1. Have the right mindset.
Think like an athlete . Define your mission.
Do:
Figure out your motivation. Look for partners with a positive mindset. Be passionate about your mission. Be ready for constant change. Prepare to fail, 95% do. Work to learn, not to earn. Work hard and be nice to people. Know the difference between being self-employed and starting a startup. Find advisors and mentors to build your business. Dream big and start small. Have reasonable expectations.
Don't:
Let other people set your goals.
2. Focus on the main goal.
Doing business is about making money. Focus on making money.
Do:
Figure out how you can get somebody to pay you money for your product or service. Get a seperate bank account. Get a seperate credit card account. Get a seperate email for business. Get an accounting and bookkeeping service. Remember your number one goal is to make money. Remember your time is short, but you do need to keep on learning. Remember you can push through for the long-term if you are passionate enough about something to want to do it for free.
Don't:
Don't waste time and/or money to
- get business cards, t-shirts or logos,
- build a business plan or website,
- incorporate a legal corporation,
- contact an accountant or lawyer,
- get startup advice from institutions.
Surround yourself with people who try to de-risk themselves. Doing business is about taking risks. The more risk you take, the higher the probability of success.
3. Decide what you want to build.
Determine that there is a solid, profitable business opportunity. Make things people want. (Paul Graham)
Do:
Understand trends and markets. Identify current trends. Identify current growth. Identify good and bad ideas, early. Identify your skillset. Identify the core problem to solve. Identify product features to work on first.
Don't:
Focus only on your interests.
4. Find the right co-founders and advisors.
Learn to articulate your vision and attract talent. Find co-founders or right people to work with your initial idea. Assembling the right team is critical. Choosing the right co-founder defines the shape of your company's future more than any other.
Do:
Look for problem solvers. Look for partners with a strong work ethic. Look for constant learners. Look for partners who can break down complex problems into simple solutions. Look for flexible partnership agreements if needed.
Don't:
Think good partners are easy to find. Think past performance is everything. Initiate inflexible structures or incorporate a legal corporation before the venture makes a considerable cashflow.
5. Raise your first round of money, or bootstrap your company.
Raise money when you can, not when you have to. Having someone - even family or close friends - believe in you enough to give you some cash is a major milestone. It is also a major milestone to believe in yourself enough to ask for cash from other people.
Do:
Bootstrap / Be self-funded if you can. Convince family&friends or business angel to help fund your venture. Have a strong business plan lined up. Try to ask for funding after you have product/market fit.
Don't:
Expect no return on investment. Everybody is expecting a return on investment. Every money you spend, you should also expect a return on investment on that.
6. Build v1.0 of your product.
Just delivering something to the world is a major milestone. Ship your MVP (minimal viable product) asap.
Do:
Advertise your MVP to a small group of people. Iterate product features on early feedback. Bootstrap your MVP if you can. Be confident and put your money where your mouth is. Have a clear idea on how to get the first 100 users. Iterate your idea, product or service with first market feedback. Focus on product/market fit.
Don't:
Try to talk to everybody or you speak to nobody. Shy away from going online. Have fear to show your product. Have fear from getting feedback.
7. Demonstrate that people want your product.
With enough twisting and turning, you should be able to build something that people want. You should celebrate once 100 people who are not your friends and family tell you that using your product was useful. If you don't reach that milestone within 4 months of building v1.0 and raising money, find something new to build. Hopefully you build something that people want before you run out of money.
Do:
Find the love / early adopters. Validate the need for an MVP. Customer develop/market research. Assumptions. Start A/B testing. Expose the core gratifying experience. Add metrics. Start charging money. Increase customer support. Do whatever is required to get to product/market fit (Marc Andreessen):
- changing out people,
- rewriting your product,
- moving into a different market,
- telling customers no when you don’t want to,
- telling customers yes when you don’t want to,
- raising that fourth round of highly dilutive venture capital.
Don't:
Let your own opinion destroy your venture.
8. Raise your second round of money, or reinvest some profits.
Again, raise money when you can, not when you have to.
Do:
Convince corporations or investment funds to fund the startup based on:
- Right team.
- Solid, profitable business opportunity.
- Proof of concept prototype that addresses the critical risk factors.
Come up with a business plan that guarantees a return on the investment. Bring in some experienced "bigger business" folk to help in the areas you aren't familiar with as you hit scale.
Don't:
Bring in inexperienced investors. Bring in investors without domain knowhow.
9. Figure out how to scale.
Lots of promising, buzz-worthy startups die here. Scaling is very difficult and takes much more than being written about in TechCrunch. There are lots of large, entrenched players trying to stop your innovation. Of all the non-glamorous things it takes to create a real company out of a startup, scaling is the least glamorous. Only the strong achieve this milestone.
Do:
Focus on a subscription model. Benefit from a retaining customer over a period of time. Use developer friendly payment providers like stripe, paypal, gumroad or kajabi. Drive growth:
- Focus on new marketing opportunities.
- Identify the current trend in distribution.
- Be genuine. Do not try to sound professional.
- Optimize your conversion funnel.
- Get into the viral loop.
Remember that most of the money you spend on advertising does NOT work. Remember that if a product is really good, it will grow on its own - and this is how you get massive amounts of growth. Make sure there is a way for your business to grow in sort of a viral/exponential way without having you to pay for each single person. Incentive your customers to help grow your product. Prepare yourself to become a manager. Learn how to hire and maintain your company culture.
Don't:
Incorporate a legal corporation right from the start. Once you make sufficient revenue, you can consider forming a legal corporation. Focus on a one-time purchase fee as acquiring customers for a new business is very costly.
10. Accept the consequences.
a. Go broke (very likely), b. become cash-flow positive (unlikely), c. get bought (very unlikely), or d. IPO (extremely unlikely).
Do:
Accept that startups provide a very low probability of success in nature. Be open to learn from anyone and anything. Be aware that lots of startups succeed due to financial resources some families provide to their family members.
Don't:
Listen to advice of people who do not have startup experience.
11. Repeat.
Startup Genome Report (by Steve Blank) Some of their key findings:
- Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.
- Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.
- Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.
- Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)
- Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
- Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.
- Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.
- Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
- Most successful founders are driven by impact rather than experience or money.
- Founders overestimate the value of IP before product market fit by 255%.
- Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.
- Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.
- Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.
- B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.