Software development for startups is extremely risky. Over 90% of emerging businesses fail and only a fraction of survivors produce a profitable exit. But don’t let that discourage you! Take it as a challenge. Our guide will show you how to improve the chances of launching your business successfully.
We’ll tell you what makes the software development process distinct for early businesses. Then, you’ll learn how to avoid the common challenges, validate your business idea, and improve time-to-market while reducing development costs.
Maybe, you’re still contemplating if you should hire a software development company for your startup project? Good news for you: we’ll talk about the advantages of outsourcing development for startups and tell you how to find the optimal vendor! Are you ready?
What makes startup software development unique?
Startups and emerging companies seek to validate their idea, capture an audience, and create a profitable revenue model. Their goals are often reflected in their IT infrastructure, management, and software development process.
Let’s go through the main difference in software development for startups and established companies.
- Focus on innovation. Enterprises are often tied with legacy infrastructures, meaning they must refactor their systems to implement the newest technologies. On the other hand, startups can pick a modern architecture that integrates with current technologies, like AI-powered analytics and machine learning.
- Easier to scale. Unlike larger companies stuck with on-premises infrastructure, most startups choose cloud-based infrastructures. For example, Amazon Web Services (AWS) and Microsoft Azure can automatically adjust storage, servers, and computing resources based on your operational needs. Actually, 62% of companies choose cloud platforms for operational scalability.
- Flexible development. Decision-making and change management are much faster in startups because they have fewer stakeholders. Smaller teams are also prone to using flexible methodologies that focus on teamwork, automation, and iterative development.
- Time-sensitivity. Nearly 19% of startups fail because they miss their window of opportunity. You have a limited time to capture the market fit because other companies can capitalize on your idea and build their product faster.
- Smaller scope. Startup and enterprise software usually aims at different audiences. Smaller businesses are trying to fix a specific problem and fill niche market gaps. Enterprises have a broader focus and often target other companies, which is why their software has more features.
- Dependence on research. Startups must determine their audience, identify a significant problem, devise a solution, and build a business model that solves it. This makes research and market study critical parts of the software development process. After all, enterprises have more resources to experiment and promote their solutions.
Our guide would be incomplete if we didn’t mention the challenges startups face during development.
Challenges of custom software development for startups
Here are some limitations and problems you should be ready for during the software development lifecycle.
- Unrealistic estimation. Software projects often run over budget and take longer than expected because companies underestimate the impact of technological complexities, scope changes, and other risks. You should also have enough resources to support your startup after launch, which requires a long-term plan with post-release goals, milestones, and an allocated budget.
- Tunnel vision. About 14% of startups fail because they’re too focused on the initial research and ignore their customer’s input. You should be ready to pivot based on your audience’s reaction to your product, features, and business model.
- Insufficient security focus. According to LogicMonitor’s Cloud Vision 2020 study, security (66%), compliance (60%), and data privacy (57%) are the main challenges for IT professionals. Even a single major data leak or data privacy law infringement can cause devastating consequences to your startup.
- Wrong methodology. Development can go off the rails without effective software development practices and tools. Speaking plainly, your team should be familiar with iterative methodologies if you want to maximize productivity, establish quality assurance criteria, and control your expenses.
- Lack of expertise. Finding competent full-time engineers with relevant expertise is difficult for emerging businesses. You also need experienced project managers to plan, track, and schedule the development. You might need to augment your in-house team with third-party talent or outsource parts of your project.
But don’t think you can relax even if you hire an agency to do the hard work. You still need to plan out the production and post-release support before launching your project.
How to prepare for a startup software development: 7 steps
Preparation is critical for testing your business idea with limited resources and time. So, here are the steps you should follow to minimize your risks.
Step 1: Identify the target audience
Building a solution for a minor or nonexistent problem is the worst mistake you can make. It’s actually cited as the main reason for the failure of over 42% of startups. Sure, tackling some problems might be interesting, but not all of them are viable enough to invest in something as costly as custom software development.
You need to create a detailed profile of your target audience before launching your startup. It should have the following information:
- Who is your ideal customer: is it a person, organization, or both?
- Where are your customers located?
- What devices do they use?
- What problems and desires do they have?
- Are there any existing solutions for that?
- How do they solve their problems or satisfy desires now?
- Why do you think the existing solutions don’t meet their expectations?
- How often do your clients face these problems?
