23 Apr Death of the MVP
It’s possible I exaggerated a bit on the title above, while the Death of the MVP might be extreme, the days of the “minimum” (i.e. move fast and break things) approach to building high-growth software are long gone and we’re now in the golden age of “viable” (i.e. build something customers love) being the best path to sustainable growth.
To be clear, I’m not advocating for a completely blind launch without customer feedback. Instead, I look at the approaches of startups like Superhuman and Notion, both had very small, exclusive initial user bases from which they could collect feedback. Superhuman founder and CEO Rahul Vohra has discussed at length how his team built a process to discover product/market fit and a roadmap without a public launch.
Minimum = Low Cost
The term MVP was coined in 2001 and made popular by Eric Ries and his book The Lean Startup, but a lot has changed since then. In the last two decades, we’ve witnessed an exponential decline storage costs coupled with the rise in open-source software, and more recently no-code software is beginning to approach an inflection point for adoption by the masses.
The result: cost is significantly less of a factor in launching a software product than it was 20 years ago and almost anyone can or will soon be able to achieve a “minimum” product meaning viability/customer evangelism becomes the differentiating factor.
Look no further than your phone, US consumers had an average of ~100 apps installed on their phones in 2017, but only use 40 on a monthly basis (I’m betting daily is about 25% of that number) meaning attention and usability are at a premium to cut through the noise of home screens.
When You Can’t Move Fast and Break Things
The old Silicon Valley adage “move fast and break things” has worked extremely well for several decades, however the stakes for emerging technologies in analog industries are much too high for enterprise customers to accept this approach from would be vendors.
The firms in these industries utilize RFPs that often clearly define problem sets and require 12+ month procurement cycles rendering the “move fast” motive behind the MVP approach moot. They are searching for solutions that protect, connect, or extend the life of capital intensive assets that are 10+ years old – there are certain things that you cannot break and data you cannot lose.
However, the length of these sales cycles and need to work with trusted partners often means problem validation happens in a more transparent and organic nature. The trade-off for speed is the validation of a product that solves a material business case and results in a long-term paying customer.
Validation = Healthier Investing Climate
The result has been a healthy venture investing climate in industrial tech as the valuations are increasing where traction (validation, product/market fit) becomes apparent. According to Energize Ventures partner John Tough, Series A valuations have been more or less steady over the last decade despite deal volume increasing 10x. However, Series B and especially Series C valuations are increasing which indicates that capital is willing to pay for established winners.
This is great news for entrepreneurs and early-stage investors alike in that the market seems to be rewarding patience and the building of fundamentally sound business models.
Rather it is through market forces as is the case in consumer software or necessity as in industrial tech, the decline of the MVP has arrived. I expect the trend to be further compounded as founders and investors look to disrupt industries with high-barriers of entry due to regulation or consumer confidence.
Automotive and Biotech are perfect examples of sectors where anything less than near-perfection won’t be accepted by regulators or consumers, and industries like real estate and construction have decades of entrenched interests that won’t adopt products unless they are seamless and obviously better than the status quo.
The MVP era was the most productive in human history and the philosophy undoubtedly helped countless startups grow beyond their wildest dreams. However, we’re now in a new age where customers expect the best and those who can reliably solve problems in a way that creates long-term customer value will have the upper hand on the competition.