Reading OnStartups (pp. 31-50)

Chapter 4: On Market Positioning and Strategy

Enterprise Software Markets

As the industry evolved and matured, the market for enterprise software became increasingly challenging. Enterprise customers became dissatisfied with the terms being offered by enterprise software vendors, especially those involving high upfront fees. Power shifted to the customer as competition increased and the ROI of the software came into question. (31)

Startup challenges when addressing the enterprise opportunity: difficult to access large, enterprise buyers; enterprises have long committee cycles and committee-based purchasing; and enterprise customers often have large customization requirements before product can be useful to them. (32)

Consumer and Small Business Markets

Consumer and Small Business markets present their own set of challenges: high fragmentation and difficult to reach efficiently; price points for software products sold into these markets are significantly lower than those in the Enterprise sector; several alternatives to any given product category creating competitive pressures. (33)

Horizontal vs. Vertical Markets

Tackling a horizontal market in the initial stages can be risky for the following reasons: require extensive resources for product development; sales and marketing. These are resources that startups cannot afford. (34)

Startups must make key decisions regarding how they will position their product in an ever-more competitive marketplace and with an increasingly sophisticated set of customers. Each decision comes with trade-offs that will influence other aspects of the business. (36)

Chapter 5: On Product Development

A key driver of success is an ability to build a working product that solves a meaningful customer problem. If developing working software is not a core competency of the startup, it’s unlikely that the startup will succeed. Further, the success rate for software development products are extremely low. (37)

On Product Development Failures

Shah outlines the following key reasons for development: inexperienced developers; product is not really; product has no owner; no strategic plan for product development; product platform is unrecognized. (38)

Successful software development practices: an early release of the evolving product design to customers; daily incorporation of new software code and rapid feedback on design changes; a team with broad-based experience of shipping multiple projects; major investments in the design of product architecture. (41)

There is indeed a difference between average and exceptional developers. (43)

The overall quality of the initial development team is a large predictor of future success. Having one or two 10x programmers on the team reduces the time it takes to delver to the marketplace. (43)

Posits that it often does not make sense to outsource the core development effort. Projects continue to be difficult to manage and prone to cost and time over-runs. (44)

“Because we’re a software company, and developing software is what we’re supposed to be good at.” (46)

Non-technical founders that don’t have such an individual on the team already will generally have a difficult time hiring for this role as they often don’t know what kind of person they need to hire. (50)