Is this the year you finally get so tired of working for someone else that you bust out to found your own company?
Maybe you’re not quite ready to give up that paycheck, but perhaps you’re game to test out a side project, with the hope of turning it into a fulltime gig. Just remember, turning a side project into a startup takes some serious preparation.
There are many kinds of companies you could start, of course, in the category of lifestyle or local businesses. But what we’ll talk about here is a true startup – as in one intended to scale and become a high-growth business. So, if you think your time may be coming to take a run at it, I have some steps you can take to resolve to make 2021 your year.
(Of course, if you work for one of the big tech companies in Silicon Valley, you might be lucky enough to be one of the select few chosen for this program: “Z Fellows offers $10k to stop what you’re doing for a week and work on a side project.” But back to reality.)
I submit the following ten recommendations, based on more than three decades of experience helping my clients launch and grow more than 200 startups, and also serving as a mentor and coach to many new founders over the past five years.
1. Read a Good Startup Book (or Two)
The two titles I recommend most frequently are the following, the authors of which I have had the privilege to meet and get to know. Both are really great reads:
• “Startup Opportunities: Know When to Quit Your Day Job,” by Brad Feld (with Sean Wise).
• “The Art of the Start,” by Guy Kawasaki. (A huge best-seller, later published in a 2.0 version.)
Here’s another excellent book I became aware of recently when I was offered a beta review copy:
• “The Entrepreneur’s Paradox: How to Overcome The Sixteen Pitfalls Along the Startup Journey,” by Curtis Morley. (Due out March 16, 2021; available now for preorder.)
2. Identify a Significant Problem You Can Solve
Important point: don’t start with a product idea – start with a “compelling unmet need,” as Brad Feld, a VC with Foundry Group, puts it in his book cited above. “Focusing on a clear pain point is very powerful. The greater the pain, the more likely your product will resonate with customers. You can approach this as a low-cost solution with a very large market or an expensive solution for a niche market. Either way, your customer should view you as a solution to a major problem.”
3. Find One or More Team Members
If you think you’re onto a startup concept worth pursuing, you won’t get far without convincing others to come along for the ride with you – initially, at least one cofounder. Guy Kawasaki calls them “soulmates.” He says, “Successful companies are started, and made successful, by at least two, and usually more” such folks. That can be your first major challenge. Think of finding a cofounder like getting married. What skills will balance yours? Resources that can help here include the very well regarded Cofounders Lab. (A client of mine, whose company also became a personal portfolio company, used it to find his cofounder/CTO about four years ago. The two have built an extensive team and a very successful SaaS company, recently experiencing 100% year-over-year growth and nearing $15 million in annual revenue.)
4. Consider Applying to Startup Accelerators
These programs come in many varieties – equity vs. non-equity type, general vs. vertically focused. Competition is fierce for the top programs, such as Y Combinator in the Bay Area and the various Techstars accelerators around the country (which make an equity investment in the startups they choose). But there are many others that are worthy of your attention – such as the Gener8tor accelerator, which is a top-15 program active in several Midwest states that offers both equity and non-equity programs. [Full disclosure: I’m a mentor.] Do some research and you’ll find many more. Accelerators provide advice and guidance in developing your plan and your business model, helping you craft your pitch, and connecting you with valuable resources and potential investors. If you get accepted into a program, the time commitment for you and your cofounder(s) will usually be 7 to 12 weeks. That used to mean on-site, but all these accelerators had to run their programs remotely in 2020, and will likely continue to do so, at least in part.
5. Define Your Product and Size Your Market
What will it do? What benefit will it provide? Where does it fit in the market? What is the dollar size of its market segment? What growth is forecast for that segment? To scope the aggregate size of a “compelling unmet need,” Brad Feld recommends asking three questions: “(1) How many people suffer from the pain you are addressing? (2) What is the intensity of the pain each user feels? (3) Is this pain felt once or repeatedly?”
He goes on to say: “If the pain you are addressing doesn’t impact enough people, or doesn’t impact people deeply, it will be difficult to gain market traction. If current solutions are good enough, then the pain may not be enough to justify the need for the startup’s solution. The number of potential customers suffering from the pain you are addressing is referred to as the total addressable market (TAM).”
6. Talk to Customers
Who exactly would buy your product? Single buyer or multiple purchase influencers? Why would they buy? What would be the sales process and sales cycle? What is the perceived value proposition? Related to this step is determining your business model. But Guy Kawasaki’s advice here is to just copy somebody. “Commerce has been around for a long time, and by now clever people have pretty much invented every business model that’s possible. You can innovate in technology, markets, and customers, but inventing a new business model is a bad bet. Try to relate your business model to one that’s already successful and understood. You have plenty of other battles to fight.”
7. Research Your Competition
Please don’t ever think (or, worse, say to an investor) that you have no competition. Many times, the hardest competitor of all to overcome – as alluded to above – is “the status quo.” Do your research. If your product is really addressing a major unmet need, someone else is likely working on it, too. You need to understand how you will differentiate from any of these you can identify.
8. Create a Budget
What resources do you have to survive the first year? What will it cost to develop your product? What will your customer acquisition costs be? What will your capital requirements be for year 2 and year 3 of your business?
9. Seek Advice and Counsel
You’ll need a good attorney, of course. But also find at least one trusted resource who can be a coach or mentor, serving as a sounding board. Someone who’s been there before. Someone who can challenge you as you develop your plan. Plan to award equity to your advisors if you can’t initially pay them.
10. Develop a Plan for Fundraising and Create Your Pitch
Once this step is completed, you can start networking in earnest, seeking referrals and introductions to successful founders and potential investors. Get as much feedback as you from these smart people. It can be as valuable, or even more valuable, than the checks you’ll ultimately get from your investors. At the point you start taking those, the fun really begins. You’re committed.
So, there they are – a list of resolutions you can make today. Ten steps for you to take, one at a time. The tasks that will form a path to reach your goal: to become the founder of a startup. By seriously addressing them head-on, will help ensure your startup journey gets off on the right foot. As you progress, you certainly can and should seek more help from the support system you will build. Remember, you’re far from alone if you do that right.
Maybe, just maybe, 2021 will be the year you’ll find you have what it takes. Good luck!