[UPDATED] Entrepreneurship is neither a science nor an art. It is a discipline that you can only master with self-learning, consistent dedication and by dreaming big.
Many entrepreneurs give up too soon on their dreams mainly due to two reasons: Lack of knowledge or lack of resources. Although there is no magical solution to address “How to start a startup?”, nonetheless, allow me to enlighten you with the best strategies that can help you to launch a startup and accomplish your dreams.
The fact is that there is no single best approach to start a startup. It is more of a trial and error phenomenon that varies from industry to industry. To top that, things constantly change over time.
The biggest mistake that most entrepreneurs make when they think about what business to start is that they get overly optimistic. They think that their idea can change the world, and during that thinking process, they forget that coming up with a creative startup idea is just the first step.
Another fact to note is that the market today is completely saturated. The expectations of customers have grown to a level where catering to them is not an easy task. Especially not without a clever execution plan.
While answering the question ‘How to Start a Startup’ is tough. But, it isn’t impossible. Let’s take a look at the best approaches to start a startup in 2020.
Come up With a Brilliant Startup Idea
To begin with, you must have a clear idea of your startup. What is a brilliant startup idea anyway? Brilliance is not coming up with something unique. There are plenty of startup ideas that are not unique. It just needs to be a better version of what already exists and performing well in the market.
Rick of SuperHi puts it in a great way:
“Your startup needs to be the best-in-class, not the first in the market.”
Google was not the first search engine neither was Facebook the first social network. They are, however, just better from their peers.
Thinking of a brilliant startup idea is of no use if it cannot guarantee you success. The only way to ensure success is to believe that your startup provides something that your prospects need.
In his first lecture on How to Start a Startup, Sam Altman stated, “The best startups seem like a bad idea but are really a good idea.”
In simpler terms, Sam tries to explain that you should focus on being a contrarian investor. You should have your own opinions alongside your own sweat equity. If an idea is a good idea, then obviously other people would be chasing it. It will be hard to differentiate and compete.
Also, if you’re pursuing an idea that doesn’t sound that great, it means that you have discovered some insight that others haven’t. That insight will provide you the competitive advantage you need. You can occupy a position. You can start developing your solution. You can acquire a base of customers. All of that before your competitors realize that such an opportunity exists.
By the time they do realize it, you will have already gained the momentum and it will be harder for others to dislodge you. Always remember, your idea is the first step towards success. So take your time. Sleep on it and maybe you will come up with something ingenious.
Analyze Current Markets and Trends
Once you have your startup idea, it’s time to ask yourself, “Who is this idea for?”
You need to take into account the attributes of your potential customers, such as their age, gender, relationship status, income, hobbies etc.
Many times you need to dig deeper in order to identify your buyer personas, customer requirements, aspirations and problems that you can resolve with your product or service. Talk to your audience about your idea and garner feedback. It is a good practice to select your target market and approach those customers only.
“When we first had a startup idea, we decided to talk to potential users”, Liza Dziuba, CMO, and co-founder of Flawless App.
Charlie Gaudet, the founder of Predictable Profits says, “In addition to ensuring the niche market is large enough, has money to spend and is easy to reach – when looking for a niche, it must fulfill one of three criteria.”
1. The idea behind your product or service must be working in the market where customers are already purchasing similar products or services nonetheless, are being underserved.
- Your target audience should be demonstrating a demand for your product by actively looking for a solution that resolves their problem.
- Customers must show a strong desire for your product or service by actively inquiring about the product or their desired benefit.
Rob O’Donovan, the co-founder and CEO of CharlieHR – an HR platform for small businesses says, “People might find a really good idea for a great product that some people will like, but once they actually get it out there they realize those people in the world are 1,000 not 10 million, and you need a much bigger number to build a business,”
Determine Product-Market Fit
Achieving the product market fit can be challenging while starting a startup, as it requires a thorough understanding of your target market.
You can only win your buyers’ trust if you are solving their real problems with your product.
‘Make sure you are solving a big enough problem. If your company’s problem is not 10X better than the traditional product or service, it will be difficult to have a product-market fit. Talk to strangers, family, friends, and coworkers and see if they would PAY for your product or service not just see if they like it,’ says Gene Caballero, Cofounder at Greenpal.
It is better to charge your very first customers to make sure they’re willing to pay.
As Steve Benson of Badger Mapping says, ‘Even if your product is still a piece of junk, don’t give it away for free, or else you won’t learn if it’s a problem worth paying to solve.’
Now is the perfect time to build MVP. What is MVP you ask?
An MVP is a development technique popularized by Eric Ries for building the basic version of a product. It envisions that the early adopters can test and provide feedback to improve the product further. Building MVP can take multiple iterations to reach completion.
According to Eric Ries, “The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
According to Steve Blank, “You’re selling the vision and delivering the minimum feature set to visionaries, not everyone.”
Every company starts with a basic product model with limited features. Even Google launched their search engine with a basic HTML page just to test how their users will react to it. These MVPs also allow startups to understand which direction to take. It allows them to realize problems and then come up with effective solutions.
