We thought Google is the best at getting the most trusted and shared answers so we wanted to check with it first.
This is Google’s top answers:
We went back to Google and asked:
With some research, we found:
What’s going on here? today, it costs less than $5,000 to launch a startup but to build an app, you need $100,000+? if the product of a startup venture is its app, how come we see this price discrepancy between launching startups and building apps?
Short answer: you don’t need an app to launch a startup.
Do you know how Groupon started?
Groupon is the second fastest startup to ever reach a billion-dollar valuation; they did it in a year a half. They must have received big initial (angel and seed) rounds of funding to be able to reach this valuation this fast, no? this is Groupon founder Andrew Mason’s answer to how they started:
“All we did was we took a WordPress Blog and we skimmed it to say Groupon and then every day we would do a new post with the points embedded. It was totally ghetto. We would sell t-shirts on the first version of Groupon. We’d say in the right up, ‘This t-shirt will come in the color red, size large. If you want a different color or size, email that to us.’ We didn’t have a form to add that stuff. We were just, it was so cobbled together. It was enough to prove the concept and show that it was something that people really liked. The actual coupon generation that we were doing was all FileMaker. We would run a script that would email the coupon PDF to people. It got to the point where we’d sell 500 sushi coupons in a day and we’d send 500 PDFs to people with Apple Mail at the same time. Really the first, until July of the first year was just a scrambling to grab the tiger by the tail. It was trying to catch up and reasonable piece together a product.”
Do you know how Zappos started?
Zappos founder Nick Swinmurn went to local shoe stores to ask for owners’ permission to take photos of shoes and put them online. For each online order, Nick went back to the stores, purchased the shoes and shipped them to the buyer. Was this scalable? absolutely not. Was it enough to validate the need for a convenient method to buy shoes? it sure was. Was it enough to generate revenue for reinvestment and attract investors’ attention? acquired by Amazon for $1.2B so you know the answer.
None of these startups and hundreds of others including Airbnb and ZeroCater built a $100,000+ application since day one. What they all have in common is using non-scalable methods for validation before building for scalability.
Launching a startup is cheaper than building an application because a startup solution is not always dependent on technology (app); the product can be served using existing, non-scalable methods. More specifically, open source software and cloud based tools democratized startup development.
In other words, if “I can’t code” or “I don’t have funding” is why we’re not executing on our ideas, we should always keep in mind that no matter how technologically advanced and complex our solution can be, there is always a non-scalable version of an idea. This applies to technical and non-technical, funded or bootstrapped founders.
What if we’re ready to scale? why is it so expensive to build a scalable application?
Take the example of Square, a mobile payment startup that went public in 2016. According to a Square employee, the company uses Ruby as its main web language, Java for back-end services, Ruby on Rails 3 running on JRuby as its web framework, they are developing their own service framework, PostgreSQL as their primary data store, Redis for caching and finally decided to self-host their servers for security reasons.
Think about this for a second, what is the minimum number of team members that Square needs to build its application using the technologies and frameworks above? assume the answer is only 3-4 members. Since the average salary of a software engineer is $100,000, the monthly income of a team with 4 members is about $33,000. Since it can take as little as 2 months and as long as 6 months to build a scalable version of an application depending on scope and complexity, the estimation should range between $66,000 and up to $200,000.
This is where the power of teams of co-founders with complementary skills comes in. The truth is, rarely do we find founding teams that have it all figured out. Whether it is lacking people with technical skills, business background, design expertise or members with specific knowledge in an area that matters for the startup. For this, luckily for our generation, the gig/freelance economy democratized on demand employment and made it a lot easier and affordable to find the needed talent from a pool of worldwide applicants as opposed to local interested candidates only. Today, visit sites like Upwork, post a job, give it 5 minutes and you’ll see applicants rolling in.
Funding seems to always be the solution to all problems. Do you know what percentage of startups get funded? according to research findings by Fundable, 0.05% of startups receive Venture Capital funding and 0.91% are angel funded. Most startups are self-funded. Ideas are not fundable. You’ll be asked for traction, revenue, team, vision, commitment, etc.
The point is, building startup value is not dependent on a web or mobile application. It’s about doing it the Groupon way and it doesn’t take a million dollars.