to Launching a Startup COMPANY
Planning a new venture
is a difficult and confusing process. No single article or book can
address all the things that need to be done, as so many will be
specific to that venture and the order can vary greatly depending on
many factors. However, here we are trying to outline some of the
key steps to help you formulate a business plan and vision. We will
show you how you can outline a timeline that might work by revealing
many of the key steps that are not well thought through by many new
entrepreneurs. The time-frame for the first ten steps can be a few
months or even a full year, but as much should be done as possible
before a large burn rate is incurred, which might greatly limit your
time to learn and develop the business plan. Using virtual teams of
advisors that are not on the payroll, but available for consultation
is often a great way to keep expenses down, while not compromising
on quality or experience needed to develop your plan.
Typically, an entrepreneur will start with a product idea and that
portion of the vision that is made up by that "core technology,"
problem, or idea. The problem with this as a starting point is that
this is really only about 2 percent to 5 percent of starting a
company. The other 95 percent (or more) is much harder and will
require many diverse skills. Most people start with this core idea
or market-need and that is not a bad place to start, as it indicates
the POSSIBILITY of a market, provided everyone, or at least lots of
people think like you, and are willing to pay enough for your
solution compared to alternatives.
First I recommend conducting lots and lots of upfront market
research, and then creating a draft brochure of what the company
might look like to a consumer of the product or service. This does
not mean carrying out elaborate and expensive quantitative studies
because it is WAY too early for that. Real-world data gathering and
interviews that get people's reaction to your business proposal is
needed. This will allow some informal surveying of your
mother-in-law and others to sharpen and focus your idea on a market
and improve your presentation before showing it to anyone
"professional." Smoothing out some kinks and identifying the key
questions and objections is critical. Then, after some validation
by real buyers, at a particular price point, you can begin to pull
together a real development and business plan for launching your
good starting point is to read the short chapter on “The Marketing
and Communications Pyramid." You can start at the top and work
down. Obviously there are many ways to go about this task and I
know several that can be combined in the process to validate the
value of a business concept and begin to get a handle on the risks,
costs, and opportunity. One very experienced person can sometimes
do this, but typically you will need to draw on the experience of
several people with backgrounds in marketing, sales, finance,
product development, and operations.
What Steps Should You
Take In Creating and Validating a Business Venture or Idea?
Spend the first
five to ten years of your career learning on someone else's nickel.
Get good experience managing people in small companies and some in
larger ones. You need market-knowledge and experience, project
management experience, people and management experience, and ideally
some sales and marketing experience too. You cannot do it all and
will need to hire or bring in partners to complement your own
skills. However, the more well-rounded your skills, the better your
chance of success will be due to a huge efficiency in the early
on a core idea, technology, or need as a starting point to iterate
from, which solves a big problem today. It must be three to ten
times better or cheaper than alternative solutions if you need to
attract capital investment early on.
market research (probably using a consultant if you are not
experienced at this) which answers the questions: How big is the
potential market? Who specifically will buy the product in great
detail which includes the exact person (decision maker), company
type or list, vertical market(s) etc? Who is solving this problem
today and find everything you can about how they do it?
a “Marketing and Messaging Communications Pyramid” and the documents
it specifies in the top down order until you get to a "business
plan," which at this stage should not be written in any detail until
you have a complete management team and some market validation
some Competitive Landscape Maps for your space with a visual
representation of your competitors and your position in the
a risk assessment landscape map of your market entry or launch
a draft business presentation slide show and/or rough executive
summary to show people informally and flush out your ideas better.
a spreadsheet, develop a financing strategy that plans all needed
financings to reach well beyond breakeven to $25MM or more in
revenue (as appropriate). You will likely need some consulting help
here from an experienced entrepreneur who has successfully raised
either angel financing, venture capital for any institutional
source, or both.
this point you may want to begin recruiting a virtual team that is
not on a full-time salary, but passionate about your venture and
willing to invest a little time to help validate the plan and also
be willing to join if and when financing comes together and risk is
down some. You will also likely need to pay some consultants who
make their living doing this, and can't eat stock options in small
amounts. Paying through stock options here is a good way to limit
salary for potential full-time employees, but this is complex and
needs advice specific to the exact circumstances. Seek a consulting
executive at this point rather than a lawyer, to design your stock
option allocation plan, but not to implement a plan. At this point
you are just modeling the financials and you do not yet need the
paperwork and specifics. You just need an outline for contingent
offer letters, discussion, and the like.
