Dissidents of the Silicon Valley. IT development approaches for startups.

Deutsche Version der Publikation.

The goal of every startup is to become a business.

(Note: a startup is a unique endeavor based on innovation that requires "manual" operation. A business is a system that can be configured to operate via delegation regardless of who is running it.)

I’m still not quite certain why startup founders keep forgetting about this. Nonetheless, this is a common occurrence, especially for those nurturing their first startup.

I can talk for hours on end about creating solutions in IT development that compensate for the entrepreneur's refusal to follow market conventions when it's impossible to use a standard development approach. That, however, is a topic for another time.

Engineering solutions for the development process can significantly affect the final result of a startup both positively and negatively. An appropriately selected development approach can compensate for the entrepreneur's refusal to follow standard conventions of startup growth.

We usually advocate for following market protocols and conventions. That's because we are interested to see the market experience in high demand within the blazing fires of startup foundries. However, we must admit that things are changing and new practices aren't always tied to just the subjective motivation of our clients. Their search for new growth solutions could be a response to the changing nature of software products, the market's advance through different stages, or an attempt to evade lobbying or hidden monopolies to success.

And who knows, perhaps this dissidence towards Silicon Valley standards will once lead to new market conventions. Especially since the talks of said conventions not being effective are already starting to spread.

And still, I believe it's not yet time for a revolution. The spirit and methods of the Silicon Valley remain the standards of success, even if they will shortly require adjustments under the pressure of the ongoing IT market changes.

A story of a startup in which its founder placed his bet on creating a unique technology clearly illustrates how a refusal to abide by the Silicon Valley business conventions and practices can lead to the crash of even the most promising project. A great start, albeit 5 years ago.

For this startup, we have developed the ability to recognize data in a cellphone's video feed and augment the picture with changes logically tied to the real video. Research and development received the bulk of the budget, funded from the founder's savings. The entrepreneur was passionate about his idea and remained deaf to suggestions of going the easier way or at least approaching the problem step by step, in sync with the product's marketing.

Owing to his tenacity and vision for a patent, we managed to create a product unique to the market as early as during the first development stage.

The product came out so good that it even attracted the attention of an IT industry giant who invited us along with the founder to their workshops where a plethora of specialists offered their solutions for growing the business and product.

It was a pleasant surprise seeing the corporation's engineers blown away when they realized that the elements of the augmented reality were swiftly following both the movement of the arm holding the phone as well as the object in the frame. Recently I realized that even after five years that have passed since then, there is still no user-friendly solution coming even from industry leaders who are using text recognition and substitution in a video feed.

So how did an IT product based on a unique technology not only fail to bring dividends to its founder but also become a source of problems?

To garner experience, one must avoid survivorship bias and overcome failures. The philosophy of the Silicon Valley dictates it is these failures in particular that grant a startup founder the access to the world of innovative entrepreneurship.

The AR-based startup founder's main idea was to create a product centered around a then non-existent technological solution. And also find the demand context and the user's cognitive operation that would be fully automated.

From a technical standpoint this would mean:
- conduct the research;
- create a technology;
- develop a prototype to satisfy the identified demand;
- launch the product;

The finance plan assumed avoiding bringing in investors and finalizing everything using only personal funds. And then "indefinitely" benefitting from a job well done by living off the patent and end-user money.

What became the crux of this unsuccessful plan and what changes could have created a good ecosystem for the product to thrive in? Let's "play around" with the project's history.

End-user based monetization.

The mistake is considered to be (as was rightly pointed out to us during the workshops) the plan to only monetize based on a costly price for the end-user.

The Internet was born as a freedom zone and a resource "accessibility revolution" for every person on Earth regardless of real-life restrictions. This spirit lives on in the mass consumer's perception of what cost they consider to be fair for an application.

As practice shows, only dedicated professional IT products are expected to have a high end-user cost, while mostly oriented at corporate clients.

Startup marketing

The startup founder's budget was missing a product marketing entry almost entirely. Marketing plays a significant part in the market practices of promoting a product. There is a notion, coming from market critics, that the main purpose of marketing is "inflating the funding bubble", multiplication, and capitalization, but that's not the topic of this article.

But how plausible is it that a great product or technology will organically, without marketing efforts, receive customer recognition?

The situation on the IT products market is such that we have a huge number of incredibly "bad" products, and it's so large and disappointing that the modern user is not even motivated to try out "the new stuff".

A lack of investors plus a lack of marketing equals no commercial success for a product?

Most certainly, the majority of typical marketing efforts are impossible without investors. Yet I am still intrigued by the absolute refusal of any kind of marketing, especially since the startup founder has had a profound experience in marketing campaigns in his professional activity.

