Want to build a startup?
Many future entrepreneurs have a hard time to find an idea to start a business with. We suggest “DO NOT LOOK FOR AN IDEA”. look around with wide open eyes and look for problems that have not yet been solved. There are 100’s of thousands of challenges – they only need to be conquered. From clean water for everybody, to better heater, less energy consuming air conditions, safer vehicles, and on it goes. Try to solve a problem that is out there and you have the skills to start finding a solution. Most successful startups stumbled over a problem, had the idea how to solve it, got stuck, but never gave up and eventually had a great solution to make live easier for hundreds of thousand of people.
Look for 1 single problem to solve.
Before you start
A couple of thoughts and experiences that may make your live as first time entrepreneur much easier:
“Wouldn’t it be cool to do this or that” sorry wrong start. It’s why most entrepreneurs fail. Yes it maybe cool but most likely it is not a solution to a burning problem. Every significant startup in the past 50 years solved a need in their market. The need to socialize globally, the need to make finding a Taxi muh easier, the need to get virtually anything by ordering it online, the need to get all your customer data on a klick of a button without having a whole IT department, having a car that does not consume petrol but clean electricity.
“If we can do this, we would make over 100,000 people happy.”
You have an idea and you are excited about it. Often times young entrepreneurs would like to get a validation from some experienced entrepreneurs or investors. Validating your idea is a great first move. But instead of talking to other entrepreneurs or investors – talk to 23 potential customers. Do that before you even invest time and resources in building prototypes.
- Did you speak to at least 23 potential customers to verify that your idea is solving a real problem and providing a much-needed solution.
- Share the presentation or document you used when discussing your idea.
Interview at least 23 potential customers.
Before you do anything other than writing down your idea, attract at least another co-founder. Our world is too complex to do everything alone. And more importantly, our world is moving too fast for a single human to start a successful business and grow it fast enough before others enter their space. None of the top investors will ever invest in a solopreneur, no matter how cool the idea is.
If you are a business person, find the technical co-founder. If you are an engineer find a business co-founder. If you can’t attract another entrepreneur, consider your idea is either not good enough or your skills and personality is not well enough developed to attract others which will always be necessary as you need to attract customers, business partners, investors and more. Only two engineers or two business people is no better than a solopreneur – it’s all about the diverse skill set on the business leader bench.
Be committed to give your co-founder(s) at least 20% of your company and not be the dominating “main” investor.
- Do you already have a diverse founders team with business as well as subject matter expertise
- Did you make well documented arrangement between founders regarding the equity ownership distribution.
Look for 2 more founders and give them 33% of the company each.
You and your co-founder will now want to develop the whole concept of your company. This includes defining the problem you are solving or the need you are fulfilling. It determines who your target audience will be and what you are bringing to your market. Describe what’s unique about you and make some intense research who else is offering similar solutions. Research other potential companies in the US, all over Europe and Asia. Define what the SINGLE most important function of your business is. If you have a list of important features – select one. If that one is too weak, strengthen that feature instead of growing a list. If the unique aspect of your solution is that you offer a complete suite of features while other businesses deliver only parts of it, re-think your idea as there is almost always some missing aspect of your concept.
- Do you have a written down business concept – not necessarily a fully blown business plan
- Have you selected your single most important functionality that you want to be known for one day?
Define 1 feature and one feature only that defines your solution best and is the most critical feature of your overall vision. It’s the only thing that you need to build in the beginning.
Now at this point you may worry about getting funding. But you will be surprised how far you can get without it. Entrepreneurs make something out of nothing – not even initial funding. If you need money to make money, you are an investor. But as an entrepreneur you start without anything but your brain spark – called “idea”. When our founders started their first company they had $10,000 – savings and getting some support from family. Investors want to see that support first. If you can’t find people within your circle of friends and family, nobody else will give you money.
There is a current exception in several countries where Universities and Governments invest almost randomly $50-100,000. Be careful. You will burn through that money in no time and investors will ask what you achieved. Usually nothing. Then you are usually done. If you get nowhere with so much money – why should they put even more money into your business. Of course it’s easy to take that money but again – be extremely careful with it.
Get the equivalent of $25,000 to start your company from friends and family and start. No salary for the first six month for every founder, no employees in the first six month.
Now put together a short presentation deck with no more than 10 slides. Create a list of 50 individual people who are potential customers (people not companies). Then try to make an appointment to present your idea. When you meet them – we highly suggest to NOT argue with them – just listen super carefully. Make notes what they don’t like, did not understand, did not need, and what they liked. Ask if they would buy such a solution what they would be willing to pay. Make sure you personally speak with at least 23 relevant people. Document each and every interview. You may notice that you do not need a product to do any of the above.
Get back to the market and find an additional 23 potential customers to review your solution. Get a solid ‘market validation.’
- Did you speak to at least 23 people who have been willing to explore your solution for their business or individual use and it at least ort of solves a problem they have?
- Is the feedback motivating enough to begin investing serious time and resources to build a first prototype? If not go back to step 3.
With all the feedback you received, you may now develop a concept how you will sell the product you are planning to build, how you deliver it and how you service and support it. In a nutshell: How are you going to make money and compete with others. Then ask yourself if there is any way to make the engagement between you and your customer especially attractive – more attractive than your competitors. Determine the cost of building your solution and the price you like to sell it for. Consider a margin for distribution channels if you are addressing a large market (B2B or B2C). This is NOT your business model canvas.
Put this on no more than 3 pages.
- Do you have a written down business model that includes a possible pricing, a concept how to bring it to market and how you service customers?
- Do you have an idea how you will compete against similar solutions or educate customers about your solution that has no competition?
