Getting a software startup off the ground might seem like an easy task, especially compared to businesses that require physical machinery. But besides getting a few engineers, a project manager to steer the processes, and a robust infrastructure, there are a few more things that will play a key role in your startup’s success.
Whether you aim to become a key player in the industry or grow big enough to be acquired for your tech or customer base, you need to stick to agile practices and stay flexible, reacting to market fluctuations as fast as you can. To keep a structured approach while staying up to date with the latest changes, I’d recommend exploring the product development best practices. This will help you keep focus on the right things, tailored to the startup stage you are currently in.
As we start exploring the aforementioned startup stages, I’ll be using venture capital terminology: pre-see, seed, and Round A. However, in the context of this article, I focus on product goals rather than specific funding rounds or revenue figures. Let’s get into it.
Stages of growth
Before delving into the best practices, understanding the various stages of fintech product development is essential (since the terms really can get confusing). Let’s try and determine your stage and discuss the behind-the-scenes of what each stage entails.
:::info
Important note: As mentioned above, in this article we consider the stages of product development from the point of view of product focus, rather than attracting investment rounds.
:::
==Pre-Seed Stage Goal:== Launching your MVP, getting early adopters, generating initial revenue, and gathering feedback.
At this stage, you have an MVP and are refining your product concept, as well as seeking initial funding to kickstart development. The main goal is acquiring early adopters. This is the time to research the market and work on your prototype and pitch deck. At this stage, you still have a lot to learn about your product roadmap.
So:
You’re in the pre-product phase but have made progress.
You are refining the product based on early user interactions.
You are about to make initial hires.
Your expenses are starting to bother you.
==Seed Stage Goal:== Confirm product-market fit, build traction and generate growth to show to investors.
You know your core customer and now you have built a minimum viable product (MVP) and acquired early adopters. You are in the process of testing marketing strategies and looking for product-market-fit. Seed funding is crucial for scaling up operations and is much less risky from the investor’s point of view.
Criteria:
You know your core customer.
You’ve generated revenue.
You’ve pinpointed an initial, but definitive product-market fit.
You have an experienced team to showcase.
==Series A Stage Goal: == Scaling up!
By this stage, you should have achieved product-market fit, and the focus shifts to scaling the business and expanding market reach. Now you have a business model that focuses on generating long-term profit, since this is when you can get ready to accelerate growth and capture a larger market share.
You have developed a long-term business model.
You have achieved market-fit.
You have an impressive team to showcase.
Jumping over the barrier
Before we delve into the specifics of the best practices, it’s necessary to mention that every industry has its entry barriers. Having comprehensive domain knowledge, as well as learning the entry barriers before deciding to develop MVP is crucial in this process. However, even with thorough research, running too big of a cycle and attempting to develop everything at once, aiming for a big launch with the belief that you can bypass some of the stages can lead to significant financial losses.
These barriers differ from one industry to another, and as a founder with ample experience in FinTech, I can provide a few examples that I faced while growing my product through all the stages mentioned in this article.
Costs
Building and launching a product can cost a lot, especially when you take into account banking regulations. My suggestion would be to develop as much as you can without overcomplicating things.
Another thing is planning your tech. For instance, in the Fintech industry switching infrastructure providers once you’re up and running can be quite the challenge, so it’s better to invest the time upfront and work up sustainable economics from the beginning. And, ideally, you should have raised enough funds to afford this given the market conditions.
Level of Competition
Estimating the competition in the market is a very strategic step before the development starts. However, the absence of competition is not always a positive sign, because if there is no competition, then there might be no market for your product. On the other hand, the high level of competition does not mean that it’s impossible to enter. You just have to have a go-to-market strategy. For example, in the FinTech industry entry barriers are high. Acquiring capital and customers, separating yourself from competitors, developing the tech and getting all frameworks to comply with numerous regulations – these are just some of the aspects that you need to consider before joining the market. Add in security, customer data access, and proving to your clients that your service is safe.
Carefully think about the competition before investing your time and resources. Develop a comprehensive strategy outlining how you intend to increase account volumes and project profits. Building an app or website, as well as setting up ledgers, is a relatively streamlined process and can be done in a matter of months.
Regulatory compliance and profitability
Last but not least knowing your domain is knowing how it is regulated. Some spheres, such as MedTech, Manufacturing, Energy, EdTech, and Fintech have more regulatory compliance than others. For example, The Consumer Financial Protection Bureau (CFPB) is tightening regulations on neo-banks and Fintech companies because of their regular attempts to circumvent rules when opening accounts. Anti-Money Laundering and KYC regulations are also more alive than ever!
In most cases, unless you have a good business model at hand, profitability in the early stages is minimal to nonexistent. What adds to the difficulty of this process is the need to fulfil the regulatory requirements to stay on the market, and filling your service with robust security or other compliance measures will take time and money.
n Best Practices for Product Development in Early Stages
==1. Pre-seed. MVP==
The goal: Here you are about to show that your product is about to fulfil a market need no other company can as well – so it is all about building an MVP and starting to generate first revenue. Concepts and vision!
Best practices:
Focus on discovery: This is the perfect time to learn as much as you can from your clients. What you can do to validate the need for your product is conduct a lot of customer interviews to gain a clearer understanding of pain points and the price range to solve the need.
