If you've ever watched Shark Tank, a well-known American reality TV series, startup founders can pitch and present their business idea to investors even if they don't have a full-fledged product. What they have is an initial version of what they want to drive investments for. That's where a minimum viable product (MVP) comes into play.
An MVP can play different roles in a business's transformation life cycle. Whatever the nuance, the goal of the MVP is the same: drive down risk, reduce cost, and save time. It means you only need to build the barebone version of your product that can be used to validate critical hypotheses and determine whether to continue investment.
From my point of view, I will cover in this article 7 takeaways from building MVPs for startups. I also include practical examples:
- Well-known legends – legendary stories of great businesses that are currently rocking the world of tech but started as MVPs.
- Success stories – less renowned yet remarkable examples of startups who built MVP and won the world over time.
- Unsuccessful startups – some stories about startups that failed due to a lack of MVP validation.
Let’s find out.
7 takeaways from building MVPs with practical examples
Define a core value and a specific niche
When you kick off a new project, you might be excited and eager to build it right away. Yet, it's essential to keep your business and development team on the same page. Thus, it would help if you defined core values and a specific niche for your product in the initial days. This can allow you to be on the right track and further your product that achieves product/market fit.
Let's take a look at how Amazon did it.
When Internet connectivity was limited, the founder of Amazon, Jeff Bezos, envisioned it as a worldwide eCommerce store. At the time, people didn't trust the Internet and had no ideas about a fluid supply chain concept. To prove eCommerce's feasibility and future growth potential, he decided to build an MVP.
He listed the top 20 products that could be effectively marketed on the Internet. Then, he narrowed it down to five items and eventually landed on books as the most marketable product online. His team developed a solid online ordering and last-mile delivery process to drive costs down while maintaining high profitability. The first version of the Amazon.com website was also heavily optimized to put the spotlight on books. Within a month, he was doing $20,000 in sales every week. Despite his MVP's basic design and minimal feature set, the original Amazon platform helped Bezos to validate his value proposition. Over time, Amazon had a reliable supply chain network that could replicate other products' categories to become the "everything store" now. According to the National Retail Federation and Kantar, Amazon is currently the second-largest retailer in the world.
Via this case, we can see two focused elements are: validate their value proposition and define a specific niche. By sticking to these core elements, Amazon could reduce its product development costs and distribution costs. Starting small and scaling smartly is also the key for Amazon to achieving that broader vision.
Keep your MVP minimal
Building the first version minimally enables startups to ship their MVP to the market quickly, gather users' feedback, and iteratively fine-tune their product as well as the whole business model. You can explore two following examples of how Uber and LinkedIn have become successful businesses.
Uber is also a good example of the MVP model. Back in 2008, due to frustration with the overpriced taxis and the lack of affordable alternatives, Travis Kalanick and Garrett Camp came up with the idea to help locals and visitors find a taxi easily at a lower cost. It started as a minimal mobile interface with two core functions – connecting them with cab drivers and making payments via credit cards at a lower price. Originally dubbed UberCab, its services were first tested in New York by the founders and their friends with only three cars in 2010. Then, it was officially launched in San Francisco. Once they validated the market, they could build the ride-hailing app with more advanced features, like driver location tracking, fare estimation, fare splitting, automated payments, linking to mobile wallets, and much more. Today, Uber has become the most successful on-demand apps of all time. You can request a ride from the Uber app, and a ride will be with you in a flash in more than 600 cities worldwide, spread over 65 countries.
The reason why Uber's users widely accepted its MVP is that Uber started lean and offered two essential features with the lowest resources in a short time. It helped two founders maintain the minimum effort, resources, and costs.
Another great example of the Lean Startup approach is the LinkedIn story. Its founder, Reid Hoffman, started LinkedIn by building a barebone of its current product. He also famously said: “If you are not embarrassed by the first version of your product, you’ve launched too late”.
In late 2002, when LinkedIn was launched, it was only a website with user profiles, and email invites connecting with people you know. At first, growth is slow, with as few as 20 signups on some days. Early adopters even complained about poor search and limited functions.
