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

If you’re deciding how to create your MVP there is an initial question you must ask yourself:

“Should I make a Functional OR Non-functional MVP?”

This is an important question. The answer can save you time, money and ultimately prevent you from choosing the wrong vehicle to prove your assumptions. All of these factors will contribute to your chances of success or failure. 

First, remember why you’re building an MVP: 

“Your MVP should be the shortest path to prove that people need your solution and will adopt your product.” 

Keep this in your mind as we move on and discuss the differences between functional and non-functional MVPs. 

Functional MVP 

A functional MVP is where you build a product and put it into the hands of your users. One great example of a functional MVP is Airbnb.

In 2007, roommates and former schoolmates Brian Chesky and Joe Gebbia Moved to San Francisco to start a business. 

But they struggled to afford the rent of their San Francisco loft apartment.

So, they opened up their apartment as cheap accommodation for attendees of a nearby design conference.

They took pictures of the apartment, uploaded it to Craigslist and had three paying guests in no time. They saw there was a market for this. So they identified the key features needed to prove that there was, in fact, a market, and built them into an MVP. 

They built a website that allowed you to explore the accommodation and book a room. It succeeded and they iterated on it to build the feature-rich product we know today.  

While this method has been successful for many companies, there are pros & cons of building this kind of MVP:

Pros

It allows you to validate customer action, not just intent. It allows you to measure real conversion, retention, cost per acquisition, etc. Not forecasts loosely based on market appetite. 

If your MVP proves successful, you’ll also have built a solid foundation on which to iterate your fully-featured product. 

You also get a head start, as committed early-adopters who were part of your MVP process are prone to stick with you as your product improves. 

Cons

Building a functional MVP is, in most cases, more expensive than a non-functional version. It takes longer to build and is harder to manage. 

For example, if you’re a non-tech founder, finding the right technical partner to execute the development of a functional MVP can take a lot of time and effort. There are however options to solve this, that can cut down both costs and time-to-market, without compromising on quality.

Non-Functional MVP

A non-functional MVP is a tool that you create to test interest in your market. For example, building a landing page, creating a promotional video or launching your product on a crowdfunding platform like Kickstarter. 

The most common, and stand out, example of a non-functional MVP is Dropbox. Instead of building a product to validate the assumptions, founder Drew Houston built a landing page and promotional video to whet the market’s appetite.  He spent $2,000 on ads and had 75,000 users on his waiting list overnight. 

The idea seems simple by today’s standards. Easy cloud storage for anything from documents to photos and music that would integrate with every device in your household.

At the time, however, the product was considered revolutionary. The video was enough to validate their assumptions and Dropbox is still one of the most popular cloud storage solutions on the market.  

As with a functional MVP, there are pros and cons to this approach. 

Pros 

Building a non-functional MVP can save you a couple of thousand dollars in development costs. Landing pages, professional videos and alike are usually cheaper, compared to building a basic, yet functional product.

It also creates a buzz around your product and allows you to build an email list of interested potential users. 

Cons 

If you need to measure KPIs such as customer retention, whetting the market’s appetite with a non-functional MVP simply isn’t going to cut it. 

You can only go so far as to measure customer intent, which can often be extremely different from customer action. A prime example of this comes from serial entrepreneur, Yaron Samid, who, in a recent conversation with us, noted about his product that: 

“People had the intent, but when we launched, suddenly nobody stopped what they were doing to sign-up and use it.

Taking action is not free. People have to make the decision to go get your product. That requires a driving force.”

Although most non-functional MVPs allow you to build a list of potential users’ contacts, you still have to build a functional product. The race is on to get your product to market before those excited users start to lose interest. 

This short comparison of the two has undoubtedly already given you some clues as to which you should build. But there are some elements that can help you with this decision. 

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. 

We often see entrepreneurs going for the non-functional approach because they think, just like Dropbox, they’ll be able to gather quick validation at a fraction of the cost. 

But is that always the case? 

Non-Functional MVP Costs & Time to Build

Not all non-functional MVPs are made the same. 

Sure, you can create a decent landing page and an ad campaign for a few thousand dollars. In terms of launch, you can expect anything between two to three months. 

Bear in mind, however, that the business landscape is radically different from when Drew Houston launched Dropbox. 

Nowadays, the landscape is much more crowded and competitive. Not to forget that not all ideas were as disruptive as the idea behind Dropbox. At the time, file storage on the cloud for the masses was a one-in-a-million idea. 

To stand out, you’d have to create something worth the market’s attention, both in terms of presentation quality and the “one-in-a-million” idea.

Let’s imagine you decide to create a video.

To make a proper quality animated video it will take ~10k USD. Any less and you compromise quality – if you pay peanuts you’ll get monkeys. 

This quality consideration is not about the animation per se, but more about the quality and efficiency of the communication and execution. 

In terms of a live-action video, let’s consider ~30k USD onwards.

Whether you choose an animated or live-action promotional video, you can expect delivery of one to three months from briefing to the final product. 

So yes, you may save some money in the process of building a non-functional MVP. But you have to weigh that up against the fact that grabbing attention in today’s business landscape is no mean feat. 

Of course, if you need to grab attention, you could go for a wildcard option, trying to go viral. 

Try to go Viral!

With the viral marketing option, the HR budget is high (good growth marketers are expensive). Also, you cannot make forecasts on the outcome because it’s impossible to predict the success of a viral campaign.

It could run perfectly and after two months you have your 10k subscribers. 

Alternatively, it could be a flop and after 2 months you have: 

• 500 subscribers
• Less money in your account 
• 2 months less in your year 
• 40% less energy in your drive deposit

The reason that this is a wildcard, and should be considered very carefully, is because until you do it, you have no way of knowing it will work. 

Finally, here’s what it takes to launch a functional MVP. 

Functional MVP Costs & Time to Build

A good-quality, functional MVP will set you back anywhere between $15,000-$50,000. It all depends on your industry, how many features you need to validate your assumptions and on whether you build with an agency or hire your own team of developers.

You can expect to launch a functional MVP between three to six months after development begins. Again, this is highly dependent on your specific industry and requirements and can take longer.

Which Should You Choose? 

I’ve already accompanied over 100 startups through Altar.io during this decision. From that experience, most startups jump in right away to develop the product. However, the alternative of a non-functional MVP should be considered. 

Your final consideration should be based on comparing the effort and output of building a functional MVP vs building a non-functional MVP (compare the time x costs/output). If you can complete your MVP’s goals with a non-functional MVP that lets you save time and money, that may be the answer for you. 

That being said, 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.

Let me leave you with this example. Say I am an investor and you say to me:

“I have 10K users that submitted a form saying they are interested in my project” 

Versus: 

“I have 100 retained, paying users as a result of my MVP.”

As an investor, the latter will immediately grab my attention, pique my interest and you will leave me hungry to learn more.