Startup how to create the first steps
Let's explore each of the stages of this event.
- Analysis of competitors . The first thing you will need to figure out before starting a startup from scratch is how competitors present themselves to your target audience. If, nevertheless, you find that similar solutions already exist in your niche, evaluate how your product compares favorably with those that already exist - this can be price, functionality, value in the eyes of consumers, technologies used in the development - it is these characteristics that will need to be staked on in the future (both during the presentation of the product to investors, and already at the stage of its release).
- Target audience research . At this stage, you will have to form a portrait of the client - that is, describe his (or their) age, gender, interests, social status, profession, etc.
- Research of clients' goals and problems. On the one hand, you can turn to the simplest method - to conduct a social. survey among your potential customers. On the other hand, this approach lacks, to a greater extent, objectivity. The fact is that most people do not want to offend anyone by leaving negative reviews about the product without any objective reasons. Moreover, you, as a CEO who is crazy about your idea, will be able to interpret the collected information in two ways (that is, draw conclusions in your favor and, as a result, start a startup where it turns out to be completely unpopular). Therefore, even a sufficiently large number of people surveyed will not be able to give you an accurate picture of the situation in a particular market segment. So, when wondering how to start your startup, you should not just interview as many people as possible, and competently plan a comprehensive market research. This will be discussed in the next paragraph.
- Idea validation . Now it's time to create a prototype - a dummy product, the work of which could be evaluated at least visually.
- Creating a landing page for the presentation of the prototype and conducting "smoke" testing . Before launching a product in the public domain (even if it is an MVP, the importance of which will be discussed below), it makes sense to create a website with its prototype and contact form, and then send paid traffic to it. This way you will get the most detailed feedback about the product from its future users and confirm the success of your idea with quite real data.
- Product viability check . What you definitely should not do is to immediately launch a startup in the form of an end product, in the hope that there will be a merchant for any product. This is an extremely dangerous decision, which in the late nineties of the last century bankrupted more than one thousand entrepreneurs. Therefore, it is better to focus your efforts on creating a startup MVP (you will learn what it is and why it is needed in the following paragraphs). Thanks to this, you can make sure that your product / service solves very real problems of the target audience and that he / she makes you want to pay the price you set for it.
- Evaluation of non-obvious factors . Typically, b2b startups are more likely to be successfully accepted by the target audience than those that are focused on the end consumer. Also, if it's a web solution, think you might be able to attract customers of the engine it's based on (for example, WordPress-based projects are sure to be of interest to WordPress fans)
Startup MVP: Need it!
MVP development - is it a mandatory procedure? And is it possible to get by with a detailed technical task instead of a startup MVP ? This is the question most entrepreneurs ask. After all, of course, none of us wants to invest in anything else other than the final product. Nevertheless, as practice shows, investors usually allocate funds not even for the launch of an MVP (and even more so, not for a description of a product that does not yet exist), but for a very real and already profitable business.
For this reason, you will be much less likely to attract investments without an already working startup MVP (that is, in fact, an MVP is not a prerequisite for attracting investors, but in 9 out of 10 cases, such a product will give you a significant advantage in in the eyes of potential investors).
We have collected expert opinion on the importance of creating an MVP:
Documentation is only enough if your product is documentation. MVP is also not enough. An investor invests NOT IN A PRODUCT, BUT IN A BUSINESS . The investor doesn't care about your product. He only cares about two things: whether you personally and your team are able to make money, and how much he can fuck from the money you earn. The rest is lyrics and noodles on the ears of fragile startups
Another popular question is “If there is no MVP, will detailed terms of reference help ?”
MVP is a simple product, even a person far from programming can make a landing page on Tilda with a simple form, and then do everything manually. Purpose: to answer the question of whether there is a demand for such a service / product. If yes, then develop the idea further.
Now that you have realized the importance of developing an MVP solution, three other problems immediately arise in front of you: what do you mean by MVP in your particular case, how to make the right choice regarding MVP functionality, and how to properly conduct MVP testing.
