Introduction: Navigating Startup Risks as a Non-Technical Founder
As a non-technical founder, taking an idea from concept to product can feel daunting. You may have a clear vision of what you want to create, but the journey from idea to launch introduces a range of risks—some of which can be challenging to navigate without a technical background.
To help guide you through this process, we’re launching a three-part series exploring the essential risks every founder faces, with a particular focus on those that uniquely impact non-technical founders. Each part will cover key risks that, if managed effectively, can set you up for a smoother, more resilient path to success.
In Part 1, we’ll begin with Technical and Product Risks—the challenge of building a product that’s feasible, functional, and able to deliver on its promise. These risks are often the most immediate, as they focus on making sure your product is both technically achievable and aligned with user expectations.
In Part 2, we’ll cover Market and Competitive Risks. Knowing if there’s demand for your product and how to differentiate it in a crowded market are essential steps in building momentum.
Finally, Part 3 will dive into Financial Risk and provide a roadmap for sustainable growth. We’ll also recap the key strategies for managing all five risks, giving you a comprehensive framework to move forward with confidence.
Part 1: Technical and Product Risks – Building a Product That Works and Delivers Real Value
For non-technical founders, the journey from a brilliant idea to a working product can feel like navigating a foreign landscape. You may know what you want to create, but when it comes to actually building it, you’re faced with two critical questions: is it technically feasible, and can it deliver real value?
Technical Risk is the first major hurdle, especially for founders without a technical background. This risk is all about feasibility: can the essential parts of your product be built and work as expected? Managing technical risk means focusing on core functionality and testing on a small scale.
Product Risk follows closely behind. Even if the product can be built, will it meet user expectations and provide a seamless experience? Addressing product risk is about ensuring that what you create not only functions but genuinely solves user problems in a way that’s intuitive and engaging.
In this first part of our series, we’ll explore top strategies to manage technical and product risks, helping you move forward with confidence, even without technical expertise.
Technical Risk: Can Your Product Be Built?
For non-technical founders, technical risk is all about validating whether your idea can be built as envisioned—without overcommitting resources too early. At the MVP (Minimum Viable Product) stage, this doesn’t mean building the perfect, finished product. Rather, it’s about proving that the core functionality is feasible on a small scale.
At Thought&Function, we often emphasise the principle of “spending the smallest amount to validate the most.” By breaking down development into manageable stages, you reduce the risk of overinvesting in untested ideas. Here are the most effective strategies for addressing technical risk at this stage.
Mitigation Strategies for Technical Risk
Begin with a Prototype
A prototype is a powerful tool for addressing technical risk, as it allows you to test specific areas of uncertainty without committing to a full build. The type of prototype you create depends on the risks you’re trying to mitigate.
For instance, if you’re creating an app that matches users with professional coaches in real-time, and there’s risk around implementing real-time matching, a functional prototype focused solely on this feature can help determine whether the backend can support these interactions. This kind of targeted testing removes technical uncertainty and provides a clearer path forward.
On the other hand, a clickable design prototype is less about validating technical feasibility and more about helping your team, stakeholders, or technical advisors identify areas that might pose challenges. While it won’t test the technology itself, it can highlight technically complex areas that would benefit from further feasibility testing with a live prototype or proof of concept.
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Why This Matters: Prototypes are essential tools for addressing technical risks, allowing you to focus on the most uncertain aspects of your product. Whether you’re testing technical feasibility with a functional prototype or aligning your team with a design prototype, the right approach ensures your efforts address the challenges that matter most.
Iterative Development
At Thought&Function, we’re firm believers in iterative development. This approach breaks down development into phases, testing each layer of complexity step-by-step. Iterative development reduces technical risk by allowing you to learn what works and what doesn’t at each stage.
Iterative development lets you refine the product incrementally, learning from each iteration rather than sinking resources into one big gamble. With every step, you’re able to validate key elements of the product, address issues early, and adjust course as needed.
Why this matters: Iterative development doesn’t just mitigate risk; it provides a structured approach to defining a clear roadmap. It helps you understand what’s working, identify where adjustments are needed to change course, and ensure resources are used effectively as you refine your product.
Use Proven, Readily Available Tools and Frameworks
Building with well-supported, reliable tools reduces technical risk by minimising unknowns. Instead of developing every aspect from scratch, development teams can rely on widely used tools and frameworks that have been tried and tested by others.
For example, using Next.js for front-end development or NestJS for the back-end provides stable foundations supported by active developer communities. These tools allow your team to focus on creating value for your customers, rather than dealing with technical challenges unrelated to your product’s core purpose.
Why This Matters: Proven, industry-leading technologies are typically more stable, updated frequently, and supported by comprehensive documentation and larger communities. These factors help reduce overhead, keep costs low, and maximize developer efficiency. Additionally, choosing widely-used technologies gives founders access to a larger talent pool, often at more competitive rates, since niche expertise isn’t required. This approach makes it easier to build a high-performing team, lower costs, and enable developers to focus on delivering what matters most.