Figure 1: Early adopters’ feedback for the first LinkedIn’s MVP
Based on user feedback in the initial MVP, LinkedIn growth accelerated with address book uploads. It also introduced new features like Groups and partners with American Express to promote its offerings to small business owners in 2003. In the same year, Sequoia Capital led the Series A investment in LinkedIn. Since then, LinkedIn quickly grew and reached 1 million users in March 2004. From 2005 to 2007, it continuously scaled up the product, focused on building advanced features, and launched premium services. After achieving its first month of profitability in March 2006, LinkedIn launched its mobile version officially in February 2008. The continuous development and product/market fit search led them to success and is used by 660+ million users in more than 200 countries and territories worldwide reported by Influencer Marking Hub.
Address customers’ pain points
Once you've identified your business goals and your market, it’s essential to define your customers' personas and articulate their pain points. You can conduct user interviews to deeply understand user needs, behaviors, and what customers expect in an ideal product. These interviews enable you to discover what customers look for when buying a similar product. Now, go through the three following examples of how the MVPs have met users' needs.
First, Etsy is an American eCommerce company focused on craft supplies and vintage items. In 2005, a group of close friends, including Chris Maguire and Haim Schoppik, started developing an online crafting website. On a crafting community forum, they saw multiple members complaining that eBay's fees were expensive and difficult to use. With this in mind, they built a highly successful yet super simple MVP approach that helped anyone register an account quickly and sell things they'd produced.
The founders of Etsy did comprehensive research on eBay's audiences and started to create the initial version in two and a half months. Despite its limited functionality and rudimentary design, thousands of sellers signed up within days of launch. This approach allowed the founders to swiftly validate their idea and solve the previously mentioned problem for buyers while driving down the development costs. They could then allocate their leftover budget to iterate and scale the website. According to Statista, as of 2020, more than 4.3 million merchants were using Etsy to sell their unique vintage items and handcrafted goods to a vast community of buyers all over the world. Etsy has become a go-to website for folks looking for one-of-a-kind crafting presents.
The critical takeaway from Etsy's MVP is they targeted solving customer pain points who complained about eBay's expensive cost and got trouble in use. By researching the market carefully, the founders built an MVP that served the user goals as effectively as possible. As a result, sellers could register quickly and save operating costs. This MVP helped meet the users' needs and validate their assumptions to become one of the leading online marketplaces.
Read also: How to build an online marketplace platform.
The second one is Instagram. It embarked on its journey in San Francisco as Burbn, a mobile location check-in app created by Kevin Systrom and Mike Krieger in 2010. Soon the founders realized that Burbn was too similar to other popular apps, like Foursquare. Early adopters also found the app confusing, and all features weren't used, leading to poor user experiences and failure. Systrom took the Burbn MVP, reviewed the user feedback, and defined one factor all users loved - easy photo-sharing. "We went out on a limb and cut everything in the Burbn app except for its photo, comment, and like capabilities. What remained was Instagram." Systrom said. They have iterated on their MVP and have been developing their app until now.
What you can learn from Instagram MVP's success is that they aimed to target customers who love photo-sharing. Once uncovering the users' pain points and prioritizing them, Instagram's founder built an MVP to solve their users' needs and create good user experiences as much as possible. Therefore, when shipping to the market, Instagram made many users excited and satisfied them.
Thirdly, it was Singulution, a sales & business management solution for multi-location vendors. As a former software engineer at a Silicon Valley company, Hunt Burdick decided to build Singulution. However, after ten months of work and burning $30,000, he couldn't validate his idea and ran out of money, leading to being eventually absorbed by another startup.
At the interview conducted by Failory, the founder of Singulution shared his insights and lessons learned from his failure.
- First, during its initial days, Burdick built what he thought people needed, neglected the market search, and solicited user feedback too late. At the time, their competitors were also established and too far ahead for them to catch up.
- Second, rather than prioritizing building core features, he developed all features in secret. Although he thought it was pretty advanced from his technical perspective, the number of features and the system's complexity made building the product difficult.
These mistakes cost them large amounts of time and money, ultimately leading to their failure.
He also advised that the right strategy would have been to build a minimal viable product, target a small essential feature set and then iterate on user feedback. Besides, customers are the core of any business. Without them, you can't run a successful business.
Figure 2: The current version of Singulution
Validate your business idea
The primary purpose of rolling out an MVP is to assess whether you should go ahead with your idea. The best approach is to uncover and validate the underlying assumptions that fuel your concept. In his book, The Lean Startup, Eric Ries wrote about how to choose what to test when designing an MVP:
“When one is choosing among the many assumptions in a business plan, it makes sense to test the riskiest assumptions first. If you can’t find a way to mitigate these risks toward the ideal that is required for a sustainable business, there is no point in testing the others.”
We will look through the three successful businesses that have validated their MVP and won all over the world.
Airbnb is an on-demand hotel booking app starting from scratch with an MVP. In 2007, two schoolmates Brian Chesky, and Joe Gebbia, moved to San Francisco to start a business. Since they couldn't afford the rent for their apartment and noticed all hotels were hocked, they decided to offer cheap accommodation to attendees of a conference nearby. They took some pictures of the apartment, uploaded them to Craigslist, and acquired three paying guests. This not only solved their own rental problem but also accommodated the attendees who had failed to book hotels. Realizing the market need, the founders built an MVP and launched the website quickly to validate their idea. Airbnb focused only on providing the essentials and testing them with the founder's own resources by building, measuring, and learning at the initial stages. This helped the founders collect user feedback and plan a business on a grander scale. Airbnb has one of the most successful online marketplace platforms and is valued at $18 billion.
When you dream of a successful product without execution, that's only a business hypothesis. Given that, an MVP is a powerful tool that enables you to validate your concept quickly and understand your client's wants. In the case of Airbnb, they delivered a minimum viable product to validate whether users wanted to be accommodated in apartments instead of booking luxurious hotels. Since then, the founders could gather users’ feedback and evolve the product.
Here's one story you probably weren't expecting. It's one of the prime examples of an MVP created by Apple: the first-generation iPhone.
Back in 2007, Steve Jobs introduced the original iPhone. According to reporters, it was flawed and incomplete, lacking some features found in the most basic phones at the launch time. However, the initial version of the iPhone was indeed a "revolutionary mobile device." Apple wasn't trying to build an excellent fully-featured product at first. They were developing a product that included the core features to validate multiple assumptions:
- Will users want to try an on-screen keyboard?
- Do users need/want access to the full internet on a mobile device?
- Will users adopt using the browser for applications instead of loading apps onto the device like previous computing apps?
- Will users adopt one device for everything? Or would they instead carry different devices? (A phone, an iPod, etc.)
After selling 1.39 million iPhones, they moved on to the next stage of the MVP process, iterating on their original product and releasing the iPhone 3G in 2008 with advanced features like larger base storage, better battery life, support for third-party apps, etc.
The primary purpose of iPhone's MVP is to excite, attract users, and spark conversations about what their product might be able to do next. Steve Jobs used MVP to prove users' needs and adopt his product. Early adopters were critical to the iPhone's success. When they tried out, promoted the product word by word, and gave actionable feedback, Apple's team could build up ideal products in the next release. Technophiles have lined up to launch the iPhone 2, iPhone 3, and even the latest iPhone 13 in 2021.
Figure 3: iPhone's MVP (1st generation) and the latest version of iPhone
One online streaming service that has taken hold of the world in video form is the famous Netflix. When Marc Randolph and Reed Hastings first heard about DVDs released in the United States in 1997, they tested the idea of selling or renting DVDs by mail. Afterward, they noticed the technology shift, and users enjoyed online streaming. By applying market knowledge, they built an MVP that lists the movies and provided a registration form for people to enter their details and rent out the movie they wanted. Reed Hastings and his co-founder zeroed in on this idea to validate a few risky assumptions:
- Would people be willing to pay for convenient access to movies?
- Instead of going to Blockbuster or anywhere else, would they prefer getting it shipped to their homes?
- If they did prefer that, it naturally followed that they would like to have video streamed to them on-demand with the web.
