Startup Success Requires Focus On These Early Stage Steps
These critical steps are far more important than raising money in the early stages of a startup.
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It is a common and misguided plea I hear when consulting with young entrepreneurs: "I have this great idea. Can you help me get money to get it started."
As an entrepreneur (or former, as I have shifted a bit from practicing to teaching), I get it. I remember how enticing it was to imagine all the great things I could do with my business idea -- if I only had the money.
In the not-so-distant past, many startup companies were funded with nothing more than an idea scribbled on a bar napkin. Back then, investor money was relatively new, and new industries and technologies (like the internet) were like the Wild West. Everybody wanted a piece and acted on FOMO (fear of missing out).
These days, however, venture and angel money is much wiser and demanding. While investors always seek new and novel ideas, they now want much more.
Identify Market Need
Most new entrepreneurs believe that the lack of money is why most startups fail. While capital is important, more important -- and often most overlooked -- is need. If you have no customers, it does not matter how great your idea might be.
Remember this important rule for any startup idea: Does your idea solve a problem that is currently not being solved or fill a need that is not being served? If not, then you are off to a bad start.
Develop Proof of Concept
So you believe you have identified a market need? Now you need to demonstrate it. The wonderful thing about the age we live is that you do not need to spend outrageous amounts of capital proving your idea works.
Instead, you can build simple prototypes (3D printing, minimum viable products [MVPs], etc) and test quickly. Crowdfunding also provides a great means to establish proof of concept -- although a good amount of work is required to successfully launch and deliver on a campaign.
Build A Team
I often consult entrepreneurs who have a great idea but have absolutely no means to execute on it. Most do not want to share the idea for fear of someone stealing it or pride of allowing others in on it. No idea, however, will succeed without a team that can deliver on it.
In addition to a business team, building an advisory team is just as important. Having a group of professional and experienced mentors willing to provide you with transparent and honest feedback can be as important as the team working on building the business. Great advisors will be able to help with everything from the startup strategy to understanding the valuation of the company when it is ready for investor rounds.
If you get to the point when you are ready to raise capital, an investor or investors will place a tremendous amount of emphasis on the makeup of your executive and advisory team, so put time into building the right one.
Network, Network, Network
You will be busy with building your business and team, but you must make time to network during these early critical stages. Networking is important for finding long-term team members, advisors and investors and is a process that requires time and effort to be successful, and a healthy and nurtured network can help long into the future.
Once you have focused on these early-stage steps, then you can consider the endeavor of raising money for your startup. Then again, if you have gone through these steps successfully, there is a good chance you may not need to.
Are you a startup entrepreneur? What other advice do you have for others looking to get started? Please share your valuable comments below.