Software Startups: Pros & Cons, Business Advice, and Pitfalls to Avoid

Dayana Mayfield


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Running a software startup is highly desirable for good reason. Software is very scalable and does present great opportunities for big exits.

But there are plenty of software startup founders who fail. 

Unlike other business types that don’t have a big barrier to entry, when a software startup fails, the founder might lose hundreds of thousands of dollars. (With ecommerce, you can order $500 worth of inventory. With software, you’re usually looking at an initial investment of at least $150,000.

To know if you should even start a software business, we’ve got realistic pros and cons. To help you start the right business, we’re serving up top sources of ideas for new startups. And to make sure your new business is a success, we’ve got advice and common pitfalls to avoid.

The pros and cons of a software startup

Is a software startup the right business for you? Find out by considering how you feel about these various pros and cons. 


  • Scalable business model

  • You can grow it to be a large company or keep it small (“lifestyle business”)

  • Time and location freedom

  • Location freedom for your employees, contractors, and vendors


  • Expensive barrier to entry

  • Highly competitive

  • Costly to make mistakes and build the wrong features

Top sources of ideas for new software startups

Looking at a specific list of SaaS ideas is a bit silly. Think about it. Do you really want to compete with everyone else who’s reading the same list and creating the exact same business as you? No.

A far better skill than picking the best idea out of a list is to know how to vet your SaaS ideas.

Fully vetted SaaS ideas have the following characteristics:

  • They match the size and maturity of the market

  • They solve the right problem for the market (not any problem)

  • They don’t care to specific niches without good reason for doing so

  • They are paired with the right entrepreneurial team

  • They have been molded based on real customer research and feedback

While all of the above is essential for knowing which software startup idea to pursue and how to pursue it, you might be wondering how to come up with these ideas in the first place.

As we’ve said, it’s not smart to build what everyone else is building. You need to create a unique solution to an important problem.

Here are the best sources for software startup ideas:

Your professional life

What problems have you experienced on the job? What have you struggled with? What software did you always hate? You can think of the most recent job you had or the business you’re currently running to find plenty of opportunities.

The professional life of your family members or friends

Same goes with your spouse, your brother, and your best friend. What issues are they facing? What software do they use that they hate? You can create a survey and send it out or call them and ask them questions about their daily workflow. 

Negative reviews of software products with a large market

You can also check out software products with a large market size (meaning there’s plenty of opportunities) and read their negative reviews on sites like G2 and Capterra. See what customers complain about it and determine whether there’s a big enough gap between customer demands and product capabilities. If so, you might have a business idea.

All-in-one software in niches that need it

All-in-one software is a SaaS trend that isn’t going anywhere anytime soon. For some roles, such as marketers, all-in-one is seen as a pipedream and not valuable. But for business owners in many different industries, having all-in-one software is very desirable. Maybe there are some industries that don’t yet have a great comprehensive platform. You can build it.

Modernized software for traditional industries or roles

Some of the most successful software companies did something very simple to get to their current level of success: they modernized an industry that hadn’t been disrupted in a decade or more. TravelPerk is an example of this in the business travel industry. And Martial Arts on Rails did this for gym memberships. 

Best advice for software startup founders

While the road might be long and bumpy, the path ahead is really quite simple. You need to be laser focused on building what your target customers actually need and giving them a great user experience. 

You can definitely learn from other people's triumphs and mistakes.

So let's take a look at some great advice from startup founders and entrepreneurs. 

“User experience is everything. It always has been, but it’s undervalued and underinvested in. If you don’t know user-centered design, study it. Hire people who know it. Obsess over it. Live and breathe it. Get your whole company on board.” – Evan Williams, Co-Founder, Twitter


“Your most unhappy customers are your greatest source of learning.” – Bill Gates, Microsoft Founder and former CEO


"Bad shit is coming. It always is in a startup. The odds of getting from launch to liquidity without some kind of disaster happening are one in a thousand. So don't get demoralized." – Paul Graham, co-founder of Y Combinator


"Nothing works better than just improving your product." – Joel Spolsky, co-founder of Stack Overflow


"It's easy to get caught up in the day-to-day hard work of running a business and completely forget that while solving problems and building something you can be proud of, you also have an incredible opportunity to shape the future. Even better, you have the chance to meet amazing people and do amazing things along the way. It's important not to get lost among the trees and forget about the amazing, beautiful forest you're planting." – Colin Wright, co-founder of Asymmetrical Press


"Don't be a lone wolf. Lean on the experience and smarts of your teammates, investors, and mentors to help solve the tough problems and take advantage of the opportunities." – Seth Bannon, founder and CEO of Amicus


"You just have to pay attention to what people need and what has not been done." – Russell Simmons, founder of Def Jam


“The secret to successful hiring is this: look for the people who want to change the world.”  – Marc Benioff, Salesforce CEO


“If you are not embarrassed by the first version of your product, you’ve launched too late.”  – Reid Hoffman, LinkedIn Co-Founder and Venture Capitalist


“I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” – Steve Jobs, Co-Founder and CEO, Apple

Common pitfalls to steer clear of when starting your business

Sometimes it’s easier to keep track of what you’re not supposed to do than to try and do everything perfectly. 

Here are some of the most important pitfalls to avoid as a startup founder:

Building without marketing: A huge failure of many new software startups is to get the product completely ready for customers without having any sort of marketing campaigns running simultaneously. You need to at least be building up a wait list, putting out content, and running some outbound marketing campaigns. 

Launching with too many features: Too often, startup founders launch a product with more features than needed. This is hugely problematic because the company could have been pulling in revenue far sooner. Making this error puts your startup at risk of complete failure and going out of business. 

Solving an unessential problem: Does your target market really need what you’re building? Are they willing to pay for it? Will the amount they will pay for it allow you to make a profit? If the answer is no, then you’re likely building something that is a “nice to have” instead of something that is essential to increase the profits of your customer’s business.

Failing to differentiate on user experience: No matter how great the idea you have for product features, it’s super important to build something that offers a better user experience than anything currently on the market. If your software is more difficult to use, clunkier, uglier, or slower that your competitors it will surely fail. 

Building and launching your startup product is an exciting journey. Along the way, you need a product-centric dev team that caters to your users above all else. 

Learn more about DevSquad’s monthly subscription approach to high quality, fully managed software development.


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