VCs need to understand UX to build better start-ups
By: Onur Guzel
Tags: UX, VC, Service Design, Startup

VCs need to understand UX to build better start-ups

Photo by Amélie Mourichon on Unsplash

According to high-profile publications like Fortune and Forbes, 90% of start-ups fail.

Although some of these failures are due to reasons outside of the start-up’s control, many of them are. So it is of critical importance that both founders and investors are aware of how to better prepare to increase their chances of becoming that 10% that succeeds.

Before investing, VCs should have a clear understanding of all the factors that can make or break a start-up. One of these, which gets neglected an awful lot, is User Experience.

UX is not only important in the final product, but during development, it will give a lot of key information about the product and customer. This will lead to more efficient use of time, money, and manpower, which is always good when the markets are moving as quickly as they are nowadays. Not only this, but good UX design achieves a greater engagement with the market, helping increase the amount of feedback received.

Here are some of the most common pitfalls in the entrepreneurial world — taken from the CB Insights ‘Top 20 Reasons Start-ups Fail’ — to understand how good UX helps start-ups, and their VCs, avoid falling into them.

No market need

One of the main reasons for failure is that once the product has made it into the market, the start-up realizes that there was no market need. This means no interest in buying your product or service, which means all the time and money invested in developing it has gone down the drain.

This is a huge mistake that can be easily solved by appropriate user research. As a VC, be on the lookout for a UX designer on the team and appropriate UX research by the founders, something that proves that they are on top of the game and are looking to develop a product that the market needs, not just a product that they like.

Running out of cash

As mentioned before, if you have not researched the market properly or have taken too long to invest in UX design, the company will have to make huge investments to make up for the lost development. Fixing features or adding some ‘must have’ features too late will be very costly and could lead to not having enough cash when it is needed. In fact, according to IEEE Spectrum, the cost of having to fix an error in a piece of software when it is out in the market could be up to 100 times higher than if the error had been fixed in the developing stage. If this is for software, imagine the amount it will cost on a physical product too. This is a lot of money and time that you don’t want your founders wasting.

The best way to be on the lookout for this as a VC is to make sure that the founders understand the importance of testing their hypothesis as often as they can and that they use a minimum valuable product concept to test their UX research. This will assure you that they are thinking and testing before using your investment.

Not having the right team.

Once again, if they focus too much on the engineering and business side of a product without taking into account the UX part of the equation, they do not have a great team. And without a great team, it does not matter how good a product is; the possibility of failure is too high. You can’t out-market a bad user experience, nor can you build a product focused on a customer if you haven’t researched it properly.

Getting out-competed

There is nothing — or almost nothing — new under the sun. What this means is that most products and services that will come into the market already exist. Their functionality and the solution they provide are already out there. However, a key differentiator for many start-ups has been the user experience.

A great example of a start-up that leveraged their UX to make room for themselves in the industry was Uber. They don’t solve many new problems from the customer end, but they have changed the whole experience of transporting in the city by focusing on UX.

VCs should make sure they are looking for founders that know that their competitive advantage is key and that they can seize their UX development to achieve it.

To sum up the importance of UX in today’s markets to any VC, Beverly May, executive director of the forum’s UX Awards, said: