A friend recently asked me for some basic tips on how to develop an app business, this post is a summary of my e-mail to her.
7 High Level Tips
Don’t build it and expect customers to come. They won’t. They’re busy. Sell it, then build it.
Consumer apps are hard work and dependent on a huge amount of luck. B2B (Business to Business) much better. In other words, instead of charging each customer for delivery of food, charge the employer a flat fee for delivery of a basket every day.
Fast followers make more money than first movers. If you can see someone in the world that’s making money using your idea, shamelessly copy him/her in every way possible. Maybe use a different name.
If you don’t get negative feedback on your idea, you probably have a bad proposition. Why? Because if it’s so obvious then someone else is definitely doing it, and you’re entering a competitive environment. Competition eats profits for breakfast. Much better to enter a vacuum and build a monopoly. As Peter Thiel regularly reminds us, monopoly businesses are awesome.
Products come and go, networks are forever. If you’re making a new phone, you’re guaranteed to eventually go the way of the dodo (or the Blackberry). If you’re building a network that connects all the phones, you’re guaranteed to be around for a very long time. Apple, btw, makes devices and ties them all together with networks like iMessage, the AppStore and iTunes. Apple will be around a long time.
Ideally you want a tech partner having a share of the equity. Issue a small amount of shares, then pay a discounted rate for the dev-time and provide an opportunity to ratchet up equity based on milestones. That way the incentives are aligned.
If you ever need to raise a sizeable amount of cash (i.e.: R5mil or more), you’ll have to move to Silicon Valley. The Valley is the only place on earth with sufficient cash and risk appetite for tech start-ups. Valley-dwellers only invest in companies they can visit by car.
Where Do I Start and Other Questions
Question: Where do I start?
Answer: Sign up (and register) a business to pay a monthly subscription for your product. If you insist on going down the direct-to-consumer road, build a “Minimum Viable Product”, launch it, see what happens. You’re in for about R100,000.
How do I choose a developer?
It’s like dating. Personal reference is much safer than meeting on the Internet.
Should I use a local company or as my sister has done in the past with Website development, opt to outsource to a place like India?
Go local or go home. Communication challenges aside, outsourcing is fraught with risk, particularly around who owns the IP. Imagine suing a company based in India? Keep it simple.
Is assessing past work a good way of judging a developer's capabilities?
Yes. Client references are best. Experienced developers are generally better than new guys on the block. They know what they don’t know.
Do I need a detailed draft of what I envisage (I have a number of ideas but I'm not sure how much should be left to the developer to decide)?
The more detailed the spec the better. It’s actually impossible to be too detailed. Axure is a great wireframe app.
Do I negotiate a turnkey project fee (not sure what app speak for this is) or pay by the hour as many of the guys online advertise?
Phase 1: iOS only.
Phase 2: Android.
Read Eric Ries’ book, The Lean Startup.
How do you determine whether to begin with Android or Apple or both?
Apple first, always. Rich people have iPhones. Poor people don’t. It’s difficult to make money from poor people. They don’t have money. That’s why they’re called poor people.
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