Leverage APIs and Existing Libraries
APIs and libraries offer pre-built solutions for common functionalities, speeding up MVP development while reducing complexity. APIs enable you to integrate functions like payments, location services, or language processing without having to build them from scratch.
For many founders, a well-designed clickable prototype, combined with a functional prototype, enhanced with basic APIs, can tackle a lot of risk in one go. By visualising the product, and by demonstrating key features with minimal development, founders can make their vision concrete and functional without overextending resources.
Why This Matters: APIs and libraries streamline development, allowing founders to validate product functionality quickly and focus their efforts on refining unique features rather than elements that don't directly demonstrate the product's value to users and investors.
Product Risk: Will the Product Deliver Real Value to Users?
Once you’ve ensured that the product can be built, the next critical question is whether it will deliver real value. Product risk addresses the risk that the product, even if functional, might not meet user expectations. A product that feels clunky, confusing, or only partially solves the problem can still struggle, even if demand is high.
At Thought&Function, we often guide founders to take a user-centred approach to ensure that what’s built aligns closely with user needs. Here’s how we recommend managing product risk early on.
Key Strategies for Product Risk
Embrace User-Centred Design
A product that isn’t user-friendly can quickly lose traction, even if it addresses a real need. Early user testing helps you gather feedback on core functionality and user experience, guiding you to make adjustments before the product fully launches.
Establish Continuous Feedback Loops
Once users have tried a prototype or early product version, regular feedback is essential. At Thought&Function, we help founders establish feedback loops through multiple methods, including regular demo and review meetings with clients. We also use user analytics tools like Posthog to gather data on user interactions, providing insights into areas where users may be struggling. Additionally, we advise clients to identify groups of friendly users who can test the product early on, offering real-world feedback that shapes the product experience before broader release.
Integrating a Robust QA Process
At Thought&Function, we apply a multi-pronged quality assurance (QA) approach to catch issues early, ensuring that each product is reliable and user-ready. Our QA process includes:
- Automated Unit Testing: Developers write unit tests for new code, often following a test-driven development (TDD) approach. These tests run automatically through our Continuous Integration pipeline, flagging issues before code is merged.
- Dedicated QA Engineers: Specialist QA engineers test each new feature against acceptance criteria (A/Cs) detailed in project tickets, ensuring the functionality meets expectations before release.
- Comprehensive Regression Testing: Our QA team conducts thorough regression tests before any production release, using both manual and automated testing tools to ensure that all features work harmoniously.
With attention to detail, our QA team also identifies subtle usability or design inconsistencies, refining the product to enhance user confidence and satisfaction.
Why This Matters: A rigorous QA process reduces product risk by identifying and resolving issues early, ensuring a high-quality, reliable product experience for users.
Building a Product that Works and Delivers Real Value
Getting technical and product risks right lays the foundation for a product that works and resonates with your users. By focusing on prototypes, iterative development, user-centred design, and continuous feedback, we can build a product that’s not only feasible but also genuinely valuable.
In the next part of our series, we’ll explore Market and Competitive Risks—the essential questions of whether there’s demand for your product and what makes it stand out in a crowded market. Stay tuned for more insights to help you navigate each stage of your growth journey.
Stay tuned!
1 - Prioritise new features / Address User Drop-Off
When you're running a SaaS company, deciding which features to roll out next can make or break your product's appeal. Additionally, understanding why users leave your SaaS platform can be as important as attracting them in the first place. By keeping an eye on KPIs like Churn Rate and Engagement Rate, you gain invaluable insights into what keeps users satisfied and what might be pushing them away. Let's look into some crucial KPIs which can guide you in making well-informed decisions about your next big feature update:
1. Feature Conversion Funnel:
This KPI measures how effectively users move from initial engagement to full use of a feature. It helps SaaS companies identify where users drop off, guiding improvements to enhance feature adoption and prioritising development efforts.
You can use the following formula to calculate this KPI:
2. User Engagement Rate:
For SaaS companies, engagement rate measures how actively users are interacting with the application. High engagement rates are often indicative of a valuable and sticky product, reducing the likelihood of user drop-off.
The calculation for this KPI can be done using this formula:
3. Customer Satisfaction:
This KPI measures how satisfied customers are with a product or feature, typically through surveys. High satisfaction rates correlate with lower churn and higher loyalty, making it essential for evaluating user experience and identifying areas for improvement in SaaS offerings.