When the idea was validated, the numbers reached 300,000 users by 2000 and grew to 4.2 million by 2005. Netflix iterated and improved its MVP to become one of the over-the-top content platforms and production companies. Users can watch pretty much limitless movies and series from anywhere that has an internet connection.
The MVP helped Netflix validate the riskiest assumption - bring the smooth delivery to end-users. The founders also utilized the MVP to gain feedback before scaling.
Release with a small group
Once you have completed your MVP, it’s time to ship it to small groups known as early adopters. You can conduct user testability and collect valuable feedback from early adopters. This enables you to understand how your solution works for customers and how to improve it.
How Twitter did it.
Twitter was created in 2006 by a group of engineers led by Jack Dorsey. During one of its internal hackathons, his employees at Odeo came up with the idea of an SMS-based messaging platform for the team. When releasing an MVP to the market, it was initially named "Twittr." Odeo employees loved the solution and used it so often that they eventually made the platform public in July 2006. I think that in 2006, Dorsey couldn't probably imagine how successful his idea would become. In 2007, it achieved great success at the South by Southwest Interactive conference. Daily tweets rose from 20,000 to 60,000. After that, Twitter's popularity exploded, and its user base grew exponentially. These days, the idea has evolved greatly – Twitter is now one of the significant sources of news, celebrity rumors, and jokes. Validating the MVP in a small group of people can help startup founders stay focused on solving specific problems and collect actionable feedback from early adopters.
“Make every detail perfect and limit the number of details to perfect.” - Jack Dorsey shared his thought about building Twitter's MVP. Evan Williams, Twitter’s co-founder, also shared the same opinion: “Any time you're building a product, there are a million things you want to add to make it better, but the fact is the vast majority of them will not impact your success. It's more important to make those decisions well than it is to figure out how to increase productivity, so you can add more and more.”
Like Twitter, the initial target users were its employees, and they only wanted to serve their internal purpose. Testing in small groups helped Twitter collect user feedback and solve specific problems. When their employees were satisfied with the product, the founder was confident of extending the customer personas and evolving the product for the public.
Spotify is one of the renowned global leaders in the music industry today. However, how it reached the pinnacles of success is an exciting story of digital innovation. Back in 2008, when Daniel Ek and Martin Lorentzon identified the opportunity in the music industry. Spotify was developed to validate critical assumptions:
- People prefer to stream (rather than own) music.
- Labels and artists are happy to allow individuals to do that legally.
- Fast and stable online streaming is technically feasible.
Their team started their MVP process by tackling the third assumption and tested it on themselves, family and friends. After realizing how the product would be potential and promising, they decided to extend the beta release to influential music bloggers in Sweden. These music bloggers loved the experience and quickly spread the word about this great new desktop app. Spotify began to gain popularity and was made available widely.
When it comes to user acceptance testing, validating in different environments like the founders' friends, families, or influential music bloggers in Sweden helped Spotify identify any significant issues with the MVP that must be fixed. The founders also used the results of the experiment to course correct Spotify better.
Increase users’ awareness by promotion
When many products have the same ideas, there should be an incredible promotion strategy to spread the word and stand out among competitors. The marketing plans outline the messaging and marketing strategy to get customers to adopt the new product effectively. What's more, you can use non-functional MVPs, such as creating a promotional video, building a landing page, or launching your product on a crowdfunding platform. Marketing your product in the right way can enable you to gauge users' interest and stand out in a crowd.
Here is a classic example of a successful business that developed a non-functional MVP. Dropbox approached their MVP a little differently from the MVP examples we've discussed so far.
Drew Hudson identified that file storage was a common problem back in the mid-2000s. He created a simple video that explained clearly how Dropbox allowed users to manage files scattered across multiple devices placed in a single place on the internet. He spent $2,000 on ads, and in only one night, the number of early adopters reached 75 thousand, according to TechCrunch. Once they realized the MVP's huge potential and attracted the interest of Silicon Valley investors, they released the product to the market. They generated the first million active users in under ten months.
Building a non-functional MVP saved the founder a couple of thousand dollars in development costs and got accepted to Y Combinator. In addition, he got a chance to connect Drew with his co-founder Arash Ferdowsi who saw the video on Hacker News.
