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Product Development Services 2.0: Startup Success for Venture Capitalists

Why Product Development Services 2.0 may be venture capitalists' panacea ensuring startups' success.

September 12, 2016

In 2015, venture capitalists invested almost $60 billion in more than 4,000 deals. This is despite the fact that most, if not all, know nine out of ten startups will fail.

 

Fortunately, they continue to invest so this indicates the risk is worth the reward. But this also means even a slight increase in the chances a project will succeed is a really big deal. So how can entrepreneurs – and their investors – help ensure a startup is successful? One way is to improve the product development lifecycle.

Evolution of Product Development Services

Recently, many enterprise organizations have begun shifting from a product implementation outsourcing model to a more robust product development outsourcing model (or “PDS 2.0”). With PDS 2.0, an outsourcing provider offers support through all phases of the development lifecycle and with a higher level of ownership, which allows clients to focus on innovation and decrease time-to-market.

A partnership with an experienced PDS 2.0 partner makes the development process more efficient, reliable, and productive – it is one of many ways to position a new startup for success.

Known Factors of Startup Success

As you might know, more than 80% of VC investments funds the adolescence phase of a young company’s lifecycle. In this period of accelerated growth, the financial outlooks of both successful and unsuccessful organizations look strikingly similar.

At this stage all companies are struggling to quickly deliver products to a product-hungry market. It is critical that VCs identify competent management, in particular product management, that can bring a vision to life and execute with purpose.

Need proof? Take a look at this chart from a Harvard Business Review study:

 

Essentially, if you assume there is an 80% chance each individual event is true, there is still only a 17% chance your product will succeed. Consequently, if any individual event’s probability drops to 50%, you can’t expect more than a 10% likelihood of success.

But don’t despair – that likelihood can be drastically increased with proven product development practices, as well as management, industry, and technology expertise. Of course, fulfilling this list is easier said than done and usually costs a fortune. This is where a relationship with a mature and experienced PDS 2.0 outsourcing partner becomes so important.

The Value of Partnership

A PDS 2.0 partner will let you focus on the main issues driving your business and the other factors that contribute to success while offering support for common issues facing startups, including:

  • Insufficient product management, development, and/or implementation capabilities
  • A lack of understanding about product development best practices
  • Capital constraints and/or the need for a faster time-to-market
 

Obviously, partnership alone is not a panacea for all business challenges, but it can definitely help address the issues mentioned above. By delegating some activities to your partner, you free up resources that allow you to manage other areas. Provided that both you and your partner keep the success rate of all the events at a level of 80% or more, the combined effort should result in at least a 20% likelihood of success.

In other words, instead of one startup succeeding out of 10, you end up with two. You double your chances of success. Impressive, right?

This is possible only when you choose the right partner, one you trust and who is capable of fulfilling your needs. Finding such a partner can be a totally new game for VCs that involves new risks and uncertainties.

How do you ensure a potential partner is mature enough? Does your partner have enough of the right capabilities and expertise? In my next blog posts, I will try to answer these and similar questions to help you minimize risks associated with product development.

Meanwhile, find out how SoftServe’s solution helped one client maximize productivity and efficiency while building a collaborative and sustainable environment – the building blocks of any successful startup.

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