Startup ecosystem effect on minimum viable product development in software startups

Abstract

Abstract Context Software startups develop innovative products through which they scale their business rapidly, and thus, provide value to the economy, including job generation. However, most startups fail within two years of their launch because of a poor problem-solution fit and negligence of the learning process during minimum viable product (MVP) development. An ideal startup ecosystem can assist in MVP development by providing the necessary entrepreneurial education and technical skills to founding team members for identifying problem-solution fit for their product idea, allowing them to find the right product-market fit. However, existing knowledge on the effect of the startup ecosystem elements on the MVP development is limited. Objective The empirical study presented in this article aims to identify the effect of the six ecosystem elements (entrepreneurs, technology, market, support factors, finance, and human capital) on MVP development. Method We conducted a study with 13 software startups and five supporting organizations (accelerators, incubator, co-working space, and investment firm) in the startup ecosystem of the city of Oulu in Finland. Data were collected through semi-structured interviews, observation, and materials. Results The study results showed that internal sources are most common for identifying requirements for the product idea for MVP development. The findings indicate that supporting factors, such as incubators and accelerators, can influence MVP development by providing young founders with the necessary entrepreneurship skills and education needed to create the right product-market fit. Conclusions We conclude from this study of a regional startup ecosystem that the MVP development process is most affected by founding team members’ experiences and skill sets and by advanced technologies. Furthermore, a constructive startup ecosystem around software startups can boost up the creation of an effective MVP to test product ideas and find a product-market fit.