Dwarves Radio Talk #6: Development stages of Startups

and a thought on the difference between MVP & products

We did have a talk on Startup definition to make sure the team possesses the same perspective. Coming back this week with a higher approach: Startups development stage and the difference between products and MVPs.

We started this with Bien Vo - our Backend Engineer. It was his question in the first place. We looped Khai Le in, as he's one of our veterans in business and design development. Khai has obtained a level of experience in the startup field. Some of the names that can be referred are Greengar (2013), followed by Cloud Jay (2015)

Khai: We've had some definitions of startups in the previous talk. In short, I think it's safe to call c. Startups, on the other hand, will be different from companies with a stable business model. It develops through fundraising rounds, gets bootstraps a few times until the product reaches the market-fit standard.

Startup grows through stages.

  • Ideating: formation step begins with developing an idea. Create a mission and vision to build up an initial strategy with key milestones on how to turn it into products. Commit to that idea with skillful resources from co-founders who share the same belief and the will to make it happen.
  • Problem-Solution Fit: Eliminates uncertainty through constant testing. Iterating and testing assumption. A real MVP can be made at this stage if the solution fits the problem and really solves a key set of problems or issues.
  • Validating Product-Market Fit: Where you answer, "Does my business model actually work?", "Does my product fit the user segment I've targeted?". Where founders start to test their customer segment and market. Growth hack dives in when startup want to reach the product-market fit stage.

After startups have reached this stage, they'll likely continue the fundraising work. Investors will take a good look at the startup's growth potential and decide whether or not to invest more in the product to test its ability on problem-solution fit. This is what people do in Shark Tank, bringing the first product version with a clear plan in growth and verified customer segment, then ask for funding. Funding contains many rounds: Preseed - Seed - Series A - Series B - Series C.

Bien: I feel like startups sometimes get stuck in the funding round. When the startups start to gain profit, will investors agree to spend more money on them?

Khai: The answer is how that money will be spent. They have many reasons to utilize investment. Acquire more users, or develop product's feature. If it's a promising way to scale up or take that product to a bigger market, it's a good investment.

Bien: Having more investment means the business decision will be made based on multiple sides. How to manage the funding and still be able to maintain the startup's business vision?

Han: Investors are very cautious once it comes to funding. They validate every related factor. They want to know what's your plan on using that funding before deciding on an investment. Investors won't invest just because they "feel" that you're making a profit. They need more than that. Unless you come up with a solid business plan and a deep understanding of the market, it's a no from them.

Minh: Sometimes, ventures ask for more investment from their well-known people to better prevent the product idea from being stolen. It makes sure the product won't get cloned and reduces the chance of their opponents getting funded.

Bien: How can we value the product idea before pitching them to investors? As I see in Shark Tank, people just come up with idea pitching.

Han: As I remember, startups must have their product well wrapped before pitching them to Shark Tank. It's the place for seed funding, where investment will help sell the product faster. Shark Tank helps startup founders to value their business. That's why investors come up with questions on expected revenue and business plan or growth potential.

Nam: What's the difference between an MVP and the first version of a product?

Han: Every product is made to provide a function. It must, firstly, solves something. For example, I create a product called "Online English" for 1 on 1 tutoring. I make 2 registration forms, one for the students and the other is for the teachers. Then I match their calendar and schedule the Skype call. My MVP is the act of connecting the teachers and the students, where I provide the matched requests of learning and studying.

MVP is something a founder can do by himself to tackle a problem. A product happens when tooling and technology are required to scale and serve a bigger purpose. It could be tune-up the feature or expand the market coverage.

To sum up

  • Startups are companies with financially stability-oriented. It grows through stages: Ideating - Problem-Solution Fit - Validating Product-Market Fit
  • Investors assess every factor more than profit. They come with questions on expected revenue, business plan, growth potential, and team capabilities on expanding the market
  • MVP is something a founder can do by himself to function and tackle the problem, with no tooling or technology involvement.
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