The Essential Guide to Building an MVP

Introduction: The First Pillar of Business Success

The rapid rise of the software-development industry over the past decade has introduced a range of new techniques, methodologies, and processes that have fundamentally changed how startups and development teams approach building web and mobile applications.

High startup-failure rates and an increasingly competitive market mean that maximizing funds, optimizing time, reducing risk, and gathering meaningful customer feedback have never been more critical. Traditional software-development approaches focus on solving defined problems for a known audience — but in the startup world, knowing whether your product will actually solve a problem, or resonate with a target audience, is nearly impossible to gauge without a working application.

Startups that follow traditional development methods spend months planning, designing, and building before they truly know whether a market exists. This dramatically increases the risk of early project failure. A large part of any startup's success depends on its ability to test the target market, validate ideas, and demonstrate business potential.

Out of this challenge, a number of methods have emerged to help developers plan, build, and release early working applications. One of the most widely adopted is the minimum viable product — the MVP — which has become a cornerstone of startup strategy and an effective mechanism for uncovering unknown customer and market data.

What Is an MVP?

Defining an MVP

An MVP contains the bare minimum set of essential features and functions required to be deployed and released to a group of early adopters — customers who will use the product and provide honest, actionable feedback.

The term MVP traditionally belongs to product design, but was popularized in web-application development by Eric Ries and Steve Blank, pioneers of the lean startup movement.

While the traditional definition of an MVP describes a working product, some consider it to be anything that validates initial ideas — a landing page, a customer survey, or even a social-media campaign. These pre-development activities are certainly a valuable part of the broader MVP process, but many industry practitioners argue that a true MVP should both validate ideas and deliver the highest possible customer value from the most minimal set of features.

"You're selling the vision and delivering the minimum feature set to visionaries, not everyone." — Steve Blank

What Is the Aim of an MVP?

The primary aim of an MVP in web-application development is to plan, build, and deploy a working product that fulfills two purposes: gaining customer feedback and showcasing business potential to investors.

Starting with an MVP also answers a number of critical questions and generates a rich learning experience — helping founders understand their true customers and the market they want to enter. The initial outcomes of an MVP will shape future development and confirm the next steps, whether that means pivoting and changing direction, or pressing ahead on the current path.

The process of developing an MVP is typically made up of six main stages:

What an MVP Is Not

A minimum product

Despite the name, an MVP is not simply the smallest possible release of an application. A successful MVP must be viewed not as a first complete product, but as a mechanism for validating ideas, minimizing risk, gaining insightful feedback from potential customers, and selling future potential to investors.

The final solution

An MVP is a starting point, not a destination. The application's direction will be shaped by customer feedback and initial market response. All future development will be determined by these early results — and it is entirely normal for the final product to look nothing like the original MVP.

A feature-packed application

Every feature in an MVP must align with its core goal: gaining initial feedback and testing the market. If a feature isn't essential to the application's goals and requirements, it should be excluded and considered for a later development stage.

Why Start with an MVP?

Investors Have Evolved

In the early days of the tech-startup boom in the late 1990s, investors deployed capital into promising young startups as quickly as possible. Opportunities were abundant, and funding new ideas was seen as essential to avoiding being left behind.

After the dot-com bubble burst, investor behaviour shifted considerably. Today, investors rarely put money into unvalidated ideas. Startups need to bring more than a business plan to the table — they need an operational application that demonstrates genuine potential before investors will write even a modest cheque.

While venture-capital investments in software companies rose 10% between 2001 and 2011, the highly competitive startup market has made investors more conservative. They are increasingly focused on a startup's business acumen as much as its application's potential, and they prefer to deploy capital to scale companies rather than to fund initial market and customer testing.

By developing an MVP, startups demonstrate their ability to plan, create, and execute — building confidence among prospective investors.

Source: Software Eating The World: Facts & Figures, Forbes, 2011.

To Generate Ideas, Test Assumptions, and Minimize Risk

The core aims of an MVP are to generate ideas and test assumptions. Every startup idea arrives loaded with questions:

• What problem am I trying to solve?
• Is there a demand for my product?
• Is my product engaging enough to capture an audience?
• How can I avoid failure?
• Will people really want to use this?
• Will I be able to monetize the application the way I've planned?