I assume that planning out viral methods of distribution way back during the product's concept development offers a startup some advantage beginning from the first launches. A user will manifest a natural tendency to share his application experience if you help him connect this with his other online practices.

How to handle IT technologies in a startup?

A common mistake of startup founders is an insufficient understanding of the development process.

It's easy to relate, however. When they are making decisions in the hyperspecialized and professional qualification-dependent IT realm, chances are they will fall back to conventional development process stereotypes.

Planning and other organizational processes will be based on a generic example or startup market convention, instead of rooting this into actual development processes of each unique case.

The paradox is that by stepping away from the Silicon Valley conventions of developing a startup, it is not obvious to the founders that development processes will also change.

The engineering rationale lies in selecting the basis of development for each project depending on all its variables.

Everything we now know about development approaches in the Silicon Valley was once created by engineers with consideration of business practices aimed at moving a startup on its way from an idea to a business.

In every accelerator across the Silicon Valley or any other corner of the world, there is a certain example, roadmap, or convention for all willing participants of launching a product into the market.

And if the founder has taken the path of dissidence and changed the business strategy away from convention, creating an "innovative" personal business strategy, then the IT development strategy also requires validation before confirming the viability of the development plan. This includes cases of products with nontypical funding.

A good practice is to select or even create development approaches for each project individually as both the development budget and the technological viability depend on this.

It is no secret that most startups have perished before creating a planned prototype due to the inability to prevent a systemic crash of the software part of the product. The Agile approach, commonly used during the prototyping stage, is only advantageous in cases where the demand can only be proven by factual experiments. This approach often proves to be unsustainable or too expensive in startups that include complex or innovative components.

With an engineering approach to the development of a unique and innovative product, there is always the possibility to change the tactic at any stage of the process and quickly adopt design choices that will lead to necessary results.

Regardless of whether we are saving the founder's personal capital or have access to investor funds, it is best to funnel resources into innovation and not compensate for the losses due to bad choices in development.

We have made possible a low budget development of this Augmented Reality project. First, we have conducted a research and created an innovative technological solution.

Then we noticed an opportunity to avoid the prototyping stage. Before creating the customer-facing application itself we have created an engineering project that allowed us to develop a partially finalized product bypassing a prototype and thus evading significant costs of testing and bug fixes.

Have we not proceeded this way, a product with such a funding structure would have never appeared on the market.

The role of an investor in a startup.

Simply put, the myth of an "investor diminishing the position of the founder" looks more like an attempt to avoid approaching an investor for as long as possible. Such linear logic is fair and simple, and it actually may turn out true in some cases.

We, however, have seen many times how a partnership with investors allowed startup founders to not only resolve their financial problems but also provided them with mindboggling experience of creating a product that could reach the headlines of the IT world.

I can understand the reluctance of startup founders to work with investors when the project is based around the idea that the founder is not ready to change or is not willing to be dependent on the investor's opinion by any means.

An example could be a social concept, like something about discrimination, rights, or any stroke of genius, at that. Yet during the creative phase, every other startup founder sometimes acts like a crazed mother, reluctant of letting her "baby" go into the world when it's grown up.

Certainly, this can happen to all startup founders while the idea is still ardent and new. It's precisely this energy that drives innovation into the real-world market with all its uncertainty.

But every idea must prove its right to exist once the initial stage burns out. Then comes the time of creating a stable business system with sustainable growth control. A different approach is required and different skills.

That is why Silicon Valley conventions include best-practices of passing on the project's management at a certain development stage to people who best understand the needs of a growing up business.

I do not know whether our client, the founder of the Augmented Reality startup, would be interested in becoming a serial entrepreneur and launching his good ideas to orbit, but he sure does have what it takes.

He's been through a very important stage of getting experience. His “survivalist” experience is priceless... and important for investors. He managed to defend and grow his idea and launch a product to life. And that's the most important quality of an entrepreneur.

One can see some entrepreneurs investing a lot of effort into investor pitches, convincing them they can manage to launch an interesting product into the market. Others go above and beyond to resolve all matters with their own hands. Some choose the conventional path with investors, while certain entrepreneurs embark on a unique voyage. Their success stories are also different: typical and unexpected. Investor contracts can bring various developments, and everyone will have their approach to them.

The very same technology could now be put into business demand and, after getting the investor approval, grow and set flight to a new product, this time commercially successful. And this will be a true testament to the entrepreneurial capabilities of our hero, the founder of a startup, for whom we care and to whom we wish a successful rebirth.