Five lessons from building
and selling five startups

I have now been involved in building and selling five startups.

They have operated in very different markets. We sold a car parking payment platform to a very well-known parking brand, a church communications application to one of the largest faith software providers in the United States and a charity fundraising platform to a large private equity-backed software group, among others.

Each business had a different product, customer and route to market. Some began with a clear plan. Others changed direction several times before we found where the real value was.

None of the exits happened because we followed a perfect startup formula. They happened because we found a genuine problem, built something customers needed and eventually created something another company believed was more valuable to own than compete against. That product-building experience now informs our development service.

Here are the five most important lessons I have learned.

1. A valuable business starts with a painful problem

The best startup ideas are not always the most exciting ones.

Parking payments, church communications and charity fundraising may not attract the same attention as a new consumer social network, but they contain real operational problems affecting organisations every day.

People struggle to pay for parking. Churches need to communicate with members who use different channels. Charities need to manage fundraising events, payments, donors and auctions without combining several disconnected systems.

When a problem is frequent, expensive or frustrating, customers have a reason to solve it.

This matters more than whether the idea appears innovative from the outside.

A common mistake is starting with a technology and then looking for somewhere to apply it. We have had much better results by starting with the work people already find difficult and asking whether software can make it meaningfully easier.

The questions I now ask are:

• Does this problem happen regularly?
• Who feels the pain most strongly?
• Is someone already paying to solve it?
• Is the current solution slow, expensive or frustrating?
• Would solving it create a measurable improvement?
• Can we reach the people who experience the problem?

If the problem is weak, even an excellent product will struggle. If the problem is painful enough, customers will often tolerate an imperfect early product because it already makes their lives better.

2. Distribution matters as much as the product

Founders naturally spend a great deal of time thinking about the product.

It is easy to believe that if the product is good enough, customers will find it. That rarely happens.

A startup also needs a practical way to reach its market. This is particularly important in specialist industries where the number of potential customers may be limited and relationships carry significant weight.

You need to understand:

• Where customers already look for solutions
• Who influences the purchasing decision
• How long the sales process takes
• Whether customers buy directly or through partners
• Which integrations make the product more useful
• What prevents a customer from changing provider
• How much it costs to acquire an account

In several of our businesses, partnerships and industry relationships became just as important as product development.

A larger company may already have thousands of customers, an established sales team and trusted relationships within the market. A startup can sometimes build a better solution more quickly, but the established company has the ability to distribute it at a scale the startup cannot easily achieve alone.

That difference can create the basis for an acquisition.

The value is not simply that you have built a piece of software. It is that your product becomes much more valuable when placed inside the buyer’s distribution network.

3. You do not need to build everything

Founders often feel pressure to make a product comprehensive before taking it to market.

This can lead to months or years of development without enough evidence that customers care about the core proposition.

Most successful products begin by doing one important thing particularly well.

Our early products were never complete. They solved a specific problem well enough for customers to use them and provide feedback. That feedback showed us which features mattered, which assumptions were wrong and where customers were willing to pay.

There is an important difference between an incomplete product and an unreliable one.

Customers may accept that an early product has a limited set of features. They are less likely to accept that it loses data, mishandles payments or creates more work than it removes.

The objective is not to build the smallest possible product regardless of quality. It is to build the smallest dependable solution that proves the main idea.

Before adding a feature, I now ask:

• Does this help us win or retain a customer?
• Is it required to deliver the core outcome?
• Have several customers requested it?
• Does it make the business more attractive strategically?
• What will we delay if we build it?

A long feature list can make a company look busy without making it more valuable.

4. Build something another company would struggle to recreate

An acquisition does not happen simply because a startup has revenue.

A buyer needs a reason to purchase the company rather than build a similar product itself.

That reason might be:

• A strong position in a specialist market
• Customer relationships that would take years to develop
• Technology that is difficult to reproduce
• Valuable integrations
• Proprietary data
• A recognised brand
• Industry expertise
• A product that fills a strategic gap
• A team with experience the buyer needs
• Speed to market

The strongest acquisition opportunities often combine several of these.

