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Everything You Need To Know About MVP In SaaS

Minimally Viable Product

A simplified software version with essential features for user feedback to validate the core product.

What Is MVP In SaaS?

A minimum viable product (MVP) in the SaaS industry is a simplified version of the software that contains enough features for prospects to use it and provide feedback. The main objective of an MVP is to test the waters and validate the primary product before a company invests too much time and money in product development.

Key characteristics of a sound SaaS MVP:

  • Functional: It should be able to solve a real problem for target customers.
  • User-friendly: Even non-technical users should be able to use it without operational hassles.
  • Viable: The basic version should attract users and generate revenue minus all the bells and whistles.

Five Reasons Why MVP Is Important For SaaS Companies

Starting a SaaS business is expensive, time-consuming and tricky. Per a McKinsey study, a funded software company with a 20% annual growth has a 92% chance of failing within a few years. This can be attributed to various reasons, including tepid growth rates, poor business models, low price points, cash flow issues, high customer churn, tough competition and flux in the funding market. Here’s how an MVP helps:

  • Validates demand: Although extensive market research can provide valuable insights, it cannot guarantee a market demand. However, creating an MVP allows a SaaS company to assess its demand among real customers and how it stacks up against the competition. If customers find the MVP valuable, the company can build a better version of the product and add value. Otherwise, one should scrap it or do better market research to improve or pivot.
  • Kickstarts revenue plans: Building a perfect product won’t sustain a company unless the money flows in. An MVP can give them a head start, though, as they can start earning from early adopters and cover development costs. Additionally, companies can explore and evaluate value-added features to develop tiered pricing for revenue optimisation.
  • Sticks to the core product: An MVP sticks to core functionalities and does not spend copious amounts on non-essential secondaries at that point. Besides, a lean and agile product team can make necessary changes in sync with market trends to remain sustainable. If the basic product is well-received by users, add-ons can be introduced over a longer period. A mature product will require more sophisticated technologies, an extended development period and additional investments and resources, which may not happen initially.
  • Unlocks feedback: When tested by real-life users, MVPs will generate plenty of feedback to help companies fix bugs and modify products for optimum benefits.
  • Attracts investors: Early stage SaaS startups may face scepticism from potential buyers and investors. So, creating an MVP is crucial to demonstrate the product’s potential, establish its credibility and subsequently attract investors to drive growth.

How Three SaaS Behemoths Created MVPs To Corner Success

Globally, many successful SaaS companies started with minimum viable products to validate ideas and gain traction. Here is a look at the key takeaways:

  • Dropbox:  Dropbox, a cloud storage and file-sharing platform, launched its MVP in 2008. The simple version enabled users to store and share files across multiple devices. Despite its limited features, the MVP effectively validated the concept and received valuable feedback from early adopters. Hence, Dropbox was able to iterate and enhance its product rapidly. Within the first year of its launch, the company amassed more than 1 Lakh registered users. Today, the San Francisco-headquartered SaaS giant is one of the largest cloud service providers, offering users an easy way to access their data on any device, anytime.
  • Buffer: In 2010, the social media management platform Buffer developed an MVP as a two-page website that asked users if they would be interested in a social media scheduling tool. Buffer’s founder-CEO, Joel Gascoigne, used customer feedback to build a basic version of the platform that allowed users to schedule tweets. This helped Gascoigne validate his idea and get early adopters. As per its website, Buffer serves 140,000+  users every month.

      A look at Buffer’s two-page website:

Minimally Viable Product

  • Slack: The Slack team began working on the platform by the end of 2012, and by March 2013, the team started using its minimum viable product. Instead of relying on user feedback, the team did its internal assessment to gain firsthand insights into what was effective and what needed improvement. Their initial efforts were successful, allowing the team to fine-tune and enhance the product through various iterations. Following this, Slack extended product testing to a larger audience from different organisations. The twofold strategy for MVP development was highly effective, making Slack one of the most widely used workplace communication platforms. Its website states that as many as 65 Fortune 100 companies use Slack, and it has a reach in more than 150 countries.

Three Ways To Develop A Winning MVP In SaaS

Use simple programming languages: Languages like Ruby on Rails, PHP and Python are great for fast prototyping. But these are not ideal for large user bases or heavy workloads. Conversely, complex programming languages like ASP.NET require more time and skill but work better. Early stage companies can use simple programming languages to develop their SaaS MVPs quickly. But if they want to test it on a large and growing customer base, ASP.NET is recommended.

 Try open-source tools for free: As open-source tools do not cost anything, these can be an excellent choice to add features to minimum viable products. But there are downsides. These tools often lack clear instructions or may have hidden issues. However, if you know how to use open-source tools well, these can save a lot of money in the MVP phase.

Go for ready-to-use solutions: Instead of building standard features like chatbots from scratch, a SaaS startup can look for existing solutions to reduce its efforts. For instance, a  pre-built virtual chat agent can be easily integrated with its core product to provide real-time communication and customer query resolution.