By producing an operational MVP, founders can quickly validate these initial assumptions and generate new ideas that shape the next version of the application.

Minimize Risk

Risk is inherent in any new business venture. Within the software and web-application industry, however, risk is somewhat more manageable — startups can invest a modest amount of time and capital to test the waters, then react quickly to changing situations based on customer and market research.

One of the most common mistakes startups make is misjudging their customers' true desire for their product. Even the most compelling application concept may not receive the response its creators expect.

Customer research can also produce misleading conclusions — there is a significant gap between what potential customers say they will do and what they actually do. A working application essentially asks potential customers to put their money where their mouth is. If someone expressed interest by registering via a landing page, a working application gives them a genuine opportunity to engage, producing far more accurate data than surveys alone.

Developing an MVP that lets potential customers actually use the application addresses many of the primary risks while saving both time and money.

What Do You Need to Build an MVP?

Foolproof Planning

Planning is a critical component of MVP development. It must be thorough enough to identify potential risks, set achievable goals, and establish a clear development path. Strong planning helps build a deeper understanding of the business and assists both the founder and the development team in selecting the most essential features for the initial launch.

Customer and Market Research

"We must learn what customers really want, not what they say they want or what we think they should want." — Eric Ries

Conducting thorough market research and fully understanding prospective customers are the foundational steps of any successful MVP.

According to a report by CB Insights based on an analysis of 101 startup post-mortems, the number one reason startups fail is no market need — cited by 42% of respondents. The findings underscore just how important comprehensive customer and market research is to a project's survival.

Source: The Top 20 Reasons Startups Fail, CB Insights, 2014.

Many startups skip this step, viewing it as an added expense or fearing negative feedback. But without a thorough understanding of the market and the needs and behaviours of future customers, the effectiveness and success of the MVP will be severely compromised.

Customer Research

Before conducting research, clearly define the target customer. A useful starting point is answering these questions:

• Are you solving a problem (and if so, which one?) or providing something people will desire?
• Why will they choose your product over competitors'?
• What would they be willing to pay for your application?

Once answers are established, the next step is to go out and confirm them. Common methods include focus groups, one-on-one interviews with people who fit the target audience, behavioural research, and surveys.

Market Research

Market research extends beyond understanding customers — it also involves examining the market itself. Key areas to investigate include:

• The size of the market
• How many companies operate within it
• Who the competitors are
• The challenges the market faces
• The overall uniqueness of the application
• The maturity of the market — is it established or emerging?

The results will clarify the application's position in the market and help define the core features and functions for the MVP. Useful sources include survey results, national and local business census data, and interviews with business owners and managers active in the target market.

Technology Partner

For founders who lack the programming, design skills, or manpower to build a working product, finding a capable and dedicated technology partner is essential to MVP success.

Engaging a partner to handle all technical responsibilities allows the founder to focus on the business side — marketing, raising finance, and so on.

Traditionally, technical co-founders are software engineers or developers who accept equity in exchange for providing technical services. The challenge is that for most skilled programmers, finding a well-paid full-time position is straightforward — there is little incentive to take a risk on an unvalidated idea. The pool of non-technical entrepreneurs seeking a technical co-founder also vastly outnumbers the pool of developers actively looking for one.

The alternative is to engage a software-development partner who can handle all technical responsibilities and act as a technology partner — without taking equity.

Advantages of hiring a technology partner:

• Avoid giving away equity prematurely
• Access a dedicated and motivated technical team — a successful MVP means continued work and an ongoing relationship
• Broader access to developers, which speeds up the development process
• Relevant experience specifically with MVP development

Full-Service Software-Development Company

Finding a software-development company is important; finding one that offers full-service development is essential. To plan, design, develop, launch, and maintain an application, the partner must be capable of delivering across all of those areas.

MVP development is a full-team process that requires seamless cooperation among developers, project managers, designers, and system administrators. It takes a full-service team to deliver a high-quality MVP — not a single developer.

Financial Resources

One of the first questions startups ask a technology partner is about cost. The complexity of software development makes it difficult to pin down an exact figure, but most MVPs cost between US$25,000 and US$75,000 to build.

