be any of the following

  1. An explainer video with landing page: You put your product’s functionality into some animation and ask users to sign up to get beta access.
  2. Wizard of Oz: User interface looks real and also users can interact with the app, but the actual functionality is carried out manually.
  3. Concierge MVP: It is a manual service rendered in exactly the same fashion as the product, when your users are not comfortable with technology or when it’s not possible to build an MVP.
  4. Piecemeal MVP: Users can interact with the app, but the functionality is carried out by existing and separate tools and software.
  5. Mock-up MVP: Is similar to prototyping where users can see and interact with design elements, but there is no actual functionality.
  6. Single feature MVP: Implement only the most important feature of the product.
  7. Public Proposal: Use crowd-sourcing platforms to generate initial interest to allow users to pre-order. It’s a great way of generating feedback and assess market demand

Now, you have understood the difference between prototyping and MVP, and the context where they are suitable. Both can save you a lot of money and effort. You can find and assess demand, product market-fit, competition, user expectations, product enhancements, feature selection etc, well before you spend a lot of money to develop the product.

Categories
All Topics Outsourcing

Is outsourcing a good option for startups?

We are into a global economy and companies can source products and services from wherever they found it to be cost-effective and efficient. The major reason behind this outsourcing is cost-reduction. If major companies are outsourcing their work, startups can definitely consider this option to increase business and cost efficiency in their early stages. Thanks to outsourcing platforms like Fiverr and Upwork, startups can employ top talent from any corner of the world.  Outsourcing can play a big role in startups.

Sometimes, cost reduction may not be the main concern for startups. Many startups struggle to find the required talent in their neighbourhood and short on manpower for some essential functions such as HR, accounting etc. Other times it’s the inability of startups to scale up according to the demand or requirements that makes outsourcing to be an attractive option. It needs to be understood that outsourcing by larger companies is a bit different from outsourcing by startups. Larger enterprises primarily look for reducing costs of redundant work or occasional excessive work. They don’t generally outsource their core business work. Large businesses have comfortably protected intellectual property and data. Entrepreneurs, due to the lack of internal resources, often faced with the risk of divulging their core business models and data to their outsourcing agencies. There are ways to mitigate such concerns if the entrepreneur do some homework and get answers to the following questions.

  1. Which parts of your business, you would like to outsource because you can’t find resources? Technology advice, business functions, software development, human resources or something else
  2. What are the efficiencies or enhancements you are trying to achieve? Cost reduction, technical expertise, team building or something else
  3. Do you have to outsource 100% of a particular business activity? If yes, are there any sensitive issues that can jeopardize your company’s operations and data in the future
  4. If you aren’t ready to outsource 100% of your business function, are you able to separate what can be safely outsourced
  5. Do you prefer an individual freelancer or a company to outsource your work? Is this decision influenced by your budget?
  6. Do you have any preferences as to which countries or regions you can outsource your work? What are the factors that are influencing you here? Language, culture, moral issues or something else
  7. Are you able to select the outsourcing agency or freelancer yourself? Do you have enough knowledge of the business function you want to outsource, so you can interview and select your partner? If not, what are your plans to find the likely solution and the solution provider?
  8. Can you judge the quality of the work that your outsourcing partner is providing to you? If not, what are your plans to make sure that you are getting the desired quality?

Outsourcing isn’t a small decision. It puts you in contact with new people, cultures and work ethics. It is absolutely necessary to do some homework regarding, how often and how long you can depend on the outsourcing agency before developing your internal capabilities. Outsourcing has several advantages, you can continue to operate within certain costs and your operations are highly scalable. It gives you an advantage over others. But there are certain drawbacks like low quality output and lack of control, if you are not able to choose the right partner.

If you can do some analysis and pose those above questions to yourself, you are in a much better position to take advantage of outsourcing, which is a highly flexible and an effective way of accelerating startup growth.

Categories
All Topics Funding

Raising funds from friends and family

Your friends, relatives and family are your greatest supporters in life. They love to join with you in any kind of fun or activity. It’s a natural bond. Not surprisingly, friends and family are the second largest investor group in the USA, putting a staggering $60 billion which is more than what angel investors, VCs and banks put together at $56 billion. The biggest source of funding is the entrepreneur’s own savings and credit, amounting to $185 billion.