Although a non-functional MVP allows startup founders to validate user intent, they don't validate user actions. If you come up with any ideas about a completely new product or a new market, you can utilize this approach. It can help you gather feedback and arouse customers' interest before developing a full-fledged product. Otherwise, you need to build an MVP to validate user action directly.
We can’t talk about successful non-functional MVP examples without mentioning Buffer. In 2010, British entrepreneur Joel Gascoigne stumbled on an idea for the social media scheduling application. At that time, he was already an advocate of Eric Ries’ Lean Startup principles. And he wanted to adhere to its principles as much as he could. First things first, Gascoigne created a landing page to see whether someone at all needs such an app. By iterating, learning from feedback, and showed 3-pages pricing options, he was able to verify whether people were ready to pay for the solution. After reaching a critical mass of registrations, Gascoigne built and designed the first version of the application software over seven weeks. The initial version of Buffer contained limited features which only allowed access to Twitter. Four days after the software’s launch, Buffer gained its first paying user. A few weeks after this, users reached 100 and then multiplied to 100,000 users within nine months.
Figure 4: The first versions of Buffer's non-functional MVP
What you can learn from Buffer is, if possible, use the promotion to test before you even start coding. There’s a huge gap between “I will buy your product” and the actual purchase. One hundred people who have signed up for updates likely won’t turn into 100 customers, but it shows that they’re interested in your idea. Yet, Buffer was enough to attract some users, validate the idea, and then scale.
One startup had failed due to a lack of promotion and MVP validation. Everpix was a fantastic mobile photo service that allowed users to access their entire photo library and easily upload iPhone photos. Instead of developing an MVP to validate the market, Pierre-Olivier Latour and Kevin Quennesson built a full-fledged product. Latour said, "At that point, it had been one and a half years since we started. Which is a huge amount of time for a startup to have a full-featured product." When shipping the product to the market, the software was fast, the design was clean, and the service was simple to use. However, they neglected to market the app, which resulted in extra efforts later and the loss of chance to carve out a market niche. Especially when app stores are highly competitive, and even the best apps require promotion. While other successful photo apps were attracting millions of users, Everpix had attracted fewer than 19,000 signups by March 2013. Eventually, the app shut down a year after launch. That's what happened to Everpix.
The founders admitted that they made mistakes along the way.
- Firstly, they spent too much time on the product without building an MVP, as well as not enough time on growth and distribution.
- Secondly, the initial pitch deck they put together for investors wasn't different from others.
- Finally, they marketed too late. They failed to effectively position themselves against tech giants like Apple and Google, which provide relatively robust and mostly free — Everpix alternatives.
Build unique selling propositions (USPs)
Customers are constantly overwhelmed with multiple options, and they want to quickly understand what makes one product or brand different from another. Learning how to position yourself and your products the right way can emphasize the differences and stand out among competitors. As a result, all entrepreneurs need to establish a unique selling proposition (USP) to drive their branding and marketing decisions. Some specific marketing offers include a 10% discount, free shipping, 24/7 customer support, or a strong return policy, which aren't USPs. Your USP plays to your product's strengths and base on what drives your brand or product exceptionally valuable to your consumers.
Below are the two following examples of how Facebook and Stripe have built USPs.
According to the Independent, the initial name for Facebook was "Thefacebook." Mark Zuckerberg created the application as a universal directory for students at Harvard University. It became so popular that it expanded to three other prestigious colleges – Yale, Stanford & Columbia, only a few months later.
Mark and his team focused on staying connected, adding more friends, and expanding the network. The idea for Facebook was nothing new. At the time, MySpace was technically the first well-known social networking platform. Although Facebook was a late-comer to the social networking market, it created distinct and straightforward features that addressed users' pain points, persuaded target audiences to use their product, and made their business stand out among other companies in the market. These features had never had in MySpace before:
- Messaging: send private messages to a particular user that others can not view.
- Wall: post and share messages with friends.
- Photo: share and upload their albums for their friends and family.
- Status: keep their friends and family updated about their daily whereabouts.
