Throughout the economic turbulence of the last years, a sense of ‘entrepreneurial spirit’ has prevailed and turned the UK into a hotbed of startup activity. Certainly, a significant advantage of working in a digital agency is getting to witness this first hand. Every week there is a new person with designs to create a unique and disruptive product or service.

The pandemic could have easily stunted the UK’s startup growth ­– instead, the shift to remote work and increased reliance on technology created a plethora of new opportunities. Over 753,000 new startups were founded in the UK between March 2021 and March 2022 – the second-highest number of startups registered in one year, only topped by the 810,000 startups founded in 2020-21.

However, the economic climate has turned rather bleak over the last year. Soaring inflation, rising interest rates and a looming recession have begun reversing the substantial gains made during the UK tech boom that emerged during the pandemic. 

How has the financial crisis affected UK businesses?

Double-digit inflation has not only raised everyday living costs but has hit businesses hard. Reduced consumer spending power and increasing supply chain costs are eating into profit margins.

Similarly, in an effort to support employees through real terms wage cuts, tech businesses have responded by paying employees more. In 2022, salaries rose at their fastest rate in 20 years, although still lagging behind the rate of inflation. Meanwhile, the Bank of England has had to push interest rates to 2008-Financial-Crisis levels, leaving businesses with loans with higher interest payments, less disposable income, and larger overheads.

The tech investment market is also feeling the effects of the current economic slowdown. In the UK, technology investment fell 22% last year, one of the sharpest drops in Europe, due to challenging economic conditions.

In other words, today’s budding entrepreneurs have had the misfortune of starting their venture at the most challenging of times. It would be fair to say that some may even be reconsidering whether it’s even worth it.

But is there ever a ‘good time’ to start a business? In many ways, no – if not inflationary issues, entrepreneurs would eventually need to adjust to some other issue that arises with growing a business. Startup founders should not be disheartened but rather seek ways to adjust.

As such, it is more crucial than ever for tech startups, particularly those just getting started or still in the ideation stage, to develop and deliver their products as quickly as possible.

Making use of an MVP

Tighter finances will require a savvy allocation of resources. Building smarter will mean there are financial efficiencies to consider in each stage.

In the development phase, for instance, entrepreneurs should look closely at what their minimum viable product (MVP) is going to look like.

An MVP is the first form of a product that can be released to users, with the intention of gathering and analysing user data to determine future development. Using a minimum viable product is often described as a ‘lean’ approach to launching. The product is intended to get into the hands of customers as quickly as possible, reducing time costs while eliminating wasted financial resources.

Before launching, start-up founders must consider carefully and evaluate what their MVP will do, and, more importantly, what consumer data will be most valuable. With no easy cash in circulation, entrepreneurs must be focused on creating an MVP on time and on budget. Bring something to market that showcases the core purpose of the tech products, and then worry about adding further functionality. As such, it is important that they decide upon the best form of MVP best suited to their needs.

The predominant form of MVPs brought to market is a version which is functional but stripped back only to its core essentials. Doing this enables startups to avoid the costs of developing a fully formed product only to later find out it's not a fit for use. Meanwhile, they can save time on building product features that may fail to connect with users – the primary reason for MVPs is more user testing at the initial stages in the hopes of finishing with a refined and effective product.

Entrepreneurs and their development teams must focus on what their MVP will look like and work towards that clear goal.

Ready to launch

Successfully scaling a new tech product requires careful planning during the initial stage. It may sound obvious but avoiding a rushed or haphazard approach will prevent potential setbacks and ensure a smooth launch.

In fact, developing a new product is not about launching and then leaving it. Instead, once the vision of a business and its end users are identified at the discovery phase, a product needs a clear roadmap that makes room for ongoing improvements post-launch based on live feedback to continuously enhance the product – whether through user experience, new features, or functionality.

Agile development helps maintain a frugal approach and prevents focus on unnecessary features while ensuring the product meets the needs of its users. As more and more people use their offering, they can then make the updates their product requires based on feedback, allowing them to then prioritise the most important features and functionality required to scale the product based on the utility and value that the incremental functionality delivers to the user base.

In this current market, eliminating waste is key. Scaling a startup through soaring inflation and subsequent higher overheads will be accomplished by those that focus on getting the important stuff right.

Attempting to bring a product to market in the current economic climate is no mean feat. However, I am eager to observe how new founders will tackle these obstacles and succeed with fewer resources. With the right strategy, I’m certain we’ll continue to see aspiring tech entrepreneurs bring new innovative products and services that shake up the way we live and work.