If you’ve been here before, you know that we work a lot with startup founders, building together mobile-first products designed for global impact at scale. Many others do this, as agencies, development partners, outsourcing teams etc. What sets us apart is not what we do: it’s really why we do what we do and how we choose to approach this whole thing of building products in the startup space.
We strongly believe that for an early stage tech product that is born with disrupting ambitions, the first goal is not ‘success’ or scale, but survival. Survival is the name of the game in the first one or two years. Everything else is just a distraction and a vane ambition.
If survival is the goal, de-risking your product investment is the path. Our processes and value offerings are all aligned around a few areas of helping our partners do this de-risking at every step of the process. We work a lot with them in the concept stage to clarify whether something needs to be built and clarify the right foundations for a product offering. We work hand in hand with the founding teams to decipher what needs to be validated in the early stages of the product, then be laser focused on only building an MVP fit for that validation purpose. And we plan together what resources that startup needs to survive at least 12 months.
And here we get to the tricky conversation about ‘how much would the product cost?’. A valid conversation, but asking the wrong question.
The right question is: what do we need to survive during the first 12 months?
You need a solid de-risking foundation, on top of which money is a great tool to give you options in creating and validating value.
We used to update an article about the real cost of building a mobile product every year for the past 4 years. For the 2022 update, you can see the numbers below:
|Budget category||Percent||Min. Budget||Max. Budget|
|User Concepting (Research, Product definition, UX/UI Prototyping)||7%||$20,000||$25,000|
|MVP (First Product-Solution Fit hypothesis, 1 Platform Native)||25%||$86,000||$100,000|
|Post-MVP Iterations (6 months of calibration OR duplication to second platform)||50%||$172,000||$198,000|
|GTM, Marketing + Anything else||15%||$50,000||$62,500|
|Tools, 3rd Party Platform, Hosting||3%||$10,000||$12,500|
Do these numbers look scary? They might, especially if you came here with the wrong expectations about what it means to build a tech product. But let’s put a bit of context around them, in order to give you a better angle of interpretation.
More important than the numbers themselves is the approach itself.
Getting to these numbers was not an exercise of estimating features, but applying a logic of having the minimum and essential capabilities in a product team, for roughly one year. They show a realistic budget for having a good product team as an early stage tech startup. Therefore, the main alternative to budgeting a team like this is having your own full stack product team, with all the core functions, from strategy, product development, product management, testing and go-to-market. They need to be viewed in the context of such alternatives.
Therefore, this is a framework for budgeting a product team for one year.
Why do you need a product team? (If this is not obvious already): such a product team would need to figure out what product to build first (and why), build it well, launch it right and start validating it meaningfully. If the validation goes right, the product will start getting into a Product Market Fit zone and the product investment will grow. If not, the product either pivots (and new product investment is needed) or it dies (and no product investment is needed, but all the previous investment is lost).
These final numbers are based on Tapptitude’s 2022 rates, but the structure of what you need and the split between phases would stay pretty much the same if you have different rates (from other product partners, for instance). Therefore, your product investment in the first year could be lower, but be crystal clear about the compromises that come with working with cheaper teams. In what we’ve seen in the last 8+ years, one can hardly cheat when building a great product that has chances to survive and then have a significant impact in the world. And our rates are still quite affordable, given the fact that we still have a bit of cost advantage with our internal product team, an advantage that we transfer forward as value to our partners.
On the other hand, these ‘estimates’ are actually budgets we’ve seen being deployed consistently in the last years by startups that didn’t die (and some of them actually got to significant traction and closed Series As, Bs etc). For us, these numbers are realistic base lines for funding the first year in the existence of a product startup that has global growth ambitions.
Obviously, the GTM and first year marketing budget can vary significantly and be quite different from what we added in. But you get this by now. 🙂
What these numbers really show is that building a tech startup is a serious investment nowadays and it’s more important than ever to budget that carefully and then focus on surviving in the market until you get to PMF. And only after, you should start planning any meaningful scaling, which requires a whole new approach to your product investments.
Now, do you struggle to budget your own product investment?
My colleagues can help you understand how this product budgeting framework applies to your unique product challenges.