To kick-off book three in the Startup Pro series I’m going to relay a real-life startup story that demonstrates the “under the hood” mechanics of how I helped a small group of tech creators to quickly define and develop a simple idea into a profitable QSS micro startup over a long weekend. Starting a new software service-based business may seem impossible to do in a single weekend but remember as a micro startup the primary function is to build out enough of a service to prove the initial hypotheses and assumptions about the idea, including the problem to be solved, the target audience and the proposition. This ad-hoc tech startup was definitely not looking to launch an all singing all dancing product out of the gate. That would be the natural evolution once they had validated that the initial idea had some legs, was financially viable and was worth the investment of time, money and effort.
Leveraging cheap and accessible technology with a global virtual workforce make it easier than ever to start transforming even the most basic of ideas into a tangible reality. Using the QSS (Quick, Small and Simple) method your boutique startup business really can compete alongside the major players in just about any market. Did you notice that I said compete alongside? I did not say compete with. The difference is a subtle but important one. Many new creative entrepreneurs make the all too common mistake of trying to challenge the big and established market players head-on. They make the wildly incorrect assumption that a tiny piece of their market will be enough to sustain their fledgeling new enterprise and produce high annual revenues. It should not come as any surprise that most new businesses using this strategy quickly get buried, usually on price or reputation.
How long do you think it would take for a big and established organisation to price you out of the market, or replicate what you do, if they felt so inclined?
Could you really compete with Microsoft, Apple or Walmart? More to the point, why would you want to try?
What you can do, however, is to work alongside existing organisations within your chosen industry by finding discrete unserved niches on the periphery of the market that are too small or unviable for the big players to service or innovate. You can often achieve this by coming at things from an entirely different angle such as doing it faster, cheaper, quicker or more conveniently, for example. You could even create entirely new markets where competition is minimal (often referred to as blue ocean thinking). Don't forget the power of keeping things quick, small and simple. As a small enterprise agility is one of your most valuable USPs.
As I mentioned, I helped a small group of friends quite literally develop, setup and launch an online software as a service business over an Easter weekend and I mean quite literally going from a few notes and rough sketches on a Thursday afternoon to signing our first pilot customer late the following Tuesday. Here’s how.
Startup Pro Insight: Our tech startup team focused on one simple idea. Only after the successful launch of the Minimum Viable Product and the elicitation of early customer feedback were additional features and functionality discussed, let alone developed and implemented.
The idea was simple. We wanted to develop a secure enterprise way for small and medium-sized businesses to securely store, archive and backup their most critical data online. Ok so lots of companies do that, and as I mentioned earlier competing like for like with large and established market leaders is often not viable, but the idea had a simple twist that no one else was doing. We already knew that a growing number of companies were offering cloud-based backup, storage and archiving services, so a healthy market existed, but we had to come up with a simple soft innovation, a unique twist that would differentiate us from that commodity market.
We knew from personal experience and validated research that whilst companies loved the idea of simple, cheap and easy cloud data storage and backup services, they shared a common concern. Their main worry was, of course, security. Remember this was some years ago and security solutions for cloud services were very much in their infancy at that stage. What if the cloud backed storage systems were hacked? What if compromised data got out into the wild? What if personally or commercially sensitive data was held to ransom? All of these scenarios had happened previously and often resulted in detrimental financial repercussions, not to mention the natural loss of trust and huge reputational damage potential.
We focused our efforts on the most important problem to be solved, which in this case was addressing clients’ security concerns. The initial USP would be to offer a robust online storage and archive platform that would provide better security than any other service or product could deliver at that time, and in doing so would instil the much-needed trust and buying confidence from the customer’s perspective. This USP was enhanced further with the addition of a simple guarantee which I will discuss in more detail later.
After a couple of hours of intense whiteboarding we came up with a simple idea that would use a security principle that had been employed within the banking industry for centuries. This simple modern-day twist would deliver the capability to provide a backup, storage and archiving platform that was 100% secure. In fact, the system would be so secure we could offer a cast-iron guarantee to our customers against data loss or compromise on the platform, something that no one else was able to provide at that time.
How that level of security was achieved is, of course, the “secret sauce”, and besides, the mechanics of the USP are not important in relation to how our team got it up and running so quickly. So how did we go about getting a minimal version of the bare-bones functioning system up and running in just a few days? First and foremost, we had defined a crystal clear vision of a solution that solved a single validated problem, in this case, online data security. Even better was the fact that it was an emotional problem, with big risks and impacts. We had validated that organisations were keen to leverage cloud-based services for data storage and archiving, but that concerns about security were preventing them from using many of the established services for anything more important than personal pictures, documents and items with no real commercial sensitivity or inherent criminal value. All we did was develop a simple USP that solved that problem, and by doing so provided a distinctive competitive edge.
Notice that our team were not setting out to revolutionise or reinvent the established storage industry, we were not even looking to change how customers used it. We were not disruptors or even real innovators, we were just solving a simple emotional obstacle that was standing in the way of mass adoption and usage. We were confident that we had access to a healthy and established market already consuming similar services, and we now had a great way of differentiating ourselves in the eyes of our customers, so we started to get creative.
We quickly designed a technical solution of what the backend technology infrastructure would need to look like for the early version. This included details such as how many servers would be needed, what they would need to do and how they would be configured to do it. The design also covered very basic network, access control and traffic flows.
One important point to note here is that our main USP, the unhackable data security idea, had the potential to be highly complex. We had already established that we would not be able to design, test and roll out all the required security features and functionality over a long weekend and besides, it would need to be capable of scaling. What we could do at this early stage, however, with no customers, was to complete all of the necessary security aspects of the service manually. This decision was made on the assumption that the initial service would only be open to a handful of early pilot customers to begin. With this being the case, we could easily carry out the background grunt work ourselves. The main automated security functionality could be developed later down the line, once we had validated the viability of the service and its operating model by cajoling enough customers to actually use, and pay for, the early version of the service.
By the way, it's perfectly acceptable not to have all of the functionality available in full and to complete some aspects manually if you have to in the early days. As long as you are open and honest with your pilot customers and manage their expectations accordingly, they will be happy to assist you in testing, validating and developing your products and services further. And so, deployment began. Our team used a well-known cloud provider to provide virtual compute resources and built a simple five host virtualised server environment for the storage application, storage gateway and storage request system. Early customers would manage their environments via a small lightweight web application to access the gateway to manage their storage.
At a later stage, we would look into developing a more comprehensive range of mobile apps for remote management, and a more refined user-friendly desktop version, but at that point it needed to be kept Quick, Small and Simple. At the time we had no additional bandwidth for luxuries or creep in scope or requirements, something we had to work very hard at to keep in check. It's important to accept that creeping scope is an inevitability of early startup evolution. As you work on a project you start to realise the potential of what you are doing, your excitement mounts as new ideas flourish and you naturally want to act upon them and incorporate them into your early product or service iteration. I urge you to stay disciplined and focused on developing only the core functionality that delivers the primary value, and nothing else. Ring-fence the functionality and features of your early version and bank new ideas for future versions.
Once we had defined what needed to be done, we quickly engaged a great outsourced developer through a mutual friend. See how you can leverage your network? He wrote the initial web interface in just two days, including testing. In parallel to this activity our team got busy putting together the core (minimum) secure storage and backup platform. Now remember, it was essential that we kept this solution as simple and agile as possible. Costs had to be kept low as we had little validation that this idea would even work, had a viable customer base or had enough economical return to cover costs at this point, let alone whether it could generate a profit.
It’s worth noting that we did not spend valuable time carrying out pointless polls or surveys, nor did we set up lengthy customer focus groups. Instead, we invested our time, effort and money on getting the base system up and running in order to test our ideas and substantiate our early assumptions. Once again being able to quickly test your ideas, validate assumptions and gauge important customer feedback, enabling you to iterate the offering along the way, is at the heart of the successful startup. Your role is to think and act like a scientist at this point rather than a business owner, that comes later once you have validated that you have a business.
Once the platform and application had been put together and tested, a simple product landing webpage was created where a simple four-page information and pricing brochure with discount offer could be downloaded in exchange for a prospective customer’s email details. We completed some basic user testing to ensure that the end-to-end systems worked as expected and then hit social media with some broadcast marketing. We also contacted friends, colleagues and associates in our networks to help with the initial launch promotion. In addition, we engaged with a number of technology service providers who may be interested in offering the platform as a white-labelled service. Several target customers were contacted to try and get them to use the platform freely as early adopters. By 6pm on the following Tuesday, three potential paying customers were trialling the system, and by the following Wednesday, the platform had two full paying customers.
Keep in mind that at this early stage the platform had three very basic storage capacity options which were paid for via a simple monthly subscription, initiated using PayPal buttons. Once again, keeping it as simple as possible. Yes, honing needed to be done, tweaking was a daily occurrence and we had some challenges fulfilling customers’ requirements in the weeks that followed, but it was up and running and had gained enough initial interest and revenue to justify the development of additional functionality and refinement of the user experience.
At this early stage, it was no more than a down and dirty bootstrap experiment, it certainly was not a business. It took five people some hustle and just four days to stand up. It cost less than $1,000 to start and was generating a small amount of revenue within about ten days.
The point of relaying this story to you is not about what was done and how, it’s more to highlight that this type of startup would have been near impossible to bring to fruition just a few short years earlier on a startup scale, and would have likely cost ten, twenty or even a hundred times more to do it and taken many months to achieve.
It's really important to appreciate that at the time of launching the offering, the platform and the technology were really simple. No time was wasted on the detail stuff that could be manually set up, implemented and delivered. The focus was on the stuff that needed to be rock solid such as the server platform and the management web application. As I mentioned, our team did much of the user signup and security aspects manually. Later these were automated, but it made little sense to try to automate them early on until we knew they worked and that we had a viable service and an interested audience who would be willing to pay for it.
If we had taken a more traditional approach we could have done a whole heap of work, and burned developer time and money, all for nothing. Using the QSS (Quick, Small and Simple) micro startup approach we got the opportunity to see what we really needed to do in order to meet customer needs. We used a simple usage model for costing and set up PayPal to cope with monthly payments. Again, in the early days, we worked out the customer usage manually and even prepared invoices by hand. Yes, it was painful, and mistakes were made, but it was quick and simple to do until we knew we had something with the potential to be commercially viable in the long term.
As it turned out the proposition was a slow burner within the intended market. Early general cloud adoption remained tentative, and data storage and backup even more so. After some months of testing various related proposals, our team discovered a much greater need within the financial industry, and we consequently pivoted to focus solely on that niche customer base.
Today the company has a select number of premium high-paying customers who use the service, interestingly not because it's cheap, because it's not, but because it's 100% secure and they have complete peace of mind that their most important data assets are backed up, stored and archived securely and are backed by the unhackable guarantee.
Business update: the company is in the midst of evaluating several offers from large storage vendors, who are interested in incorporating the service into their own product portfolios, as well as considering a number of acquisition offers.
Startup Pro Insight: Technology should be at the forefront of what you do and how you do it. It’s there to be used and leveraged to make the lives of you and your customers quicker, simpler, more cost-effective and, most importantly of all, more profitable.
© 2019 James Kingham | All rights reserved.