Freedom is one of the most valuable notions in human life. Doing your own thing – I mean building your company – represents freedom in full measure. For many aspiring entrepreneurs, this is the most important value their own venture may bring. This freedom contains several key aspects inside: financial freedom, freedom to make your own decisions, and freedom to express yourself with your unique ideas and vision.
Starting a business is not a comfortable path, especially for those have no previous experience. Do you remember the scary “8 out of 10 startups die” line? Everyone knows that still nowadays the startup scene is blooming. Why? Because many people want to be free and independent.
It takes some hard work to create a successful business. So what do you have to think of in the first place? Well, in short, you need three things. Firstly, you have to come up with something customers actually want – your idea must be undoubtedly cool. The second ingredient is the right people on board, and, in third place, you have to spend as little money as possible to survive the initial phase – the toughest part in a life cycle of a venture.
It sounds a bit…plain and simple (in theory), yeah. And that’s the point: there are no unclimbable walls or something along your way. Surely, all three points are not easy to do, but they are not impossible either.
Most businesses that fail simply don’t provide their prospects with the product/service they really need. Fair enough, you might hear all kind of excuses why a certain startup failed – like “we ran out funds” or “we just couldn’t find the strength to go on” – but the truth is that their product wasn’t something people would believe in.
If a product changes the life of its customers for good and they can feel it, it becomes popular and, accordingly, this fast-growing popularity paves the way for its future success. This statement is quite easy to prove by answering one simple question.
Can you name a company with a massively popular product which has failed?
In our case, popularity takes roots in something that creates value. Each of us knows what we want in terms of making purchases. I need a new sweater, not a new car or anything. And I need it because it will keep me warm – that’s the value a sweater brings. And it’s a no-brainer to figure out what kind of necessity this particular product solves. You have to be able to explain your product\service idea in a sentence, with no “mmm, err, it’s something like….well…you know”. The idea may be an industry-changer, but simple enough for an 8-year-old kid to understand.
By the way, quite often founders take startup ideas for business ones which leads to confusion. In reality, there’s a difference between these two notions as there is a difference between a startup and a business. In a nutshell, “startup as an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing or offering an innovative product, process or service” (Wikipedia).
For instance, if you want to sell orange juice at the corner – it’s a business. This business works on a well-established business model – exchanging beverages for money. The different rule applies to startups. They could grow to thousands of users and still not have an established and working business model but would be kept alive by investors seeing the opportunity coming from engaging many customers.
Wait for the moment when you will be ready to work on a specific idea which solves a specific problem in a new way. If you’re lucky enough to have multiple ideas, pick up the one that occupies a special place in your mind. In order to impress investors, you’ll need to convince them that your idea is worthy. So do not rush and take our time to decide.
And most people have plenty of business ideas. Very few people have true startup ideas. Solution? Let’s hear Peter Thiel talking about that. According to his definition from his book, you can ask yourself a number of questions to find out if your idea fits the idea of a startup:
- What important truth do very few people agree with you on?
- What valuable company is nobody building?
- Can you create breakthrough technology instead of incremental improvements?
- Is now the right time to start your particular business?
- Are you starting with a big share of a small market?
- Do you have the right team?
- Do you have a way to not just create but deliver your product?
- Will your market position be defensible 10 and 20 years into the future?
- Have you identified a unique opportunity that others don’t see?
If the majority of answers are positive, you’re on the right track. What’s next?
When launching a new business, a trusted team of professionals behind your back is a must. As the CEO, you will be solving multiple issues, and they will be overwhelming most of the time (well, okay – all the time). You will need people who share the same attitude as you because you won’t simply have time to do their tasks if something goes wrong.
The quality of the team – their knowledge, skills, and competence – are the factors which define your future success. So what could possibly go wrong here? One costly mistake founders may make is hiring the wrong people, most precisely, people you know (or people that are available) instead of people you really need. All for the sake of getting work done, and fast.
So hiring the team of individuals who have a deep understanding of your company’s vision is crucial to achieving success. If your team members don’t have a connection with the core mission of your company, it won’t work. Can you imagine yourself convincing them? Trying to explain how to work harder to get the results? We’re not in a middle school anyway. Nothing can take you further from attending your goals than unmotivated people as your team members. Furthermore, as the majority of startups have to go on with limited resources, your crew members should be open to multitasking when the situation demands – it’s very important, trust my word.
You may consider yourself a lucky person if everyone in your team is motivated and skilled. But if you feel that you need some extra help from outside? Is it a startup-stopper? Surely not.
Think about partnering with a company which has enough skills and knowledge to decently implement your idea. A professional technology partner will take you throughout the pre-launch period and solve any issues you may face during the development phase. It’s even possible to adopt the hybrid model – a mix of both in-house and partner teams working on a project at the same time.
Money, or funding, is a major topic for startuppers. What about getting your company bootstrapped? Or a small bank loan is fine? Or maybe you should attract a venture capital or an angel investor? No matter which road you’re going to take, one of the key duties of a CEO is the proper management of funds. You have to understand how much money is left on the account and whether that will lead the company to a certain milestone (which are the markers of growth).
Like we stated in the introduction part, when a startup dies, in most cases the reason would be lying around running out of money. Usually (as we stated as well), there is something wrong hidden from the surface. But even a proximate cause of failure is the thing you should pay your attention to.
Let’s pretend you get a million or two from a VC firm – congratulations. What is the common mistake here? You tend to feel rich and important. You may even believe that the work is done and you need a rest. Why bother, I’m 24/7 tired and I’ve got the funds now. However, it’s important to realize that things do not work this way. What makes a rich company? Big revenues. These funds you’ve attracted aren’t revenues at all. It’s just the money investors have given you so you’ll be able to generate revenues. So despite those six-figure numbers in the bank, you still have a long way to go.
Let’s repeat: to create something your customers will love, you have to understand their needs. And the “bigger” you are, the harder that is. Again: do not rush. The slower you spend your fundings, the more time you have to learn and come up with the right ideas.
Here’s what Goran Duskic, founder & CEO of WhoAPI Inc., says: “…it’s important to track your expenses like your startup’s life depends on it. So, spend less than you earn, don’t take debt and flip that $1 three times before you spend it. Instead of spending $4 on a latte, invest $3 in Google AdWords and get 3 leads to your website and cook cheap $1 coffee. Notice I didn’t write “don’t buy coffee”, oh, you are going to need a lot of coffee”.
This expensive Italian leather chair you think you deserve or the fancy office with glass doors won’t take you anywhere. Chee-Hyung Yoon, the founder and CEO of Virect advises “Learn how to survive on a lean budget. Staying lean gives you a much longer runway and better chance of taking off.“ If the management failed to achieve the next milestone before the money ran out, it’s a disaster. Sure enough, it is still possible to raise more funds, but the valuation will be – alas! – significantly lower.
There are lots of other concerns you will be facing during the early stages of your company. However, these three points are important in the first place. Because they concern strategy, not tactics. And strategy always comes first. Are you interested in building your startup? Contact us for a free consultation.