- Gifts: send purchased virtual gifts such as flowers, cakes, and other items.
- Pokes: interact and virtually “poke” other users.
One other crucial factor that made Facebook succeed and spread the world rapidly was its development in 140 different languages, while MySpace was only used in 15 languages. These features helped Facebook create good USPs, attract users' interest quickly, and spread Facebook's message based on them. With significant gradual improvements, Facebook eventually rose to fame and became a global social network sensation. Today, Facebook boasts a whopping 2.5 billion monthly users. Not only is it the most popular social media platform on the planet, but it also owns Instagram & WhatsApp. What you can learn from Facebook's MVP is to execute your vision in a way that outshines your competitors and solidifies your foothold in the market.
The last example of building an MVP is Stripe. It's currently one of the most accessible tools to set up and integrate online payment processing. Let's get back to their MVP's story. John Collison and his brother Patrick began debating why it was so challenging to take payments online in 2010. For the first six months, they concentrated on learning everything about the industry and the difficulties users faced with the solutions available (PayPal). They shared the concept with friends and family and observed how they reacted to it. The original version, called /dev/payments at the time, wasn't much to look at.
Figure 5: The first version of Stripe called /dev/payments
Despite its basic design and limited features, within two weeks of building their initial MVP, they had their first transactions with the 280 North company in the Y Combinator. They identified that they could greatly benefit from big investors’ credibility as an online payment startup. They built a full-fledged product that differentiates them from other competitors. As a result, it's considered a much more powerful alternative to PayPal. Stripe also raised a few rounds from VCs and quickly grew into one of the US's largest mobile payment processing companies, with big clients and partnerships with Visa, Apple, Facebook, and Twitter.
There are several reasons why Stripe has success.
- First, they thoroughly researched their biggest competitor (PayPal) and looked for gaps to potentially introduce their brand differently.
- Next, they make a list of all the potential differentiators of Stripe and what they sell. Take the founders' information and shift through it to single out their strongest USP.
- Last but not least, early-stage advice from mentors, investors, or startup advisors can be a critical factor in Stripe's startup success.
You have explored several takeaways from building an MVP with practical examples. The minimum viable product allowed these large giants to test ideas cheaply and ensure that they could spread their product when the time was right. You also can kick off your project with an MVP that helps you minimize risks, transform your ideas into working software, and validate value risks, usability risks, feasibility risks, and business viability risks. Developing an MVP is an ongoing cycle of building, measuring, and learning until you can ship your full-fledged product that reaches product/market fit. As a result, startups should focus on quick adaptation to the market via product validation.
List of references:
- Hunt Burdick, Singulution: Burning $30,000 & 10 Months - Why you need to start lean, www.failory.com, 2019.
- Tapan Patel, Build An MVP Right: What Uber, Airbnb, and Facebook Have Taught Us, www.linkedin.com, 2020.
- Paolo Dotta, The Ultimate List of MVP Examples, www.altar.io.
- Chris Bank, Building Minimum Viable Products at Spotify, www.speckyboy.com, 2014.
- Casey Newton, Out of the picture: why the world's best photo startup is going out of business, www.theverge.com, 2013.
- Marina Pasquali, Etsy: number of active sellers 2012-2020, www.statista.com, 2021.
- Nation Retail Federation, Top 50 Global Retailers 2020 compiled by Kantar, www.nrf.com.
- LinkedIn, www.wikipedia.org.
- Twitter, www.wikipedia.org.
- Stripe, www.wikipedia.org.
- Figure 1: Early adopters’ feedback for the first LinkedIn MVP, digital image, www.linkedin.com, accessed 1 Oct 2021.
- Figure 2: The current version of Singulution, digital image, www.amazon.com, accessed 23 Sep 2021.
- Figure 3: iPhone's MVP (1st generation) and the latest version of iPhone, digital image, accessed 23 Sep 2021.
- Figure 4: The first versions of Buffer's non-functional MVP, www.buffer.com, accessed 23 Sep 2021.
- Figure 5: The first version of Stripe called /dev/payments, www.vator.tv, accessed 23 Sep 2021.