Find your potential perfect fit: Following the discovery process, you can expand on your findings and document them to get a complete picture of where your product fits best. The perfect size of your customer, key value points that resonate with them, missing features, pricing benchmarks and overlooked customer segments that hold potential are some aspects that might be useful to consider.
MVP: At this point, investors will want to see proof of your plan. You can launch a minimum viable product (MVP) that incorporates a single feature and use services like Stripe as BaaS (example from the FinTech industry) or other third-party APIs to facilitate this process, which allows you to monitor conversion rates and gauge overall customer satisfaction. This is the perfect time to assess your product features from your customer’s point of view (the one you got a deeper understanding of during your discovery process). You can identify the main feature that brings the value and implement it as quickly and simply as you can.
Founder’s Role: At this point, it is best to get involved in the process as much as possible – it is not yet the time to delegate all customer discussions to sales managers. This will help you stay in the loop. Having a simple pitch deck for your investors can make a night and day difference. In your meetings let your investors talk and ask them questions. Then do the pitch.
==2. Seed==
The goal: Demonstrating that your fintech product has a market-fit and can achieve initial traction with your core customers. This is where you aim to acquire enough capital to make your idea a reality.
Best practices:
Develop wisely: Using a common, simple and scalable tech stack as well as third-party APIs will help you deliver the product sooner (shorten time-to-market). Sticking to highly complex solutions from the start can waste your time and money on things that you might not actually need. When developing your product, always keep in mind that your feature set and architecture should allow you to develop flexibly and adjust to the market quickly. Also, using existing APIs, especially during the MVP stage, will go easier on your budget and give you needed insights into your revenue model, which, in the current stage of the fintech lifecycle, can be rather confusing.
Keep your priorities straight: Instead of focusing too much on development, focus on user acquisition and try to reduce CAC as much as you can. Lowering development costs, shortening time-to-market, optimizing customer acquisition costs as well as smartly investing in marketing – are all tried-and-true ways to reach positive unit economics and sustainable product growth.
Do what already works best: At this stage, you will have solid findings and proof they work. Taking what you know and doubling down as you continue to further formulate your playbook and find even more proof that it works will allow you to gain more traction as you continue
The ultimate playbook: There are several aspects of what your playbook should include. Outreach templates, an ideal customer profile, defined sales stages, ready presentations, and demos, and pricing tiering. n
Hire and delegate: At this stage, you should have proof of what works, and what doesn’t, so you can hire and delegate. This is the point where you can slowly but surely distance yourself from some of the less critical aspects of your business. I’d still recommend staying in the loop about pricing and feedback since these metrics will help you better evaluate the current state of your business, especially in the realm of B2B Fintech).
Role of Demo: In B2B FinTech, you might encounter a problem where potential clients need your help not only in making a purchasing decision but also with the technical aspects of integrating your API service. The role of a well-thought-out demo is huge here. As these companies are focused on selling solutions, not buying them, they often need you to present a structure that they can implement inside of their business.
As I’ve mentioned before, this is a great opportunity to thoroughly interview your first clients and learn to guess what it is they want and need (since often they don’t even know themselves).
==3. Round A==
The goal: Scaling! You’ve found product market-fit, gained traction and success and now are getting ready to scale.
Best practices: n
Make sure you are ready for scale: As you are now entering the scaling stage it is crucial to check that everything is working correctly. Is your business model ready for scale? Do you know where to go to reach more customers? And is your legal work all in place? These are some of the essential questions to ask yourself at this stage. n
Sales: Once everything is in place, I would recommend deciding where to direct your focus in the upcoming months. Assigning specific teams dedicated to serving specific customer verticals, dividing them by geographic territory (in case you already have a large sales team) and separating salesmen based on the skill set that allows them to deal with different types of customers (established companies or other startups) are some of the best practices in terms of sales. n
Building a customer lifecycle: Three key divisions require a team: customer onboarding, customer success, and customer support. Each requires a tailored skill set and will help your customers implement your product, support early use and look for ways to solidify your relationship with the customer and establish new alleys for selling new products in the future. n
Maximum efficiency: To help you streamline your business to the max there are plenty of available tools you might want to consider. Product marketing for new feature launches, sales playbooks, end-to-end flow documentation and SLAs are some among many.
Pipeline reviews: As many employees will be eager to share their successful sales calls and achieved results, it may be a good idea to establish a structure for this process. Building a more organized way of collecting feedback can make it more accessible to a higher number of employees within the company (or, instead, only for the people related to the deal), provide insights, and serve as a help book for future account owners that will join your business as you scale.
Ready yet?
Launching a startup will be an exciting journey with many hurdles to overcome. If you know there’s a problem and you have the solution – go for it! Your goals may shift as you grow. Startups rarely stick to the initial plan, but despite that, having one is going to be the cornerstone of your success.
Speaking from experience in terms of FinTech, the aim to become the biggest company on the market6 might transform into a lucrative acquisition deal for your tech.
As a final tip, remember that besides your target industry, many other unrelated fields might need your product or feature and can become a great direction for the expansion of your business. A tech example would be Facebook – a company that started as a university social database and transformed into one of the biggest marketing aggregators worldwide. Who knows where your journey might take you, but as you already know yourself – it will be an exciting one nonetheless.