What does it take to build a startup?
This is typically the first question that a person asks themselves once they’ve come to the conclusion that they would like to be an entrepreneur. Of course, often times new entrepreneurs tend to drastically underestimate what it actually takes to build a successful startup.
Speaking from experience, trust me, building a business is insanely difficult. On the bright side though, it is possible to build a business from the ground up if you have what it takes.
Here are a few things I’ve come to realize that can drastically improve your chances of building a successful startup. Be sure to add your insight to this list.
A Good Idea
When I say that you need a “good idea”, what I mean is that your business idea needs to provide some value that is not currently being provided very well. In other words, don’t simply create a business that already exists.
I launched my first startup when I was at Florida State University. My main reason for starting the business was so that I could work myself through school and apply, first hand, what I learned in business school. In reality, I started the business for all the wrong reasons; as a result, the company’s progress was initially slow. Once we adjusted our strategy to provide value that wasn’t being provided in the marketplace, however, sales took off.
When talking about startups, a good idea:
- solves a problem that is not currently being solved very well
- can be scaled
- can be profitable
A Great Team
With that being said, great ideas are a dime a dozen; just ask investors. If you don’t have the right management team lined up, most investors won’t even give your startup a second glance; regardless of how great your idea may sound.
The truth is, you need to be able to make your idea happen. In most cases, I would recommend that you have business partners of some sort. If you can’t afford to fill the skills-gap by hiring employees, consider reaching out to a few experts and offering them equity in your startup. It’s much better to have a solid team than try to take on tasks that you aren’t equipped to do.
Either way, whether you plan to start solo or hire employees from the start, there are a few crucial capabilities that every startup will need.
- Marketing: When you first launch a startup, you need to generate cash quickly. In order to generate sales, people need to know about your product or service. If you’re not a marketing expert you’ll need to some how acquire these skills. In most cases, it’s typically better to outsource these tasks to a company who has experience with startups. Be careful, though, there are an infinite number of Internet “gurus” out there. Be sure that the proposed solution makes a clear connection to your bottom line.
- Tech Skills: One of the easiest ways to grow a startup is by utilizing technology to increase efficiency. If you can, utilize free technologies such as Google Apps first and then move on to paid technologies as needed. In most instances, it’s fairly easy to learn these technologies yourself. Let’s say, however, that your startup requires heavy software development and you have no idea what “development” even means. In that case, it’s typically a good idea to reach out to a few credible developers and offer them equity in your startup.
- Finance: As a startup, you and your team need to have at least a basic understanding of how money flows through your business. After that, however, it’s typically sufficient to hire an accountant for the rest of the work. As your startup grows, you can then start to dig a little deeper into financial topics.
A Detailed Business Plan
If you fail to prepare, then be prepared to fail.
It’s a cliche saying but it’s true; if you want your startup to succeed, you need to know how to make progress and then create a detailed plan that illustrates how you plan to make that progress.
Building a useful business plan can be a daunting task that most people won’t do. However, taking the time to think through your startup idea and how you plan to actually make that idea happen could be the difference between success and failure.
- Business planning software
- U.S Census Bureau
- Pew Research Center
- Google Trends and Google Insight for Search
The Right Investors
While it is certainly possible, boot-strapping a business without outside investment is incredibly difficult. It simply takes way too much time to grow a business without money. In most cases, you will need to go through a series of investment rounds to properly fund and build your startup. For those interested in learning a bit more about angel investors and venture capitalists, be sure to read through this note on investing.
With that being, if you do plan to seek funding, you will want to make sure that you partner with the right investors. This is a huge decision, so be sure to take your time and make wise decisions. Teaming up with the right investors could make all the difference for your startup.
Key characteristics to look for in a potential investor:
- open, honest, and has realistic expectations
- sees themselves as a “partner” more than an “investor”
- has a well diversified portfolio of investments already
- has assets and capabilities that can benefit your startup
The Right Personality
Even if you have all the above pieces, let’s face it, your startup could still fail. Building a successful startup is incredibly difficult and certainly isn’t for everyone. In my experience, it seems that a few personality traits seem to favor entrepreneurs building startups:
- obsessively passionate about business and people
- calculated risk-taker
Do you have what it takes to build a successful startup?