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Building Software Products At Startups: Best Practices And Common Mistakes

Mar 23, 20229 min read

Robert Krajewski

Co-founder and CEO of Ideamotive. Entrepreneur, mentor and startup advisor.

No wonder the software development industry is booming. The rapid development of technology has paved the way for new software services such as the Internet of Things (IoT), artificial intelligence, and machine learning. 


In fact, by 2017, the software industry had already shown significant growth in all 50 states, even at a time when the United States economy was in recession. 


No wonder developers are getting the recognition and opportunities they deserve in a tech-driven world. 


Startups are especially vulnerable in the world of software development. They are tasked with creating a solution to a problem from scratch and are therefore inherently fragile in their endeavors. So, even with the rise of startup culture and a booming job market, there are still various ways for Product Owners, IT Project Managers, and Startup C-level to make their project outstanding, attracting only the best talent to work for your needs. 


Understanding some of the most common practices and learning from others’ mistakes will help you avoid making them yourself. Bookmark our building software products at startups checklist and share it with the stakeholders!

5 best practices of the software development process for startups 

Before proceeding to our guide, be sure to understand what’s software product development life cycle. This is the basis for the below material.

1. Define a clear scope of work

It's about the idea. When you have an idea, it seems to be easy to understand. When you try to explain this idea, it gets more complicated. It forces you to take a fresh look at your idea. The key point is that if you have a vision, you can determine the scope of work. 


Write it down so you could better understand, improve and explain it to others. 


Our experience shows that there are many situations when the client only has a vision of the product. And now it's our turn - our mission - to define the requirements and help to better understand the idea and product. This is called the "discovery stage".


Here is a guide on how to define product requirements:

  1. Write documentation that describes business goals, needs, and how to achieve the expected result;
  2. If the above is too difficult, then prepare a list of questions describing the main goals and achievements you are striving for. Then answer the questions;
  3. Feel free to spend time on this. It will cost you time in the beginning, but it will save you much more in the future.

2. Vendor selection

(Probably the most crucial part of the plan. Just imagine having talent perfectly matched with your startups' needs (technology, industry, and team dynamics). Isn’t it 75% of success?)


Software development is not a walk in the park and it takes experience and expertise to create cutting-edge technology solutions. Fortunately, there is no need to deal with this alone.


Partner with experienced software developers for startups to make your dreams come true. When you come to a fork in the road and don't know which direction to turn, your development team will be there to guide you and help you make the decisions that are best for your business.


On top of that, by dealing with a decent talent supplier, you get access to experienced developers, software consultants who ask you the right questions at the right time, and a variety of development services. Each service offers functionality that you might not be able to implement on your own. 


Let's look at some of the possibilities:

  • Web application development
  • Mobile development
  • Cloud computing
  • Compliance
  • Cybersecurity
  • Systems integration
  • etc.

Insourcing vs outsourcing

Given that hiring a dev team is a must we should decide what option to choose:

  1. hire on-site devs
  2. take advantage of offshore software development 

As our IT outsourcing report suggests, you need to outsource software development in 2 cases:

  1. you do not have full-time developers
  2. your own engineering team does not have sufficient experience in a particular area.

Thus, it is better to have a reliable partner that meets the requirements. When a vendor has the right domain expertise, it will cost the customer less time and money than if they had to research everything from scratch. Therefore, we think that the search for a supplier should also be related to experience in the subject area.

How to find a good outsourcing company?

Start with research. 

  1. First, pay attention to subject expertise - it increases the chance of making the product more successful. 
  2. Second, find customer testimonials, and external information about the supplier. You can find useful supplier information on external platforms such as Clutch and GoodFirms. If you see that customers cooperate with the vendor several times, then this company has done its job well. It is much easier to keep working with a trusted supplier than to find a new one. Moreover, it increases the chances of project implementation and customer satisfaction.

What are the criteria for a "good outsourcing company"?

A good outsourcing company is:

  • proper experience
  • excellent communication

The latter is one of the most important parts of any collaboration. Effectively built communication and ensured transparency allow the client to remain calm and satisfied.


This is important for every client, but even more important for clients from a different time zone. For example, Warsaw is 6 hours ahead of Washington. Communication, team management, and customer expectations management is crucial here.


Moreover, check if your vendor offers the next services:

  • Project discovery & specification
  • Prototyping and MVP Development
  • Software/product consultation

For example, a decent company will help you figure out the main differences between monolithic vs microservices architecture and serverless vs microservices architecture.

How to start offshore building software products at startups?

