Apr 25, 2019

The Software Development Fund

By Elia Fedorovski

In March of 1955, two ex-IBM employees, founded Computer Usage Company (CUC) with the intention of offering computer program-development services. They started off with a staff of five working from their sole office in New York City. By 1967, their staffing number had increased to over 700, with 12 offices and a revenue of $13 million.

CUC is known as the first independent company to develop and market computer software, and since then, much in the industry has changed, and the number of software-development companies has increased significantly, and their business model diversified.

The most attractive software development model to date is the full service development company. The full service development companies offer a wide range of software-development services before, during, and after an application’s lifecycle — typically UX/UI design and branding, software development and Q&A testing, project management, and system and application support and monitoring. As a result, full-service development companies behave more like a technological partner, rather than just a contractor.

The internal business structure of a full-service company provides you with many advantages that benefit your own business:

They generally employ a diversified staff — You’ll have access to a large number of highly skilled software professionals.

They behave more like a technology partner — Partnering with a team that shares your vision and goals adds invaluable benefits to your business. The overall engagement factor is much higher with full-service teams, which results in a stronger partnership and a common desire to produce a successful application.

However, no matter how much the so-called ‘technology partner’ is advertised, at the end of the day, they are not. Their business model relies solely on software development, and in some cases keeping you addicted to their services with constant upgrades and maintenance fees.

It is high time for a new software development business model.

To create a new model one has to take a step back and look at the long-term goal and strategy of the customer. Whenever a founder comes to software development company or independent contractor, their goal is to make a great MVP, test their concept, use it to raise money and finally graduate into a full fledged company and hire their own in-house tech team.

So the idea is to align the goals of both customer and the software developer. The best way to do that is for both parties have a stake in the software being developed and the underlying business.

What we are seeing now is customers and software development companies waking up to this and instead of simply being contracted for cash, they take equity or options as well either upfront or after product launch. Let’s call them Software Development Funds. Funds on their own do not provide software services but instead angel investments and consulting. Software Development Funds on the other hand are the perfect go-to for non-tech founders who have a great idea that they need developing and need to raise money for.

They not only receive the best software development service where all interests are naturally aligned, but also have a real partner who will help them raise needed funds with the right VCs and Angel Investors.

All parties having a stake in the long-term success of a product naturally leads to the best outcome – and that should be the minimum standard of any software development project.

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