6 lessons from software start-ups

Every large tech corporation began as a small start-up at one point.

Looking for the path to longevity? Then act like a start-up.

The latest wave of start-ups may well be a harbinger of widespread market disruption, but their methods and strategies could be worth copying.

Here are six things software start-ups do that any business can learn from.

They evolve rapidly

Many small businesses do the same thing forever, but it’s rare to find a start-up that still offers only its original service even a handful of years after starting. Fierce competition and fickle customers mean start-ups are always improving and launching complementary offerings, which sometimes go on to supplant the original offer.

Ash Conway, the founder of the software bug finding start-up Bugwolf, says his company has changed its proposition several times.

“We quickly realised our model was in fact about optimising teams, reducing costs and risk, and speeding up the software testing process,” Conway explains. “These discoveries were only possible because we listened to our customers and were open to testing new discoveries and pivoting where it makes sense.”

Rapid innovation is essential. Entrepreneur and investor Tony Surtees says the three defences are to get big quickly, build customer loyalty, and constantly innovate.

“A consistently growing ongoing customer value proposition is the most sustainable, when you preserve your original promise and add new value,” Surtees says.

They measure everything

Start-ups are fanatical collectors of data. They closely measure and monitor online customer behaviour such as where they spend time on a website and what they browse, as well as what they buy. Trends revealed by the data will lead them to change tack accordingly. Start-ups also innovate ahead of customer needs, but kill ideas quickly if customers are unimpressed.

Google Analytics is the standard tool for monitoring customer activity online, while social media monitoring tools such as Hootsuite and Klout give understanding of what customers are saying through social media. SurveyMonkey is also popular for soliciting direct feedback.

By collecting and analysing web data and feedback a business can determine what is keeping customers loyal and where to direct its future efforts.

They are not afraid to fail

The rapid innovation path followed by start-ups inevitably means they will come up with some ideas that don’t work. It’s no surprise then that many of them talk about the importance of embracing and learning from failure.

Mick Liubinskas is a strong advocate of “flearning” – learning from failure. The entrepreneur-in-resident with Telstra’s muru-D start-up accelerator says it’s important to develop a culture that does not penalise people if their ideas fail, and instead rewards them for what they learn.

“To maintain a good position as a start-up you need to be a fast learner,” Liubinskas says.

They make fast decisions

When start-ups are developing software they often use a methodology called “agile”. This is based on the idea that rapid development cycles using cross-functional teams are more successful than drawn out, heavily documented processes.

According to Jason Lim, an associate with Adventure Capital Venture Management, this aligns well with the nature of start-ups.

“Start-ups need to be iterative and move quickly, and need to test their solutions with customers,” Lim says. “Products constantly evolve based on customer feedback, and start-ups need frameworks that can help them build products faster and better.”

“To maintain a good position as a start-up you need to be a fast learner,” Liubinskas says.

The principles of agile can also be applied to other business functions. It’s not unusual to find marketing and legal teams at start-ups organised along agile lines, using agile tools such as visual task boards to track activities.

They collaborate

Small teams and agile principles mean software start-ups are heavy users of cloud-based software as a low-cost way to share ideas, track progress and complete tasks as groups. These tools become essential as start-ups grow larger and spread internationally.

Lim says popular tools include HipChat and Slack, and Google’s Gmail for email.

“Gmail is used by almost every start-up I know, while Office365 is the other alternative,” Lim says.

They only do what they have to

Small teams and limited funding also mean start-ups are reluctant to hire anyone they don’t have to. Instead they turn to freelancers and outsourcing services such as Freelancer.com and Elance to get non-core tasks done.

Just as most businesses outsource their accounting, start-ups outsource functions such as HR and payroll management, and use online marketplaces such as 99designs or DesignCrowd to create graphics and even chunks of their websites.

Staffing services such as Nvoi and Sidekicker are useful for finding pre-vetted short-term staff for sales, merchandising and more. Ride-share service Uber uses Sidekicker to access temporary staff who can help train up its drivers.

The director of international business at Freelancer.com Sebastián Siseles, says his company’s services are used by start-ups including Showpo, Gadgets Boutique and Airtasker for everything from transcribing foreign conversations to creating websites and graphics.

“Theoretically a start-up can outsource almost everything,” Siseles says. “I don´t think there is an upper bound on how much can be outsourced if their business is completely service-based.”

The desire to keep teams lean also leads start-ups to look for manual processes that can be automated through software. Because of this they tend to be heavy users of information capture and tracking tools, such as customer relationship management and support management. 

Read next: How to be a better decision-maker

October 2021
October 2021

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