Effective Startup Planning
Although there’s no road-map to effective startup planning, there are a few points you may want to think about in your early stages. When we discuss effective startup planning we focus on purpose and priorities. While being effective is about doing the right things, being efficient is about doing things the right way. Let’s give some thought to doing the right things in three important areas: the people, the problem and the money.
The first stage in effective startup planning is knowing who to partner with and who not to partner with. Partnerships are not just born through finding someone who has characteristics that you do not possess, such as a natural marketer siding with a developer. Although this may seem logical, a common history together may turn out to be a better predictor of long term success. A good question to ask yourself is whether at some point in time you have experienced challenges together with the person with whom you are partnering. Have you been able to emerge together triumphantly on the other side? Working on a project together before deciding to create a startup is a great way to find out your weaknesses and theirs and test the waters before taking on risks and making your partnership legally binding.
In addition, although in the beginning each of you may be taking on several roles, it is advisable to carve out the name and position for each founding member. This is especially important in order for investors to know who they should address and on which issues. As you put your heads together, it’s also important to examine your end goals. Each member may have different objectives in mind such as wanting to sell the company within a short period versus seeing it as a lifetime venture. Setting expectations on these ambitions will help guide your steps along the way.
Another important issue to think about is the level of commitment you have to the venture. There is no doubt that it’s important to be an expert, but commitment may be an even more significant factor in determining the sustainability of a company, especially through hard times. Lastly, give some thought to signing an agreement stating that all founders’ ideas belong to the company, and that it is everyone's only job.
One last tip on people: unless one of the partners has worked a significant number of years on the venture before it has become a partnership, consider splitting ownership relatively equally. Remember, you will be partnering for a long time.
Ask yourself what is the problem you are solving. A commonality among successful startups is that they are solving a problem the founders themselves are experiencing.This initial approach gives them a certain level of expertise. For example, the founders of Airbnb were themselves hosts. Focusing on the problem or product should come first, before you start to think about profit. You need to initially consider what customers will want and only second about the business model to make money from it. Putting the business model as first priority may derail you from the problem you are set yourself to solve in the market.
If you are an entrepreneur, you are not afraid of failing. The question is what tools and techniques will help you fail forward and fail fast. Start by identifying milestones so that you know where you want to be at each stage based on a timeline. To stay on track, get a mentor outside your circle that can be objective. We’ve also covered Minimum Viable Product in an earlier post worth checking out.
Effective startup planning also encompasses funding, and funding needs planning. There is a lot to cover on this subject. In this post, we will limit ourselves to describing only some basic terminology. There are three sources of capital that will help you start working on your prototype: friends and family, angel investors and accelerators. This is called seed capital. We won’t cover friends and family - that is up to you. Angels invest money in the riskier stages of the startup. When you enter a room with angel investors they expect at least one thing from the get go; you must be able to say what your product does in one or two sentences. If you are unable to do that you may want to go back to the drawing board. Accelerators will offer capital, mentorship and space for a period of 3-4 months usually, in exchange for some equity of your company.
While the early rounds of funding we discussed seem relatively straightforward, the next step involves higher expectations. Venture Capital (VC) firms will want to see evidence of real growth and traction. This is the time when you should hone your presentation skills. Obtaining capital at this stage may be quite challenging, as VC firms will research your company and team as well as your business model and customer base. But there is a light at the end of the tunnel. If you’ve managed to secure investment at this leg of your startup journey, the next rounds of raising funds should be considerably easier since you have been vetted by other firms.
One last tip on venture capital: although there is a widespread belief that VC firms invest in good people and good ideas, that may only be half the truth. According to Harvard Business Review, a large percentage of VC capital goes during certain periods to a “hot industry” such as today’s internet space. It’s wise to be cognizant of current trends and see whether your startup falls within them.
In the process of preparing and presenting your company many many times, you will have honed your presentations to be as natural, precise, informational, and interesting as possible, by the time you reach your real investment targets.
Read July 2 2016
Tips for outcome objectives
Keep reading from Paragraph: Should you
The early stages of a startup
Gil: Your first customers can be very valuable at telling you what adjustments you can make so that reiterations of the product are better suited for the market.
Later on, as you grow a larger audience, such adjustments become more difficult.
“There is nothing more valuable, in the early stages of a startup, than smart users. If you listen to them, they'll tell you exactly how to make a winning product. “
“Once you get big (in users or employees) it gets hard to change your product.”
The majority of startups fail….
company’s Objectives and Key Results(OKRs)
How to create a culture of accountability in your startup?
when and how do you make and update these OKRs?
a Kanban-style planning system
“It's no coincidence that startups start around universities, because that's where smart people meet. ”
“The best odds are in niche markets.” http://paulgraham.com/start.html
“Ask everyone about their previous IP history” http://paulgraham.com/start.html
“You have an idea, maybe a working prototype and are looking for funding that will allow you to focus on your project full time. Pre-seed capital tends to cover the first stage in the life of a startup and is often compromised of three main sources of financing:”
-FFF (Fools, friends and family):
-Angles- “business angels often invest their own money and at one of the most riskiest stages for startups, thus their importance in every single startup market.”
“When you raise VC-scale money, the investors get a great deal of control. If they have a board majority, they're literally your bosses. “
“ if you can trade stock for something that improves your odds, it's probably a smart move. “
“The first thing you'll need is a few tens of thousands of dollars to pay your expenses while you develop a prototype. This is called seed capital. “
“Usually you get seed money from individual rich people called angels.”
“The next round of funding is the one in which you might deal with actual venture capital firms.:”
“I know a number of VCs now, and when you talk to them you realize that it's a seller's market. Even now there is too much money chasing too few good deals. “
“Most VCs will tell you that they don't just provide money, but connections and advice. I'd advise you to be skeptical about claims of experience and connections.”
“The main reason they want to talk about your idea is to judge you, not the idea. So as long as you seem like you know what you're doing, you can probably keep a few things back from them.”
“When you get a couple million dollars from a VC firm, you tend to feel rich. It's important to realize you're not. A rich company is one with large revenues. This money isn't revenue.”
“ What matters is not the absolute number of new customers, but the ratio of new customers to existing ones. If you're really getting a constant number of new customers every month, you're in trouble, because that means your growth rate is decreasing.”
“During Y Combinator we measure growth rate per week, partly because there is so little time before Demo Day, and partly because startups early on need frequent feedback from their users to tweak what they're doing. ”
“A good growth rate during YC is 5-7% a week. If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing.“
“ Judging yourself by weekly growth doesn't mean you can look no more than a week ahead. Once you experience the pain of missing your target one week (it was the only thing that mattered, and you failed at it), you become interested in anything that could spare you such pain in the future. So you'll be willing for example to hire another programmer, who won't contribute to this week's growth but perhaps in a month will have implemented some new feature that will get you more users. But only if (a) the distraction of hiring someone won't make you miss your numbers in the short term, and (b) you're sufficiently worried about whether you can keep hitting your numbers without hiring someone new.“
“The fascinating thing about optimizing for growth is that it can actually discover startup ideas. You can use the need for growth as a form of evolutionary pressure. If you start out with some initial plan and modify it as necessary to keep hitting, say, 10% weekly growth, you may end up with a quite different company than you meant to start. But anything that grows consistently at 10% a week is almost certainly a better idea than you started with. “