Raising Funds (Seed Funding)

Securing the right amount of funding to cover MVP development is one of the earliest challenges startups face. Attracting investor capital at this stage based solely on an idea is extremely difficult. A highly effective way to improve the odds of securing initial funds is to create a high-level prototype.

Working with UX/UI designers to build a prototype gives investors a visual concept, helping them understand the idea and vision more concretely.

Funding at this stage is commonly referred to as seed funding — early investment used to support MVP development and the initial stages of the business. Common sources include:

• Personal savings
• Friends and family
• Loans
• Angel investors
• Crowdfunding

Each option carries its own rewards and risks, and the right choice depends on the startup's specific circumstances.

Hourly Rate vs. Fixed Price

The payment model used with a software-development company is another important financial consideration. The two most common options are hourly-rate and fixed-bid models.

Fixed bid

This model is popular with some development companies, but it is frequently the wrong choice for startups. While a fixed price may seem appealing for budget control, it often causes irreparable problems during development:

• Developers and client work against each other. Developers want to finish as quickly as possible to maximize profit; the client wants to fit in as many features as possible to maximize value. These competing incentives make it difficult for either party to be fully satisfied — one will always be disadvantaged.
• Software development requires agility. The fixed-bid model imposes rigidity on a process that inherently needs flexibility, limiting the ability to change direction when required.
• More time on planning than development. Developers use heavy upfront planning to reduce risk, but careful planning is time-consuming and often doesn't hold anyway. This erodes development time and creates unnecessary stress and cost for both parties.

Hourly rate

An increasing number of development companies are moving away from fixed-bid toward hourly-rate models, which better serve both sides. This model aligns with agile methodologies and offers the following benefits:

• Greater transparency and a stronger working relationship. Clients can see how much time has been spent on each part of the project and what the outcomes are.
• Ability to change direction. Aligned with agile principles, the hourly-rate model allows developers to build software progressively. Change is a normal part of software development, and the freedom to adjust course when needed is critical to success.
• Faster development. Without the need to over-plan in order to minimize risk, developers can start working earlier, deliver functional features sooner, and gather client feedback that shapes the remainder of the MVP.

Some startups worry that the hourly-rate model reduces developer motivation — in practice, the opposite tends to be true. Development companies depend on the success of client projects for ongoing work. A successful MVP leads to further development phases and a continued working relationship. The hourly-rate model also necessitates a close working relationship, effectively integrating the developers into the startup's team.

Which Features Should Be Included in the MVP?

"As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek." — Eric Ries

Deciding which features to include is one of the more difficult aspects of MVP development. Applications are built from many features, and choosing the right ones requires discipline. The guiding principle is straightforward: the features included in an MVP should only be those that directly connect to its goal.

In practice, feature selection is a collaborative effort between the founder and the development partner. By analyzing customer and market research results, and by understanding the startup's goals, core business model, and vision, the development team can map out the features that belong in the MVP.

Once the main feature list is established, developers will often look for opportunities to consolidate smaller features into a single larger one — a worthwhile exercise that saves development time.

While features vary significantly across MVPs, certain categories of features have no place in any MVP and should be excluded.

Features to Leave Out

Cool features

These are features with no real functional purpose — they look good but add minimal value to the MVP. Social-media integration is a common example; it rarely adds meaningful value to most early-stage applications.

Copycat features

A competitor having a certain feature doesn't mean it belongs in your MVP. Replicating competitors' features adds development time without necessarily serving the application's core goals. Feature selection should be driven by the application's own objectives — not by what competitors have built.

Features requested by early adopters

User input is valuable, but caution is warranted when acting on feature requests from early users — particularly those on a freemium tier. A feature that suits one user segment may not suit others, and it won't automatically translate into a better overall experience. It's also genuinely difficult for users to evaluate whether they want a feature they haven't yet used. User-requested features should be based on thorough research and analysis, and are generally better suited to post-MVP development phases.

Key Takeaways

• Beginning with an MVP is the first pillar of startup success.
• Thoroughly plan the MVP before a single line of code is written.
• Conduct detailed customer and market research — the data will drive every major decision.
• Engage a full-service technology partner capable of handling planning, design, development, and ongoing support.
• Choose a payment model — typically hourly rate — that aligns with the agile nature of MVP development.
• Feature selection should be ruthless: include only what directly serves the MVP's core learning goal.