First of all, you can arrange an interview or set up an introductory call with C-level managers. Ask them about the following: 

  • how they work, 
  • what approaches they use, 
  • how they work with clients, 
  • ask them to provide recommendations from clients. 

You need to talk to people, to see them - it helps to understand them better. At this stage, you can already decide if you are ready to move on with them or not. What's more, you can always google and find everything needed.

3. Choose the right development methodology

There are various ways to organize the two main phases of software development (i.e., design and development).


Your task is to determine which phase to focus on.


Will your development team spend most of their time developing a fixed plan, or adapting to problems in the development process?


Choosing the wrong software development methodology (SDM) can cause project budget overruns and delays.


The selection process is quite simple as there are only two methodologies to choose from: 

  1. traditional 
  2. agile.

Within each of these two categories, different development methods can be used, tailored to the specific needs of the software development business.


Traditional methodologies are more planning-oriented and require careful analysis as the project is carefully planned before it starts. This makes traditional development methods more suitable for more experienced, stable, and predictable companies that know exactly what they want and how to achieve it. 


When using agile methodologies, there is no need for initial planning. Teams can adjust their approach if product requirements change. An agile approach, on the other hand, is ideal for startups.


Using an agile methodology gives startups the following benefits:

  • Enhanced collaboration between remote developers
  • Higher software quality
  • Increasing customer satisfaction
  • Shorter time to market
  • Reduce development costs

Agile methodologies allow startups to improve and streamline their development process when they need to, without having to worry about sticking to any rigid plan or process.

4. Monetization approach

Before launching your product, your marketing team should detail your app's monetization strategy.


Ways to monetize startups include:

  • Subscriptions (freemium or tiered)
  • In-app sales
  • Ads
  • Purchases
  • Sponsored partnerships

Choose the proven business model for your startup that fits your marketing strategy and generates the most revenue. 


Note: No matter which model you choose, try to maintain a pleasant user experience.


For example, you can earn money from a free app by placing in-app ads in its interface. Alternatively, you can provide premium subscribers with an ad-free version of the app.


Another monetization option involves making your software available for sale after a free trial period. This trial window allows users to try out the application before purchasing or subscribing to it.


In general, you can combine several strategies to maximize profits, but by no means at the expense of user experience.


Don’t draw this out into a lifetime special. Pick a startup financial model that will generate income.

5. Prioritize all features and functionality

Answer the following questions and write down simple answers: “What features should I do more of? What features should I get rid of? Where should I innovate?” It's important to be willing to drop some features to save money or get to market sooner.


In the beginning, it is very important to make an MVP or a project prototype. A minimum viable product (MVP) is the easiest way to get to market without a complex solution. This allows you the flexibility to change your product and take a different direction. Building features with an MVP mindset ensures that you don't create the wrong things ahead of time, as it forces you to rely on feedback rather than long-term assumptions.


Sometimes a prototype makes sense as a client can share it with potential clients or investors and get valuable feedback.


Best practices

  • Define a clear scope of work

Write documentation that describes business goals, needs, and how to achieve the expected result

  • Vendor selection
  1. Find candidacies on Clutch or GoodFirms
  2. Pay attention to subject expertise
  3. Find customer testimonials and external information about the supplier
  4. Ask them how they work, what approaches they use, how they work with clients, and ask them to provide recommendations from clients.
  • Choose the right development methodology
  • Traditional methodologies are more planning-oriented and require careful analysis as the project is carefully planned before it starts.
  • When using agile methodologies, there is no need for initial planning. Teams can adjust their approach if product requirements change.
  • Monetization approach

Ways to monetize startups include:

  • Subscriptions (freemium or tiered)
  • In-app sales
  • Ads
  • Purchases
  • Sponsored partnerships
  • Prioritize all features and functionality

A prototype makes sense as a client can share it with potential clients or investors and get valuable feedback

7 common mistakes of building software products at startups

1. Premature market research

Most of the software products/services that dominate the market were created at the right time for the right market.


For example, back in 2000, Microsoft coined the term "Tablet PC". During this time, the first Microsoft tablet was introduced. But this did not cause a stir in the market. In short, the market was not ready. More than a decade later, Steve Jobs and his iPhone changed the landscape of mobile technology.

Did Microsoft conduct premature market research? Of course, they will never reveal their results. But this event shows that market research is a critical step in software development for startups. It revolves around validating the idea and the maturity of the product.