recruiting a management team with the key skill sets needed to
validate the concept and business plan much further and to add
details. Much iteration will be required as these people come on
board, and the only thing that is certain is the first plan will be
wrong and will need many adjustments along the way.
a draft business plan consisting of 10 to 20 pages, plus an appendix
that has plenty of supporting market research. At this point use as
many lists and bullets of ideas that are easy to change. Do not
write lots of pretty prose, as that will take a lot more effort and
is guaranteed to change radically as you learn more.
out and try to "sell" the product to customers to get their
feedback. This should be done as soon as possible and may be
possible much earlier with a mockup or product prototype. After
validating the concept by getting real money from customers somehow,
probably for services with a commitment to a product shown in a
prototype form, you can rewrite the business plan to reflect all
changes based on your learning experience. This will allow you to do
a risk assessment with some real market feedback
this point you may want to look at possible intellectual property
protection (everyone so far has been under non-disclosures to
protect your rights here). A patent can be helpful, but it can also
be worthless sometimes if there are ten other ways to do the same
thing. Balancing this with the potential cost will require
experienced advice from someone without a conflict of interest (i.e.
NOT your lawyer).
your business plan to version #2 based on the customer and market
experience trials. Start turning some lists of bullets into short
your first level of outside financing. Today, this is pretty much
personal funds or friends and family. Nowadays, few angels are
investing prior to having a product and a few sales. This is a topic
for another book all by itself, so obviously you should learn much
more about this and get help from experienced entrepreneurs and
consultants. There are many, many ways to raise money, but all are
usually time consuming and difficult.
actual product development. At this point, this could be from your
own funds or using unpaid co-founders. You could also sell services
that might help you develop the product you need on someone else’s
the hiring process for marketing and selling efforts around three to
six months before the product will be ready, more for longer
selling cycles. You need to have someone on board to begin setting
up the selling process. They should be used to doing more market
validation and soften the beach by building a customer database and
validating the target (best) customer. They should identify the
lowest fruit for early sales. Find out who needs the product the
most, and are therefore willing to take the risk of working with a
new player to get some specific feature(s) you have that others do
for operations and product/services delivery just-in-time, before
product launch, and use this staff for quality control as they are
trained. Usually only one or two weeks before the product launch is
OK for this function, but obviously it depends on the complexity of
the product and support. Add a couple of weeks minimum to whatever
the training time is expected to be.
selling real product and booking revenue. You need a real "sales
partner" or someone committed (as shown by low salary and high
success compensation via equity and/or bonus) who has worked in this
industry selling before and worked in this exact stage company for
at least three years.
signing no less than ten customers, you may want to look at
beginning to raise expansion funds from serious angel groups,
super-angels, or institutions that still do real “Series and B” type
financings (make them prove it by showing you recent investments
they did and speaking with that management as many will say they do
to leave the door open even though they don't).
this point you will need to hire an experienced CEO, at least
part-time, but full-time if you expect to raise more than $2 million
in financing. This person MUST have grown startup companies
successfully before and you probably also need to add some more
senior management talent in the finance, sales and marketing areas,
either virtual staff or full-time.
closing a larger financing, hold on for the ride of your life. If
you have a good product and the money to grow, you should be able to
expand, or "roll out" your the product or service very rapidly.
Each of these steps
requires experience and has varying levels of associated risk. Each
task must be attacked with a clear understanding of what you and
your team (virtual or otherwise) already know how to do, and what
you do not know well enough to accomplish without some outside
help. Errors in judgment here can be fatal for a company. Finding
experts in the particular areas, to leverage their experience
without using much of their time is a critical talent you will need
to develop. You can barter services, charm a little volunteer
effort, or buy it – but you must enlist others willing to help you
with referrals, interviews, and other networking.
Obviously this is a simple and generic outline with many missing
details that are specific to your situation. Timelines can vary from
weeks to many years. Seek small amounts of help from many experts
along the way. Nothing can replace experience.
to Launching a Startup COMPANY