We advise that you focus on one essential pain of your audience instead of trying to solve everything at once. You should also evaluate its significance by questioning people that match your customer profile and researching potential competitors.
Step 2: Study the market
You should look at how other companies tried to solve your audience’s problem. Dissect their software, development process, and revenue model. This also means looking through review platforms and social networks to see what their audience thinks is lacking in their products. It’s equally important to learn from unsuccessful startups in the same niche.
Visiting technology startup forums, hackathons, and meetups is another excellent way to discover success stories, failures, and accomplishments. Doing so helps you avoid rookie mistakes during custom software development.
Finally, you need to know about regulations for your industry. For example, healthcare and healthtech companies might need to follow HIPAA, GDPR, PCI DSS, and other local laws to get licensed and avoid fines.
Step 3: Document requirements
The development team must define the SOW (statement of work), decide on the technical stack, and document all specifications. If you want to outsource the project, you may need to work out these questions with your software development services provider.
Some of the things you should document at this stage include:
- Programming languages, frameworks, APIs, and middleware
- UI/UX design specifications, application logic, and key features
- Type of architecture (monolith, microservices, containerized, or hybrid mode) and tenancy isolation
- Authentication, authorization, data breach prevention, encryption, and access control tools
- Risk mitigation strategies and backup solutions
And don’t forget about non-functional requirements like the ability to scale, the daily load, latency, and other key performance indicators.
Startups shouldn’t shy away from open-source toolkits and frameworks that speed up the development. For example, low-code platforms provide ready-made templates and graphical interfaces to reduce hand coding and involve non-technical staff in the production. For the record, 84% of companies say these solutions have drastically improved their time-to-market.
Step 4: Build a roadmap
A roadmap lays out the software development lifecycle into steps with goals, progress metrics, deadlines, and success criteria. It would help to create a separate roadmap for the stakeholders, developers, marketers, and IT operations teams to prioritize the core tasks. Startups can also build an external map for customers to motivate them to wait for new features in future updates.
A detailed roadmap helps you allocate the budget. To do this, you need to calculate one-time purchases for each stage of the development. Next, determine the recurring costs for cloud hosting, subscriptions, fees, taxes, and other services throughout the lifecycle.
Step 5: Design a business model
Based on market research, identify the suitable payment model and pricing for your product. You also need to ensure your strategy can scale as your business expands.
Most startups pick the subscription-based model. However, nothing stops you from trying different strategies. Take free mobile applications that make money from in-app ads but also allow users to upgrade to an ad-free subscription. You can also introduce several tiers of prices based on available features, concurrent users, or consumption metrics.
Step 6: Validate your idea with an MVP
Before you start pouring investments into full-scale development, you might want to validate your business. The problem is, that’s impossible until you try it out on a real audience. And that’s why you need a minimum viable product (MVP) — a simplified version of your product with barebone functionality required.
MVP software development lets you introduce your product to customers faster and with less investment. Doing so can help you validate the demand for your solution, get feedback from users for further iterations, and attract investors for your startup.
It might sound strange, but sometimes it’s hard not to overstuff your MVP with needless functionality. To avoid this, concentrate on the features that solve the audience’s core problem. You can even spare resources on a scalable architecture and use third-party integrations at this point. After all, it’s only an intermediate stage before the actual development starts.
Step 7: Establish a feedback loop
You must promote your startup before launching an MVP or a prototype. It would help to showcase it to the audience and influencers to get some traction. Companies in niche industries, like healthtech, should also be ready to back up their solution with peer reviews, scientific research, and consumer metrics.
An effective feedback loop is critical for capturing your customers’ feedback and keeping them invested. You can create online forums, build communities on social media, and incentivize users to participate in surveys.
Software projects are never easy, especially for an enthusiastic startup with little experience. So, it wouldn’t hurt to get help from professional outsourcing firms.
Benefits of outsourcing software development services
Are you still wondering if you should hire an outside company or rely on your team? Let’s figure out the benefits of outsourcing your project to a reputable company.
- Global talent pool. The global shortage of full-time developers can rise from 1.4 million in 2021 to 4 million in 2025, making it even harder to find competent developers. However, outsourcing helps you reach beyond your local talent pool to experienced engineers, designers, testers, and project managers.
- Scalable team. Software projects often change their scope over the lifecycle. Choosing a flexible outsourcing company means you won’t need to overpay your team, fire people, or search for new employees since vendors can easily change the team size based on your needs.