Market research is important in software development as it serves several purposes such as:

  1. identifying market requirements
  2. cost
  3. pricing

In addition, startup owners can uncover other potential opportunities through this process. These opportunities include developing new products or even upgrading existing ones. Market research is a determining factor for commercialization.


Avoid premature market research with the right tools and methods. Know the strengths and weaknesses of your product. It is best to know your market.

2. Lack of viability analysis

Starting out as an entrepreneur can be an adrenaline rush. It's interesting and all ideas seem viable. However, it is not. With no prior experience, some startup owners enter software development without having tested market feasibility.


Viability analysis includes market acceptance, cost analysis, target market penetration, etc. In the case of presentation software, the market is dominated by Microsoft's PowerPoint. However, Slidebean wants to share some of it. It has a unique business strategy and focuses on a presentation design platform for startups and small businesses.


By not doing a thorough viability analysis, you are putting your future at risk before you even begin.

3. Customization instead of building software from scratch

The argument between customizing software and building software should lead to the question: How much does it cost to create a software application? Given time to market and cost, startup owners prefer customization.


However, software customization has many disadvantages. For example, by using customized software, your business can be left behind technically competent competitors.


Customization can offer less cost compared to building software from scratch. When choosing between these two options, you need to carefully weigh everything. In the long run, customization is more expensive, especially due to technological advances. Here are some examples:

  • Difficulty adding or removing built-in functions
  • Compatibility issues with various software APIs
  • Scalable across multiple cloud technologies and data partners

Thus, in most cases, building software from scratch is cheaper than customizing it.

4. Lack of coordination between stakeholders

Software stakeholders include product owners (startup owners), offshore developers, and target users. Lack of coordination between startup owners and the development team is always a common mistake.


It is important to ensure that the output is an accurate model of the desired product. Thus, coordination is vital. This forces stakeholders to create software according to user requirements and market needs.


Avoid this simple mistake by setting up proper communication protocols. Use project management tools to track and manage results.

5. Ignoring DevOps 

The DevOps philosophy has become synonymous with the startup world. DevOps brings together the development and operations teams to create a cohesive internal organization and build on agile methodologies. 


The goal of DevOps is to shorten the development life cycle, speed up application deployment, automate tasks, improve security, and get valuable feedback much faster. 

6. Creating too many features 

Feature sprawl is a software technology term that describes a period of time in production when development teams are burdened with too many feature requests (whether from stakeholders or internally), creating backlogs with too many half-done features instead of favorites. Functional sprawl can happen to businesses of any size, but start-up organizations are especially prone to it because they have a big vision that doesn't necessarily scale.


Developers often try to cram as many features into a product as possible and appeal to a wide range of users. However, new software should be intuitive and easy to learn. When too many bells and whistles are involved, it becomes much more difficult to improve. To shorten the learning curve, focus on the problem and solution, and do your best to hone your minimum viable product. Once you feel confident about what you've created, you can start adding more features.

7. Wrong choice of a development team

As the old saying goes, your business is only as good as the people who run it. When you're looking for web and mobile developers to join your team, it's important to go beyond resumes. Every engineer works with the technology they like, and a common mistake among start-up organizations is to hire coding "ninjas" who are adamant about their preferences. These "ninjas" can be very skilled in a narrow set of technologies, and it can be difficult for them to switch to other types of technologies or introduce something new.


In addition, they may be more interested in their own self-development than in ensuring the success of a startup. Throughout the hiring process, make sure you ask questions that help you see the difference between a developer who wants to grow with you and someone who wants to add something to their resume. This helps to look for developers who have some experience with other startups.

Develop and profit

Understanding the challenges, options, and best practices of building software products at startups is essential. In doing so you'll create a practical, efficient, and timely development strategy that builds products that meet market needs and generates a large and loyal customer base.


After all, creating exceptional software is a talent that not all developers possess. Hence, finding the right people is a race. In addition, specialists are hard to find and expensive.


Cost is the main reason why startup owners hire inexperienced developers. However, ignoring the human aspect of software development is a huge mistake. Don't rely solely on paper credentials, but explore the developers' years of experience.


In dealing with people, most startup owners are always looking for the technical capabilities of developers. However, behavioral aspects are equally important. After all, software development is all about time management, meeting deadlines, and collaboration.


Ignoring the importance of hiring the right people leads to disaster. The competition is getting tough. Thus, hire competent resources who can understand the viability of your ideas.

Robert Krajewski

Robert is a co-founder of Ideamotive. Entrepreneur, who with passion spreads digital revolution all around the internet. Mentor and advisor at startup accelerators. Loves to learn and discover new business models.

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