Photo credit: Parent Co
I have been organizing meet ups on product management here in Cebu, Philippines. We visit startups in their offices, and we do a conference-type event, where the companies we visit share how they build software. These were the companies we visited.
My main takeaway? Software development is a long and expensive game. Saastr says to budget at least 24 months to reach initial traction. Based on my data, a more realistic number for this part of the world is 36 to 60 months (3 to 5 years).
The first years would cost roughly the same as a small manufacturing business or a small real estate project. It is expensive because the worst outcome would be countless lines of useless code, not equipment or land you could sell at a loss. Failure for startups (businesses without established playbooks) is also more likely than ones with proven business models.
Despite all these, the call of software product development is irresistible to many entrepreneurs, because with software, it costs practically zero time and money to replicate the value you create (aside from being creatively rewarding). Financially, software startups are the worst kind of business to fail with, and the best kind of business to succeed with.
Before I share how these startups funded their product development, let me list down the other important things I learned from these meetups.
- Great programmers are hard to find. Their salaries are more than two times that of a non-programmer with the same years of work experience and the same base talent. Competition for talent is tough. Salaries are rising fast. Most don’t care about equity; pay market salaries. Always be recruiting.
- CTO-level guys. I’ve only seen 3 variants: 1) You are one. 2) Your co-founder is one. 3) You could afford to hire one. Note that Clicklabs and engageSPARK had to import CTOs from abroad.
- The founder or a co-founder should manage the team and the product. If you have no experience in software development, the tuition fee to reach level 1 is 12 months of bloody hand-to-hand combat. Start with vanilla scrum. Experiment with the team (e.g., length of sprints, QA process, tools). Experienced developers help with work process and momentum. Expect attrition.
- Launching your product will take at least twice as long and twice as expensive as you expect.
More musings from those meet ups here and here.
So how did these companies fund the development of their products?
1. Do software development for other companies
Sym.ph built a team of 25 through classic outsourced software development, growing their clients largely through word-of-mouth. Albert Padin leads the software development. Dave Overton does the business development. Since the beginning, their dream was to build their own products. At some point, they realized they needed to have folks dedicated to their internal projects to make this happen. They now have 6 developers who do this full time, funded by profits from projects for other companies.
Arup Maity and team built Blastasia, based in Manila, also through outsourced software development. After more than a decade of relative stability, they invested in building their own product, Xamun.
Eric Su was one of the first guys to raise some capital among this generation of Philippine startups. He got funding from Toivo Annus (Skype’s co-founder), Plug n Play and Kickstart. He built a team of 15 — possibly the best mobile development team in PH. He has extended their runway indefinitely without further dilution by accepting mobile development projects.
2. Go enterprise and build something with early revenue
Other Playbooks
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