So, you can turn to your friends, family and relatives to make them a part of your venture because,

  • These are the people who love you and trust you.
  • Most importantly, they believe in you and your potential.
  • Don’t be afraid to ask your loved ones for a loan.
  • Plus, unlike with a bank, you’ll likely be able to get some money from your friends and family without having to pay any interest.
  • Who knows if you’re lucky, you might even get funds as a gift.
  • So talk to your parents, siblings, grandparents, or even your rich uncle.
  • Just know there are some risks associated with this approach as well.
  • You definitely don’t want to take a loan your friends gave you in good faith and lose it.
  • That could put both of you in a very uncomfortable situation.
  • Loans from their family contributed to their success because they had extra motivation to not lose the investment.
  • They didn’t want to let their loved ones down.

And also this is the easiest and earliest funding route for you, when you are still not ready for the professional funding from angel investors or VCs.

However, you need to be aware of a few things when you are raising funds from your close circle of friends.

  • Your friends or relatives are not any professional investors. They don’t understand a thing about entrepreneurship or what you are doing. They invest into your venture because of your relationship with them than anything else. So, you need not lie about your business or its returns. Just tell them about your business in plain terms and ask for their help.
  • Always make them understand that they could lose money and may never get paid back, if your business fails. Make sure that they realize this and are putting only a portion of savings into your business, not their entire life’s savings.
  • You need your relationships all through your life. So, don’t create a situation of mistrust with them.
  • You may take help in the form of loan, gift, investment or money in exchange for some favour. In any case, pay some interest or offer some small incentives to them or celebrate with whenever you had some major success. This will improve your relations, and they will stand firmly behind you.
  • Always be fair, acknowledge their contribution, make sure they get what is promised to them, and they are happy with it. A later stage investor may benefit more than early stage investors like your friends. It happens often times because of the very nature of funding. In such cases, make sure that your early investors like your friends and relatives get their due recognition and are paid equally like other investors. Because they trusted you before anyone else did, and they are the least selfish about it when they entrusted you with their life’s savings

At the end of the day, you have to balance between work and life and don’t want to mix them together. Nor you want to spoil one thing for the sake of the other.

Categories
All Topics Funding

When do angels appear in your startup journey?

It takes several years of pious life and severance from worldly joy before angels appear to mortals, according to many religions. But you will be a bit relaxed to know that angel investors can appear somewhat early in your entrepreneurial journey and can save you from several possible miseries.

For many entrepreneurs, VCs and angels look the same. They can’t really find the difference between these two except for their entry points into a venture and the amount of money they invest. However, VCs and angel investors differ a lot. Let’s see how…

  • While angel investors can take an equity share of your start-up in exchange for their investment, their funding can also be exchanged for convertible debt.
  • It’s not uncommon for these investors to be entrepreneurs or former entrepreneurs themselves.
  • Although money is their motivation, they are more likely to be genuinely interested in your business as well as the growth and development of particular industries.
  • If you find the right angel investor, you may benefit from their expert advice and management skills.
  • It’s more common for angel investors to supply funding to businesses when they are still in the early stages, whereas VCs typically look to get involved a little later.
  • Unlike a VC firm that has a committee and advisors working together, an angel investor may make a decision on their own.
  • They may simply like your plan, trust your goals, and believe that your business will be successful.
  • That’s why it’s important for you to be able to articulate your business plan well.
  • A short meeting over coffee or lunch with an angel investor might be all it takes to get them on board to fund your start-up.

Now you started seeing the typical angel investor,

  • Someone with high education from an Ivy League college or similar
  • Someone who had a few decades of successful career in top companies or someone who successfully exited a few businesses
  • Gained immense managerial experience and is well-connected
  • Amassed or inherited a lot of wealth, but don’t want to spend it on paintings or luxury cruises
  • Someone whose success is often seen only in his association with companies or teams he worked with, but wants to make a name for himself as a thought leader or mentor or a managerial practitioner
  • Most importantly, someone who is willing to put his own money at risk

So, angel investors want you to share your uncertain dream with them, to make up for a long and often boringly successful career he or she had. Your venture excites them as much it excites you. They need something to play around with and watch it grow. Obviously, it’s not the reward that entices them, it’s the challenge that they never had before. It’s something like a rich man trying to understand what hunger really is and trying to figure out how to earn his bread.

Angel investors like to operate mostly within their realm of expertise, but they want to solve problems arising out of various business scenarios. Entrepreneurs can greatly benefit from their experience and managerial skills.

In the next few articles, we will explore how to approach angel investors, and we will also discuss different types of angel investors, such as individuals, networks and super angels.