We will present the solution to the first problem in the form of an allegory: if your final product is a motorcycle, then the MVP in this case is at least a full-fledged bicycle (if not a moped). It is logical that the solution of the second and third problems follows from the solution of the first one: just determine the features/characteristics of your future product that are fundamentally important for the user, indicate the expected result of its work (this is usually indicated in the documentation) and get to work!
THE RIGHT APPROACH TO MVP DEVELOPMENT
NOT MVP
MVP
You may also need to create a small MVP site (also known as startup sites) with which you can present your product to future investors.
Thus, MVP for startups is the best solution for the most effective and quick fundraising for the further development of the project.
How to create a startup project. Team search
Since you will be working on a project from the know-how category, it is very important to involve real professionals in organizing a startup (so be prepared for the fact that you may even need to outsource to save money). We also note that at this stage in the development of a business startup on the Internet, you should already have a fully formed technical task in your hands so that you can provide it in the form of a list of requirements for the finished product to your development team.
So, how to write a startup project? When organizing startup projects, it is extremely important not only to have a plan for its implementation, but also a reliable, dedicated team that is ready to bring it to life. Therefore, when asking the question: “How to write a startup?”, Forget about successful stories from the nineties, which said that “three guys started organizing a startup right in the garage and a year later earned their first million” - today it does not work. In order to minimize the risks and not burn out, you will need to assemble an impressive team of pros.
As a rule, several persons take part in the creation and development of a startup. Namely: analyst, marketer, developer, designer . This is, of course, a dream team.
Naturally, such a combo is not always found, so if you don’t have one of these people, then you should start looking or delegate these responsibilities at least to outsourcing.
If your team is working remotely, make sure that you are able to keep in touch with each of its members at all times. For these purposes, there are many useful software solutions - from the familiar Skype to all of us and ending with more business-oriented products (for example, the same Slack).
How to implement a startup?
The success of this event depends 50 percent on the idea itself, and 50 percent on the professionalism of the team that brings it to life. And if the implementation of the first aspect depends solely on you, then the following recommendations will help you decide on the second.
You have two options: hire a team on staff or outsource the task to contractors.
However, when it comes to a startup, recruiting a whole staff of employees will definitely not be the best idea. Therefore, the only right decision is the search for contractors.
And here you already have three options to choose from:
- freelancers . Hiring freelancers is the cheapest way to build a startup. On the other hand, such a factor as reliability suffers with relationships (any member of the assembled team can disappear at any moment), in addition, there is a risk that one of your new employees simply does not have enough competence to complete the project ;
- outstaffing . The main disadvantage of outstaffing is that you have to pay the team even for downtime. This, in turn, can significantly hit the pocket;
- outsourcing . Outsourcing is the most successful choice in terms of price-quality ratio. In particular, for the implementation of your plans, you can contact us. So, our team has been creating startups and MVPs of various kinds for more than 5 years.
How to assemble a team for a startup?
Finding and selecting contractors is a sore spot for many CEOs. The main problem they face is, first of all, the ever-changing budget. Therefore, in order to avoid such situations, experts strongly recommend choosing the “ fixed price ” payment option. It is for this reason that we have chosen this approach to work, because. it minimizes risks on the part of the client. Read more about options for forms of cooperation here .
The second reason why some idea owners hesitate to implement them is the lack of specialists of the required level. In turn, in order to quickly make sure that you have to deal with a team of real professionals, make sure that the project manager is highly qualified, that is, the person who sets the level and motivation for the rest of the team members.
And, finally, when it comes to projects aimed at mastering a fundamentally new target audience (and this is exactly what startups are), it is preferable that all specialists already have experience working with each other (that is, in fact, they represent a well-coordinated team) . Otherwise, you risk losing a lot of time while they “grind” to each other.
When the team is assembled, the idea is ready, and marketing research is presented, it's time to look for investments. About where and how to look for them, we will talk below.