The calculation for this KPI can be done using this formula:
2 - Accelerate User Growth
Growing a user base is one of the most exciting challenges in the SaaS world. It's not just about bringing in new sign-ups but ensuring they stick around and find real value in your product. We'll delve into effective SaaS KPIs like Monthly Active Users and the Growth Rate of New Signups that can help you craft strategies to not only attract more users but also engage them deeply:
1. Customer Acquisition Cost (CAC)
The CAC is a crucial KPI for SaaS companies, as it quantifies the cost involved in acquiring new customers. Understanding this metric is essential for evaluating the effectiveness of your marketing strategies and ensuring sustainable growth by maintaining a balance between expenditure and incoming revenue.
To find this KPI, use this formula:
2. Growth Rate of New Signups
This KPI tracks the percentage increase in user signups over a given period. It's particularly useful for SaaS businesses to monitor momentum in market penetration and user interest, helping to direct marketing efforts and product development.
This formula is used to calculate the KPI:
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3. Monthly Active Users (MAU)
In the SaaS world, the MAU KPI measures the number of unique users who interact with your software within a month. This metric is vital as it indicates the active reach of your product and helps gauge the overall stickiness and appeal of your platform.
The following formula can be used to calculate this KPI:
3 - Provide Product Metrics to Investors
Communicating effectively with investors is crucial for any SaaS business. Clear and precise metrics like Monthly Recurring Revenue (MRR) and Churn Rate not only showcase the financial health of your company but also reassure investors about the scalability and stability of your business model. Let's walk through the vital KPIs that paint a transparent picture of your SaaS company's performance for its stakeholders:
1. Monthly Recurring Revenue (MRR)
MRR is a key financial metric for any SaaS business, reflecting the total predictable revenue generated from customers every month. It's essential for investors as it provides a clear picture of the company’s financial health and growth potential.
Here’s the formula to calculate this KPI:
2. Churn Rate
Churn rate is an indispensable KPI for SaaS companies, indicating the percentage of customers who discontinue their subscriptions within a specific period. A lower churn rate suggests a higher customer satisfaction and product-market fit, which is critical for long-term success.
This is the formula for calculating the KPI:
3. Lifetime Value (LTV)
LTV measures the total revenue a SaaS company can expect from a single customer throughout their relationship. This KPI is crucial for understanding how much a company should invest in acquiring customers and for determining the profitability of long-term business strategies.
Use this formula to find the KPI:
4 - Optimise Revenue Generation / Monetisation
Turning your SaaS platform into a robust revenue-generating machine requires more than just great software; it needs a smart monetisation strategy. By focusing on KPIs like Average Revenue Per User (ARPU) and Conversion Rates from Free to Paid, you can really dial in on what makes your users upgrade and how to boost your overall profitability. Let’s break down these KPIs and explore how you can use them to fine-tune your monetisation efforts for maximum impact:
1. Average Revenue Per User (ARPU)
ARPU is a critical financial KPI for SaaS businesses, measuring the revenue generated per user. It helps in assessing the revenue impact of different operational strategies and in fine-tuning pricing models.
Here's the formula you need to calculate this KPI:
2. Conversion Rate from Free to Paid
This metric tracks the percentage of users converting from free trial versions to paid subscriptions. For SaaS companies, a higher conversion rate indicates effective monetisation strategies and a compelling value proposition.
The following formula can be used to calculate this KPI:
3. Revenue Growth Rate
The revenue growth rate is an essential KPI for SaaS businesses, showcasing the rate at which the company's revenue is expanding. This KPI is vital for investors and stakeholders to assess the overall business growth and scaling capacity.
You can find this KPI using this formula:
5 - Improve Business Resource Allocation and Strategy
Ensuring sustainable business growth and operational efficiency is paramount for any SaaS business. Key performance indicators (KPIs), such as the LTV:CAC ratio, provide a clear picture into the returns generated and optimal resource distribution. Let's dive into the KPIs that will help you strategically allocate resources, adjust marketing strategies, and effectively balance customer acquisition with retention:
1. Customer Lifetime Value to Customer Acquisition Cost Ratio (LTV:CAC)
The LTV:CAC ratio is a vital KPI in the SaaS industry, providing insight into the relationship between the lifetime value of a customer and the cost to acquire them. A healthy ratio indicates that a company is spending efficiently on customer acquisition while maximising revenue from each customer. The bigger the multiple, the more budget you can put into growing a team and customer growth.
To find the KPI, apply the following formula:
2. Customer Acquisition Cost Payback Period
The Customer Acquisition Cost (CAC) Payback Period is a critical metric for SaaS businesses. It measures how long it takes to recover the costs of acquiring new customers, helping companies evaluate the efficiency of their marketing and sales efforts. A shorter payback period means a quicker return on investment, guiding better financial and strategic decisions.
This formula will help you calculate the KPI:
3. Market Penetration Rate
The Market Penetration Rate is essential for understanding a SaaS company's market impact. It measures the percentage of the total addressable market that the company has captured. This metric helps assess competitive position and growth opportunities, indicating how well the product is adopted in the market.
Use this method to calculate the KPI:
