The Rugged World of Startups
Look around at this exact moment, and the odds are you'll see some brand name or a logo you recognize. Most likely, there is a product within view that you interact with every day of your life, and behind that product, a story of explosive success and a multi-billion dollar company name. Where there is a great need that society needs filled, the most successful companies fill that gap. These companies all started the same way. Apple, Wal-Mart, Amazon, Microsoft, and every other major business you can name was once just an idea, a seed, a startup. To an average consumer, the business world likely brings to mind images of grandeur and wealthy executives; however, a quick peek into the world of startups reveals a much less rosy picture for the could-be super companies of tomorrow.
What are the odds of success?
According to fortune.com , an overwhelming 90% of startups fail, and there is an equally extensive list of reasons for that statistic. What kind of product or service are we going to offer? What skills do we have already, and what skills do we need to hire? Is the market already too saturated? How much would it cost to develop a minimum viable product? These and countless other questions plague the minds of founders and startup teams, not to mention, many startups even pivot from their original idea in some way or another. Answering even one question wrong or failing to meet the need in question could be the difference between steady growth or imminent failure. On top of all this, technology and the growing integration of products into cell phones highlights the need to make products and services that are seamless and largely available at the touch of a screen. In startup terms, that translates to development costs. Huge development costs. In the modern business world, companies that primarily offer software services need to allocate much of their budget to necessary software development. And making a seamless product offering doesn't come cheap.
The hefty price of software development
Software requires time, effort, and money to perfect. And that remains a reality even when startups become wildly successful. In a study of 73 publicly traded SaaS (software as a service) companies conducted by medium.com , the amount of revenue at IPO and the two years before spent on R&D amounted to 23%. These successful companies allocated nearly a fourth of their revenue to making the right software offering. For startups, what you budget for is everything. The investor funding, the time, effort, and hopes of success amount to nothing if the software, the product itself, is not up to par. Thus it's easy to recognize that companies need to allocate their resources disproportionately to the end of proper development. If we break it down further, we can see the costs of paying developers at an hourly interval. According to thumbtack.com , a site that has compiled information from 200,000 professional quotes this year, the average national hourly pay for developers lies between $75 and $400 an hour. This is a massive amount objectively, and it's only magnified further in the critical startup stages where funding is so precious.
How can startups survive when investment capital is so critical?
When startups begin building their team, the more skills the founding team has, the better. A skilled founding team can translate to critical money saved in the earliest stages. But software development is especially meticulous and requires the experience to program and build out vital functionality to make the offering viable. Some resort to coding boot camps to cram the desired information for their applications. Much of the time, this doesn't yield enough of an education to facilitate the necessary programming skills. Others see the costs of expensive developers as an essential drain on funding. In such a technologically advanced age, development fees may be the most significant burn on startup funding of all early-stage functions. Which begs the question that has disrupted countless industries to date- what if there's a better way to do this?