How to attract an investor to a startup. Step by step guide
Where to get money for a startup? In fact, there are many options. The most trivial is to start a startup by creating a detailed business plan, which can later be demonstrated to investors. Thus, many owners of large businesses are motivated to receive passive income from the launch of startups, which comes regularly in the form of a certain interest rate, which was agreed with the owner of the idea at the time of the transaction. Therefore, it is quite logical that if they are interested in your proposal, they will be happy to give you funds for its implementation.
Regarding exactly how much interest can be offered to investors, we talked with our experts:
You need to evaluate your project immediately more expensive by 2 times, or even 3 times! Depending on how much you want to receive investments. The more investments you request, the more you value your business, and the better you talk about it. In order not to get that the amount of investment is equal to the estimated value of your business, it will be 50/50, but it is better that it be 70/30
Documents for investors: what you need to prepare
If you intend to seriously interest investors, you will have to take care of coming up with a name for a startup project and, in fact, registering your business (in the form of a joint-stock company - private or open, a limited liability company or a private enterprise, depending on what risks you are willing to bear , and what turnover is planned within the framework of your business activity).
Moreover, if your plans include attracting investments from other countries, you will have to register a company not locally, but, most likely, in another country with a stable economic system (for example, most ICO projects today are registered either in Switzerland or in Estonia, or offshore such as Malta or Cyprus).
By the way, a few words about offshore zones. This is a good solution for those who want to “get off” with a minimum budget for their future project. On the other hand, they often inspire much less trust from potential sponsors, so you will have to describe in as much detail as possible on your website (or any other resource with public access) why a particular country was chosen for registering a company.
The next type of documents are documents on the lease or ownership of the premises in which your project will be implemented and operated. Agree that when there is a physical place (office, retail outlet, warehouse, factory, etc.) to which the business is “fixed”, the level of trust in it from outsiders increases.
When you find partners for cooperation (for example, investors), your relationship will also have to be documented.
We also note that in addition to notarized documents, you will need:
- a detailed presentation of the project (to create it, you can use special online services that provide free colorful templates; one of the most convenient of them is the Canva service);
- business plan (what should be present in it and in what form, we will discuss below);
- road map (here you must describe with what resources and for how long you will implement each of the stages of your project).
What do the real owners of startups say about the documents? What do you need to take with you to a meeting with an investor?
An investment presentation of 8-10 slides and a basic financial plan in Excel showing your business model with all hypotheses and assumptions.
How to write a business plan for a startup?
This is what you, in fact, will demonstrate to your potential investors.
A startup business plan is needed so that when communicating with investors you do not get lost and do not operate with inaccurate data, but have a clearly defined and consistent algorithm of actions for its implementation .
So, your startup business plan should contain not only the tasks of a startup, along with a clear sequence of actions to implement the plan, but also data on the volume of regular expenses (that is, the “budget spending rate”), sources of raw materials (if you intend to produce some products), the amount of start-up costs that have already been spent on creating an MVP, as well as the time frame during which the business processes you specified will be performed.
In addition, in order to understand how to write a business plan for a startup, we recommend that you familiarize yourself with real and already existing examples of business plans from other companies (in particular, with whitepapers and roadmaps of successfully completed ICOs).
But what about those who are not confident in their abilities in writing a business plan? Is it worth it to seek the help of consultants?
Yes, sure. But no one will ever do it as correctly and as well as the owner or founder of the business. Nobody cares about presentation design if the business is not working. But if the idea is a goldmine, then the presentation can be drawn with chalk on the wall of the house - and it will work. ;
How to find an investor for a startup
So, you have decided to find an investor for a startup. How to do it as quickly as possible?
The first thing that comes to mind is to turn to special investment funds for startups. In fact, these are special sites where companies or just successful businessmen are looking for new projects in order to invest their money there and, as a result, get a passive source of income from this.