Young entrepreneurs are always worried that somebody could steel their idea. Here are a few reasons why this is something you should not worry at all. It actually is the next big risk if you are too secretive with your idea. Be open and get all the inputs. Please check this blockpost: The initial Value Of An Idea Is zero”
The only and really significant difference between success and loosing the race is execution. Execution meaning how well you run your business, how fast are you, how close are you with customers, how good are you in communicating and so forth.
Make sure you do not need more than 6 month from concept creation with your co-founders to revenue. No matter how complex your solution may be.
There is a lot of confusion what disruption really is. If you have just a better product than your competition, that is not disruptive. But if your business model is build in a way that your competitor will need to respond to what you do, then you know you are disruptive.
Long Term Vision
Create a long-term vision how your company (not necessarily your product) has an impact on the society in the foreseeable future. How do you envision your company becoming a vital part of the evolving industry you are playing in. What market development do you see and why. What will be your company’s main contribution?
Your vision will help others who join your company where you want to take it, it will indicate to potential customers that you are not just building a product but a whole company. Investors will need to know how they may see their money coming back in 10 or so years. If you don’t know – how should they know.
Look into the next 10 years – no matter how impossible it may look like. That YOU will become a multimillionaire soon, looks pretty impossible too – but you know it’s possible.
Creating a prototype (MVP)
You may be surprised but only now you start building your prototype. If you would have started earlier, you would now completely redo it. Customer feedback will change the product for the better – if not you did not listen. The Business model discussion would now change it again – if not your business model is weak. Build your product based on market needs and validation as well as your well thought out business model.
You need to be very careful with resources and the fact that your first product iteration may not perfectly match market acceptance. Therefor DO NOT develop all the cool features you have in mind. Instead build a single feature product that shows your most unique aspect representing your key differentiator in your vision as a company. The name “Minimum Viable Product” says it all: reduce it to the max, make it viable. You have no more than 6 month to build such a product.
Make sure you do not need more than 6 month to introduce your first MVP to your customers.
Find a Mentor
At this stage you will most likely ask yourself how you will build this product, how you will sell and service it, how you find customers, how it will compete in the market, how you will finance it and hundreds of other questions. It is that moment in time where you should actively look for a mentor. You will not need a consultant but an entrepreneur who built a company from zero to exit. Only a successful entrepreneur can help you do more with less and start a company from scratch with no investor. The Mentor will help you what to do best to register a company, why you need a lawyer and a Tax adviser and hundreds of other little things.
Depending on where you start your business, the WIF team may be able to help you find a good mentor.
To start, you only need to find 1 person.
With all the feedback you received, the changes you made to your concept and the business model you developed, go back to your 23 possible customers and try to make another short meeting, presenting your updates, thank them for their previous inputs and tell them how their inputs improved your idea and product. Now you should also begin to share your vision – your big picture. At that stage, you may receive one of the most important gifts: Product Ownership. Your early supporter may get excited how THEIR idea improved your solution. They become part of the new concept and most likely will share it with their contacts and friends. You just created your early adopter network.
Founding your Company
Start your business with an inexpensive structure – but one that limits your risk and exposes your undertaking as a business – not as a hobby or try and error project. At school you have done ‘projects’ and some of those projects may have been to create a business – but now you are creating a real ‘company’, you no longer “play” with projects. Usually you and your co-founder(s) have equal shares in that company.
Look to start 1 company and stay away from complicated structures that some consultants may try to sell you.
Allow yourself no longer than 6 month to present an early beta version of your solution. While one of you is doing absolutely nothing other than building the product, the other prepares for launch, creates lists of hundreds of possible customers, comes up with blog posts about the market, the problems and your solutions, talks with customers and analyzes market trends, looks for potential employees for marketing, sales and support, and maybe more engineers. Build your Go-To-Market Strategy assuming a zero-budget undertaking. And plan the seed funding, explore investors and comes up with the business plan and investment strategy. We will help you go through this entire process step by step.
Before you raise some capital to grow your business, you may want to join the Society3 Accelerator. It’s a one week intense entrepreneurs camp and a few weeks that helps you gain some initial traction, find a way to turn your business model into a disruptive business, and get investor ready. We help you be perfectly prepared to go to market with everything you need to know to grow – and grow fast.
Get some initial funding for the next steps and put that into your company. The money typically comes from your family, friends and some people who trust you that you will use the money to grow a business and not burn it through for fun. Nowadays you always get somewhere between 25,000 and 50,000 in the developed world, even 50 – 200,000 in Switzerland. In any case, it is much too early to waste your time running around and finding Business Angels or VCs.
With some seed funding you and your partner(s) will continue the journey. One will focus on improving the product, make it more scalable, or better to produce. The other will focus on sales and marketing and widen the number of users and gaining some revenue. Maybe another one is working on the financial side and manages the operation. The investor however is expecting you to grow the business – not the feature list.
Here is what you have to have in order to be attractive:
- A team of equally invested co-founders and diverse skill sets;
- Customers who love what you do;
- A very clearly articulated go to market strategy;
- A long term perspective of the business;
- A large market you can serve;
- A unique product approach;
- Attractive financials;
- You and your cofounders demonstrated that you could bootstrap to this point.
Nobody said it is a piece of cake to become a wealthy business owner ;) But it is definitely possible in any economy on the planet.
You can find angels by googling angel groups in your vicinity. The much better way is to be found!!!! Angel Investors are less interested in companies that come begging for money. The much more interesting ones are the ones that have the communication skills and communicate so well, that everybody is talking about them.
If you successfully demonstrated that you were able to gain traction, grow fast and the market loves your solution you will want to grow farther and faster. That means you will need capital to grow faster than you get the revenue in and therefor you may consider letting others participate in your growth success. Now you allow venture capital firms invest and you offer growth far better than any other company they may invest. This is the point in time you will want to speak with VCs.