How to scale a tech start-up in a recession

What is a minimum viable product (MVP) and how can you use one to scale your tech start-up fast? What is agile development? Ritam Gandhi answers your questions

One of the best things about working in a digital agency is connecting with so many aspiring tech entrepreneurs. Every week there is a new person with designs on creating a product or service that will challenge the status quo, help overcome common problems, or create entirely new opportunities for people.

According to a recent study, some 42 per cent of UK adults in full-time employment dream of leaving their jobs and starting their own business.

Such entrepreneurial spirit has to be celebrated, particularly given what we have been through over the past three years. The pandemic could easily have driven people towards conservatism; in fact, it had the opposite effect, encouraging thousands more would-be entrepreneurs to take the plunge and start their own business.

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A little over 753,000 new start-ups were founded in the UK between March 2021 and March 2022 – the second-highest number of start-ups registered in one year in Britain, only topped by the 810,000 start-ups founded over the previous 12 months.

However, since March 2022, the economic landscape has morphed for the worse. Where there was hope that the hardships and economic uncertainty brought about by Covid-19 were finally dissipating, the reality has been challenging.

What the economy means for tech start-ups

Soaring inflation has impacted businesses just as it has consumers. For a start, businesses have responded by paying employees more; salaries rose at record rates in 2022. Also, it has pushed up interest rates, affecting how much a start-up can afford to borrow if considering a business loan.

Similarly, tech businesses’ other overheads – from commercial rents to supply chain costs – are increasing. All the while, the cost-of-living crisis is eating into the spending power (and appetite) of prospective customers, whether a business is reliant on B2C or B2B trade.

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The current economic climate is impacting the tech investment sector, too; UK technology investment dropped 22 per cent last year, one of the steepest falls in Europe, amid difficult economic headwinds.

Put bluntly, this is a challenging time to start and scale a new company. But entrepreneurs should not be unduly disheartened nor discouraged.

For tech start-ups – those in their early years or even still in the ideation phase – these economic conditions mean that it has never been more important to build and deliver tech products as efficiently as possible. And that is no bad thing.

Embracing the challenge

A savvy marshalling of one’s resources is essential for most start-ups. Frugality is a good practice – investors will want to see it when the time comes to raise funding and being frugal will help an entrepreneur take a business as far as possible without having to borrow or give away equity.

So, what does this mean for developing, launching and scaling a tech start-up?

Minimum viable product (MVP)

There are financial efficiencies to consider in each stage. In the development phase, for instance, entrepreneurs should look closely at what their minimum viable product (MVP) is going to look like.

It is difficult to define an MVP, given they can vary so dramatically in form, function, purpose, and audience. Instead, it is best to clarify the concept: an MVP is the first form of a product that can be released to users, with the intention of gathering and analysing user data to determine future development.

With no easy cash in circulation, entrepreneurs must be focused on creating an MVP on time and on budget. Bring something to market that showcases the core purpose of the tech products, and then worry about adding further functionality – then the bells and whistles – further down the line, ideally when the business is revenue-generating or seed investment can be sourced.

At the heart of the “lean” start-up methodology is the principle of getting a product into the hands of customers as quickly as possible, eliminating wasted resources, and maximising efficiency. Then, it can be tested on real use cases, and the value of the product assessed. Internal feedback loops can be more quickly side-lined, and resources can be concentrated on building and learning – allowing start-ups to authenticate the worth of their concept and present a robust case for viability to potential investors.

Entrepreneurs and their development team must zone in on what their MVP will look like and work towards that very clear goal.

Launching and scaling

With a product ready to be put into customers’ hands, entrepreneurs can then prepare to launch and scale their tech start-up. But still, with revenue likely to be non-existent and profits perhaps months or years away, keeping a tight grip on those purse strings is essential.

Again, the key to successfully scaling any new tech product is a measured and considered planning stage. It will sound clichéd but trying to build on poor foundations is likely to end in disaster.

To scale a tech start-up, as well as an effective sales and marketing strategy, entrepreneurs must have a robust product roadmap which is centred around the user’s need. They can then update their proposition based on feedback as more and more people use it, allowing them to then prioritise the most important features and functionality required, scaling the product based on utility and value which the incremental functionality delivers.

Agile development

Ongoing, agile development based on feedback loops will not only ensure the product develops in line with the needs of its users, but it will also aid a frugal approach. It will prevent startup founders from focusing on the wrong things; it forces the business to listen to its customers and build something that best fits their wants and needs.

Focus is everything. There is no time or money to be wasted in pursuing needless functionality or failing to market a product based on things customers are not so worried about.

Focus on what you do best

In 2023, the best tech newcomers are likely to be those who focus on doing one or two things and doing them exceptionally well. They may evolve to do much more besides, but in the current economic climate, having a clear vision of the MVP and its agile development post-launch is of the utmost importance.

Personally, I am excited to see how entrepreneurs respond to the challenges posed by high inflation, a potentially lengthy recession, and with investment trending down. You can be sure that entrepreneurs will find a way to scale their tech start-up – and finding a way to thrive on a tight budget is a fantastic skill that should be embraced at any time.

Ritam Gandhi is founder and director of Studio Graphene, a London-based company which helps develop blank-canvas tech products, including apps, websites, AR, IoT and more. The company has completed over 250 projects since it launched in 2014, working with both new entrepreneurs and product development teams within larger companies

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Ritam Gandhi

Ritam Gandhi is founder and director of Studio Graphene, a company which helps develop blank-canvas tech products, including apps, websites, AR and IoT.