You should also understand that the correct formulation of the problem in this matter solves a lot (it would be more correct to ask not a question like: “Where can I find an investor for a startup?” Or “Where can I get investments for a startup?”, But “What can I offer a person with a high social status, so that he sees prospects for himself in my proposal?”).
From this it follows quite a logical conclusion that in order to raise money for a startup, you need a site that would consider the startup model in the most favorable light for you and for investors.
And, as the icing on the cake, we will present a series of recommendations on who to contact and who not to contact when looking for investors.
An investor is not a friend, not a fan, not a philanthropist, not a nanny, not a mentor, not an agent. This is a business partner.
This means that he expects you to be professional, responsible, and dedicated (ideally), and assumes that you yourself will figure out how to grow, build a company, and make money faster than you run out before profit or the next round. The investor does not care what you saw there. It focuses on other metrics than the amount of code you have committed.
In the same way, you expect the investor to fulfill his obligations - he must ship the money on schedule and not go into business, unless you agree otherwise. Of course, if the investor is your husband, then that's a different story.
It may happen that an investor, if he is a former businessman, may advise something, but the probability of this is negligible for many reasons. Maybe even introduce you to someone, but you should not hope for it. The investor has given you money, and that's good. If you don’t know how to do something, learn or hire staff. You can’t, you’re afraid, then hire a normal coach.
Investing in startups
Where and how to present a startup? In fact, investing in startups in recent years has become less and less dependent on the luck of their owners. So, many startup investors live on special startup sites called venture funds, startup exchanges for investors, business angel networks, business accelerators and business incubators. The best known among these resources are 500 Startups, Energy Excelerator, Accelerace, Wayra, AngelPad, and NXTP Labs. In turn, the owners of ideas, in order to attract investment in startups, simply register on such sites and place their offer of partnership there, indicating the name of the startup project and a fairly detailed description of the main tasks of the startup. It is very important at the same time to limit access to your business plan and show it only to those who
Stages of funding in startups
- Idea . This is the initial stage, when the author of the idea owns 100% of the profit. He is the only owner so far.
- Co-founders . The founder will have to hire co-founders, because at first, a startup inevitably needs resources. They will share some of the work with you. Accordingly, you will distribute the profit depending on who is involved in the implementation of the plan. An alternative to co-founders is loans and the contribution of three F: family, friends, fools.
- Business angels . When venture investment is still far away, additional sources of funding are needed. Business incubators and business angels will come to the rescue. Incubators will give startups not only workspace, but also contributions from ,000 to ,000, which corresponds to 5-10% of the shares. Business angels, as a rule, give more, but their shares are much more substantial.
- Venture investments . When there is a working version of the product, then venture investors can be attracted for further scaling. Their investments must be at least 0,000. As a rule, this type of investment has rounds: pre-seed, round A, round B, round C, round D.
- IPO . The first public sale of shares of a joint-stock company.
Distribution of investments at different stages of development
How to distribute shares in a startup?
Now let's talk about the interest you should offer your savers. If you own only the idea and nothing else, then you will probably have to prepare to part with 40% of your profits. At the stages of startup development (pre-seed and seed stages), its owners give up to 20% to investors and incubators. If you present to investors a ready-made product and a small, but already stable customer base (that is, the goal of attracting investments is to scale the business), the share of investors should not exceed 15%. Ultimately, the percentage of investors directly depends on the specific situation, because, obviously, it is much more profitable for investors to receive 10% of a million than 90% of a couple of thousand.
And now, as expected, a question for experts about at what stage of startup development an investor is needed, and the answers to it:
There are different investors at different stages. At the earliest, there are three Fs - family, friends, fools. A little later - accelerators and angel investors. At the stage of a working product and the first sales - venture investors.
Immediately. Well, if you don't have your savings under your pillow. I have learned from bitter experiences. It is better to find an investor right away than to go into debt later.
How do shares in a startup dilute?
There is one important point that many do not think about at the beginning of their journey. How is the dilution of shares in a startup at the stage of venture investment? What will a founder have to face before selling shares? When attracting investments, your share in each round decreases, so you should know in advance what your share will look like in 5-10 years.