- Easier management. It’s up to the vendor to keep the project to the agreed schedule and budget after you approve the plan. An outsourcing company provides a project manager who’ll oversee the software development lifecycle and be your main point of contact with the team. You can also access advanced tracking tools to observe the progress, communicate with developers directly, and approve changes.
- Security focus. Experienced providers integrate the latest security, data privacy, and risk mitigation techniques into your software development process. Some companies can help you improve your code quality and cybersecurity with efficient DevSecOps practices like automated testing, compliance checks, and security scans.
- Efficient practices. Outsourcing companies can apply iterative methodologies that enhance software development for startups. Choosing a company that uses Agile practices improves time-to-market (64%), software quality (45%), and team productivity (60%). Plus, a developer with DevOps mastery can release code twice faster with a three times lower failure rate.
- Cost saving. Efficient development practices, access to an advanced technical stack, team scalability, and effective management help you stick to your budget. You also don’t need to invest in onboarding and training your employees since you pay only for the time and resources spent on your project. By the way, cost reduction is the main reason for outsourcing for 70% of companies.
Despite all these advantages, outsourcing has one major downside: finding the right software development company is almost as difficult as building a team of engineers. That’s why we want to tell you what to look for.
What to look out for in a software development company?
Did you know that 60% of companies outsource their development (at least partially)? Let’s just hope that all of them have found nice vendors because the wrong company can waste your money and time or expose your confidential data. So, carefully evaluate your outsourcing destination and potential companies based on the following criteria:
- Outsourcing location. The choice of outsourcing location impacts pricing rates and developers’ skills. So, you should choose a market with a large talent pool, reasonable rates, and exceptional programming skills.
- Time-zone. Your vendor’s business hours should overlap with yours to avoid communication gaps. It would also help if your outsourcing company had branches and offices worldwide so you could reach them outside the main offices’ business hours.
- English proficiency. The language skills of the developer’s team ensure your project won’t suffer from misunderstandings. So, picking a market with a high English proficiency gives you a better chance of avoiding communication problems.
- Certifications. It’s a nice bonus if the company has certifications according to international standards. For example, the ISO 9001:2015 standard means the company follows consistent quality standards across all projects.
- Track record. Make sure the vendor has experience with similar projects and technologies. You should also check their pages on popular review platforms (like Clutch) and inspect their portfolio.
- Payment model. Find a software development company with a suitable pricing model for your startup. This could be time and material (you pay for the development and additional expenses), dedicated team (each member has an hourly rate), or Software Development as a Service (when you pay a fixed monthly fee for all kinds of software development activities).
If you’ve shortlisted many companies, you can vet them faster by sending RFIs (requests for information). In this document, you can inquire about their software development services for startups, team size, experience, and pricing. It makes it easier to filter out those that don’t meet your requirements and compare those that do.
Following our guide can improve your chances of launching a successful startup. Of course, that doesn’t mean there’s no risk that your business won’t take off. But even in that case, the practices we shared will help you spend as few resources as possible on idea validation.
Outsourcing remains the most cost-effective way of custom software development for startups. First, however, you need to make sure you’re working with a trustworthy company with relevant experience.
Over almost two decades, Acropolium delivered more than 220 projects: from mobile applications to complex enterprise software for various industries (healthcare, fintech, HoReCa, automotive, and more). We offer a wide range of services, including consulting, turnkey and subscription-based software development that cover all your technical needs. Just contact us, and let’s talk business.
Frequently Asked Questions
What are the differences between custom software development for startups and enterprises?
Enterprise can afford to target more audiences and problems at once. Their software is often designed for organizations, so it’s built with multiple features and integrations from the get-go. Meanwhile, startups strive to fill a specific market niche. They also aren’t tied with legacy infrastructures, can integrate modern technologies, and have an easier time adopting flexible software development methodologies (like Agile).
How to validate a business idea for your startup cost-efficiently?
You can create a minimum viable product (MVP) version of your software with core features. It lets you test your solution’s validity and the profitability of your business model on real audiences with minimal investments. In addition to MVP software development, open-source tools and low-code solutions can help you build your prototype with fewer resources and effort.
Should you outsource your project to a software development company?
Outsourcing is an excellent way to augment your team with relevant expertise, technical stack, industry-specific knowledge, and management practices. Additionally, outsourcing parts or an entire project to professional software development companies significantly reduces your expenses.