What's a fair price for building an MVP that turns out to be a bad business idea?


2

Let's assume a worst-case scenario: you build the MVP. MVP shows the idea is flawed. What's the value you just generated?

MVP

asked Dec 28 '11 at 18:29
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User495705
11 points

4 Answers


2

The whole purpose of the MVP is to validate your assumptions. Write your assumptions down, create an MVP to measure those assumptions, then analyze the results. If your assumptions were wrong, use the data you gained to enlighten those assumptions. Then pivot or stay the course.

An MVP can never fail you if you use it right. Its either going to validate your idea or its going to shape a new idea.

I recommend you read The Lean Startup by Eric Ries. The book is pretty much your question and my answer but it much greater detail.

answered Dec 29 '11 at 01:50
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Mike Nereson
411 points
  • Learning from your MVP can not be an afterthought or a side effect. Learning is the reason for the MVP. – Mike Nereson 8 years ago

1

A failed MVP could be worth a lot depending on what the flaw is. Essentially the flaw is a learning lesson, and perhaps the flaw could not have been known without first building the MVP.

Perhaps an example is appropriate: Suppose you build an app for runners to use targeted for the HP Touchpad and HP discontinues the product (which happened, see link). This is a fatal flaw. Suppose further you did some test marketing with runners who tell you "This is a great app, but I don't want to carry a tablet with me when I run, I already carry my iPhone, why can't it work on an iPhone?"

At this point you have learned a lot, including that people are willing to buy your product once you re-target it to an iPhone.

To me this has real value.

answered Dec 29 '11 at 00:52
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Jonny Boats
4,848 points

1

It depends how you define value. It also depends on: value to whom?

If we use the most common definition of value as: how much money can you get for it in a free market, then the most likely answer is $0. No one will pay you to acquire a failed MVP, especially if the failure is in the idea itself (cannot be fixed) vs. e.g. implementation details (which could conceivably be fixed).

There's definitely some value to you since you must have learned something along the way, but it's impossible to quantify in dollars and if you're really pedantic, it could just as well be negative value due to opportunity cost i.e. in the time you've spent building MVP you could have built something that generated revenues.

answered Dec 29 '11 at 12:26
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Krzysztof Kowalczyk
1,950 points

0

Zero? Take the loss like a business man and write it off, from taxes. THAT SAID: merging with your company could be a good proposition for a successfully company to get their hands on their loss. For example I would love to pay 10% of your loss for your business - after all, I pay 19% income tax on my income, so if I pay you 100 USD for a 1000 USD loss, then I save 190 USD taxes, gives me 90USD more cash. Details vary by tax jurisdiction.

answered Dec 28 '11 at 19:51
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Net Tecture
11 points

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