The main thesis is that the more founders a startup has, the brighter the share of the main founder is blurred. As a rule, it is more profitable to found a startup yourself, and then invite co-founders.
Carefully study the conditions that venture investors offer, because the profit of all founders and other investors depends on them during the exit. Hire competent lawyers, study the contract or talk to those who “ate the dog” on this.
It is better to contact lawyers at the A round. As a rule, business angels and private investors can also provide investments in companies that are registered with us. But, as far as venture investment is concerned, the situation is different here - our law does not yet provide the necessary tools, so most often they turn to foreign firms for help and transfer control over the company into their hands.
How to evaluate a startup?
Another question: “How to evaluate a startup?” also confuses some aspiring startups. And this is not surprising - if you are the ideological inspirer of the team, then you are unlikely to be able to give an objective assessment of your offspring.
In such a situation, independent experts (business analysts) can come to the rescue, who are able to take a sober look at the situation on the market and provide you with the most accurate forecasts regarding earnings prospects.
On the other hand, in order not to incur additional costs, answer the question “How to evaluate a startup?” you can do it yourself. To do this, you need to calculate the approximate budget that is described in your business plan and derive the market value of the product or service, which would be adequate for both consumers and you. By multiplying the amount received by the potential number of customers for a certain period of time (usually calculating the income that can be received during the first three years from the moment you started a startup on the Internet), and also subtracting some percentage associated with possible losses, you Get Startup Value.
Perhaps the opinion of well-known CEOs will help you in the distribution of the funds raised:
Depends on the stage of the startup, no need to cut the product without receiving feedback from the market. Goal: start selling as early as possible, and then distribute finances so that users get an orgasm from your product and their number grows exponentially.
Separately, we note that it is necessary to evaluate a startup before negotiating with investors. Otherwise, you are unlikely to be taken seriously by your potential partners.
By the way, you may find it helpful to have a sample list of questions that you may encounter when talking with investors:
You will be asked about unique advantages (technological, marketing, unique insights or knowledge about the market, and others). Your business model (basic financial plan). Team expertise and engagement. Only in this way can you answer the question - how to create a successful startup
Why you? Payback period? What will be beneficial for the investor? Development plan?
What to do if you don't work with an investor?
At the initial stages of work on the project, as soon as you start receiving investments from outside, you will need to agree with your investors on the procedure for exiting the project and suspending the agreement on further cooperation.
In particular, you will need to agree on how you will share revenue and work capacity, who will get a controlling stake (in the case of a joint-stock company), and who will take over the reins of power after your startup decentralizes the governing body.
Registration of a startup
In fact, registering a startup (especially in some countries, for example, in the Emirates) takes no more than an hour, even for a person who has never dealt with anything similar before. Fortunately, now an increasing number of countries are transferring this state form online. Thus, you simply fill out an application and prepare the necessary documentation, and the rest of the work will be done for you by civil servants.
As you already understood, you have not so many options regarding the choice of the format of your company. You can create a joint-stock company (open, closed, limited) or register yourself as a legal entity or individual entrepreneur - it all depends on the risks you are willing to bear. Also, consider that you may need to register your own brand or trademark (especially if your idea is to create products, not provide services).
Another thing is bookkeeping. Hoping that you can handle this on your own is not worth it. Therefore, immediately get ready for the fact that you will have to delegate all matters related to the budget of your enterprise to an accountant.
You can either hire a full-time employee to manage financial documentation or turn to the services of outstaffing companies, since you most likely will not need the daily presence of an accountant at the initial stages of your company's formation.
To complete this, you will need to think through all the legal aspects related to resolving conflict situations with your future clients - whether they will be given any compensation and in what form it will be provided.
Conclusion
We really hope that our guide will help you figure out how to create your own startup and attract investments. We will also help you if you are actively looking for a team of professionals to programmatically implement your idea. Contact us for professional advice.