A buyer may be able to recreate your visible product features. It may be much harder for them to recreate the years of decisions, customer knowledge, integrations and industry relationships behind those features.

This is why specialist knowledge can be so valuable.

Our products came from understanding how people actually worked in parking, churches and charitable fundraising. That understanding influenced hundreds of small product decisions. Individually, those decisions may not appear defensible. Together, they create something that is difficult for a general software company to reproduce quickly.

Founders should not build a company solely to sell it, but it is worth understanding who might eventually find it strategically valuable.

Ask:

• Which larger companies serve the same customers?
• What capability are they missing?
• What would take them too long to build?
• Would owning our product increase their revenue or retention?
• Could our technology strengthen a wider product suite?
• Would acquiring us prevent a competitor from gaining an advantage?

The answers can influence product priorities, partnerships and positioning long before any sale discussion begins.

5. Make the business easy to buy

A buyer is not only purchasing the product. They are taking responsibility for the company behind it.

Interest can disappear quickly if the technology, contracts, ownership or finances are unclear.

A startup becomes easier to acquire when it has:

• Clear ownership of its code and intellectual property
• Written agreements with founders, employees and contractors
• Accurate financial records
• Documented customer contracts
• Understandable recurring revenue
• Limited dependency on one person
• Secure and maintainable technology
• A clear product roadmap
• Reliable information about customers and usage
• No unresolved disputes between shareholders

Most founders do not enjoy this work. It can feel less important than building the product or winning customers.

However, poor documentation creates risk, and risk reduces value.

If a buyer cannot establish who owns the software, how customers are contracted or whether the business can operate without the founder, they may reduce their offer, add restrictive conditions or leave the transaction completely.

This work should not begin when an offer arrives.

By then, it may be too late to correct years of informal arrangements. Keeping the business organised from the beginning gives you more options, even if you never decide to sell.

Selling is not always the original plan

Not every one of our businesses was created with a specific buyer in mind.

In some cases, acquisition interest emerged because a larger company recognised that our product solved a problem it already had. In others, the relationship developed through the market over time.

A sale can be a logical next step when the product has reached a point where another company can take it further.

The buyer may have:

• A much larger customer base
• An established sales organisation
• Greater development resources
• Complementary products
• Existing relationships in the market
• The ability to operate the platform at a larger scale

That does not make selling an easy decision.

Founders invest years of work and a large part of their identity in a business. The purchase price matters, but so do the future of the product, the treatment of customers, the role of the team and the obligations that continue after completion.

The largest headline number is not necessarily the best deal.

What I would do differently today

After five startup sales, I would focus earlier on a smaller number of things.

I would spend more time speaking to customers before building. I would test whether we could reach the market as carefully as whether we could build the product. I would document agreements and ownership from the beginning. I would measure actual customer behaviour instead of relying too heavily on what people said they wanted.

I would also be more willing to keep the first version narrow.

Founders are often surrounded by advice about raising capital, hiring quickly and growing at all costs. That can be appropriate for some companies, but it is not the only way to build something valuable.

Several successful software businesses are created by small teams with detailed knowledge of a particular market. They solve an unglamorous but important problem, develop loyal customers and become strategically valuable to a larger company.

That path receives less attention, but it can produce excellent outcomes.

The main lesson

The biggest lesson from building and selling five startups is that value comes from usefulness.

A business becomes valuable when it solves an important problem, can reach the people experiencing it and has something that would be difficult or time-consuming for another company to recreate.

The technology matters, but it is only part of the business.

Customer knowledge, distribution, timing, relationships, execution and the ability to make the company easy to acquire all matter too.

You do not need to create the next global social network. You need to understand a real problem better than most people, solve it well and build a business that customers want to use.

If you do that, there is a good chance someone else will eventually want to own it.