MVP, Functional or Non-functional? The Startup Early Stage Dilemma

If you are deciding what is your MVP there is a first question you must ask yourself:

Should I make a Functional OR Non-functional MVP?

The answer is not always easy. Most startups jump right away to developing the product but there are some outliers with MVPs totally outside the box, representing an alternative that should be considered. I’ve already accompanied over 100 startups during this decision and on this post I’m sharing the rational I usually bring to help making this decision.

Dropbox & alike

Everyone talks about Dropbox and other success cases that tested their market’s appetite with an MVP that was not a fully functional product, but instead a video + a landing page and a few USD K’s in advertising. That is an extremely clever move. Warning: It only works in very specific scenarios.

Trying to go Viral !

Of course you might also consider viral marketing, but the HR budget is also high (good growth hackers are expensive) and you cannot make forecasts on the outcome, because it is impossible to predict the success of a viral campaign.

It could run perfectly and after 2 months you have your 10k subscribers, or it could be a flop and after 2 months you have 500 subscribers, less money in your account, 2 months less in your year and 40% less energy in your drive deposit.

Be Rational

Sure your goal is the same, either you go one way or the other, you want to generate metrics to gather validation, attention, talent and investors. There are infinite hypothesis, but the only way to be pragmatic between the several options is focusing on a structured rationale having always in mind your Value Proposition.

The video + a landing page + marketing is easier to predict so let’s theorize it. The point of making a non functional MVP is gathering interesting metrics to then make the real investment and/or potentially raise money to implement it and go-to-market. Let’s consider a very simple and humble goal for this non-functional MVP exercise: 10k Subscribers.

Elementary (but meaningful) Calculations

So let’s reason on the cost and time to get early validation through a standard Non-functional MVP: Video + Website + Ads + Few Virality.

To make a proper quality video it will take ~10k USD (2k videos are sh*t, if you pay with peanut you’ll get monkeys. This quality consideration is not talking about the animation but the quality and efficiency of the communication rationale). If we are talking about a filmed one let’s consider ~30k USD onwards (and time from briefing to final product between 1 and 3 months).

A proper website (Single Page) to gather metrics and subscribers could be very affordable, around 2k in the simplest version and around 10k with some marketing automation to better convert the leads.

Marketing on display advertising, if it is a very well run campaign (good video and conversion website) you’ll have a conversion close to x% and the cost-per-click will depend on the sector, but considering a average or median cost-per-click we start at y.

It is extremely hard to forecast a number for Viral k (virality factor), but let’s consider in this exercise: Each user acquired with paid marketing is bringing 4 users, so Viral K = 4.

The calculations (with acceptable numbers):

With 1$ CPC and 15% conversion we’ll have a cost per acquisition close to 1.33$ (CPA = 1$ / 15%). If we want to get the 10k subscribers, well this is a simple multiplication 10k * 1.33$ = 13.3K. Now we add the video and website and we’ve got a minimum total of ~25K and with Cartoon and a maximum of ~45K with video.

VS Functional MVP:

To help you getting to a time and cost for the functional MVP, from our experience with over 100 startups, close to 80% of the cases, a proper functional MVP (implemented with high standards) can be implemented in a ~3 months project with a budget ~30k USD.

Conclusion

Now your final consideration is comparing the effort and output of building a functional MVP vs building a non-functional MVP (compare the time x costs / output).

Remember with a functional MVP, you are actually talking about real conversion, real retention and real cost per acquisition, not forecasts based on shown appetite. I’m also sure your investor’s appetite is much higher with real KPIs, even if the total numbers are low but with a promising conversion and sustainable cost structure.

Example: you come to me (investor) saying you have 10k users that submitted your form saying they are interested VS you come to me saying you have 100 retained paying users as result of an MVP early concept validation and my attention is immediately on.

And By The Way,

I’m part of Altar.io, a team of experienced second time founders & world class Angular2 and Node.js developers based in London / Lisbon, helping companies building great products and data science.

*NEW* We have recently launched 10kstartup.com to help entrepreneurs build their Startup’s Web/Mobile app in 1 month for 10k USD.
If you have a brilliant idea that you want to bring to life, just drop me a few lines in a private message and let’s chat!

Thanks for reading,
Daniel

Thanks for sharing if you find this article useful.
Feel free to raise doubts or questions and also to criticise as much as you like 🙂


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