Back in 2006, people used to heavily rely on pirated music. Spotify came up with a unique concept of streaming live music with no buffering at all. However, before the launch, they made a few assumptions:
- People are more happy to stream music for free instead of purchasing records by their favorite artists.
- Record labels and music artists are willing to let their fans do so legally.
- Fast and reliable music streaming is technically possible.
After the assumptions, Spotify developers began to create a prototype with various songs and focused on reducing latency as much as possible. They were aiming to play music instantly without any buffer.
They began testing the prototype amongst family and friends as soon as the product took shape. It was not polished however, they were in search of genuine answers. Guess what? Their assumptions were proved right.
A Winning Startup Team
To launch a startup, get a skillful and qualified team on board, who will either assist or lead your execution plan all the way through.
Even the best business ideas can go to waste if you don’t have the right people working with you to execute them. In fact, not having the right team is one of the biggest reasons most startups fail.
Three key elements of a winning startup team are:
- All team members work towards a common goal.
- Each of them takes interest in the idea.
- They all strive for growth because that’s the only success factor
Therefore, hire a solid team of people who are willing to go through walls [so to speak]. Kreg Peeler, Founder of Spingo, an event marketing company, found his team members in the same way. He said that while searching for the best team members, he only focused on people that were creative, driven, and could adapt to a high-stress environment.
Similarly, many entrepreneurs put too much value in their idea or brand, and neglect to value their employees enough.
‘Acknowledge the fact that you can’t do everything alone. So, recruit the right people, make them grow, and keep them happy. Also, ‘don’t be afraid to fire the wrong ones,’ says Mike Khorev, a digital marketing strategist while emphasizing the value of being straightforward in business.
Networking Is Key
No matter what your business model is, and to whom you will sell to, networking can be beneficial for you in one way or another.
While starting a startup, you must network with potential buyers in order to identify their needs and wants. Similarly, network with influencers to get valuable feedback about your product. And, if you need some investment to launch your startup, network with investors and get insights into what type of startups they invest in and what they see in those startups.
“When you connect yourself to the broader entrepreneurial community you never know what direction the journey will take you in. You may be able to build a relationship with a mentor, spark valuable ideas for your startup or just meet interesting people who have important things to say about entrepreneurship, business, and life in general.” Sam Bahreini, a serial entrepreneur and growth marketer.
Immersing yourself in a network of like-minded business owners provides an insider’s take on the industry and allows you to develop relationships with experienced founders who know every bit and piece of how to start a startup.
Also, if you are in quest of finding a co-founder for your startup then your network is the first place to look into because you have like-minded and skilled personals in your network.
“Many times they will share their own stories and experiences that will help you avoid the very mistakes they made-saving you time and money along the way”, adds Josephine Caminos Oria of La Dorita.
Study Your Competitors
While starting a startup, to compete in a market that’s already filled to the brim with similar businesses, it is essential to know who are the direct and indirect competitors of your product.
Startup founders need to understand that at the initial stage, they can’t compete with bigger businesses as these businesses don’t face those problems which small startups do, and most of the time, their budget is hundred times bigger than the startups.
As Porter points out in Five Forces of Competitive Position Analysis, you can analyze your competitors by identifying:
- Who their customers are?
- What technologies do they use?
- How much can they spend on their marketing?
Before launching your startup, do ensure that you have a good understanding of the industry: the trends, current state of the market, and the recent news, as well as an understanding of the potential competitors.
Knowing your competitors inside out is invaluable while starting a startup. It gives you insights into how you can position your brand so that you can stand out and succeed.
Reid Hoffman – a Silicon Valley entrepreneur and a venture capitalist says, “Observe, orient, decide, act. It’s fighter pilot terminology. If you have the faster OODA loop in a dogfight, you live. The other person dies. In Silicon Valley, the OODA loop of your decision-making is effectively what differentiates your ability to succeed.”
When launching a new product, it’s tempting to look at other products or competitors to see what’s working or what isn’t for them. Startup founders typically have their own biases in relation to what channels might be effective and which might not be, causing the startup to completely overlook a channel that might have a lot of potentials.
“Speaking to customers is one of the best (and cheapest) ways of gathering real information on competitors,” Arthur Weiss, managing director of UK-based company Aware.
Decide Between Fundraising and Bootstrapping
Bootstrapping is viable when you have enough funds to grow your startup single-handedly. However, in such a scenario, you will be the only stakeholder and the success or failure of the startup will solely depend on you.
Fundraising is a feasible option if you are starting a startup, but have limited funds and require assistance from venture capitalists. Investors will help you grow your business by sharing the equity. But there is a chance that they will take your startup in a direction you don’t agree with.
“If your revenues are under $5 million, seek out individual investors, angels, accelerators and early-stage venture capital funds. Between $5 million and $20 million, you are past the product/market fit stage and have a line of sight to profitability, seek early growth private equity. Between $20 million and $100 million tryingy private equity or growth equity.” Keith J. Figlioli, General Partner at Healthcare Venture Capital (LRVHealth)
While making the decision, you have to be smart and understand the differences in both the approaches as your decision will have a big impact on your startup’s growth.
As an entrepreneur, don’t be scared of failure. There is no harm in asking ‘How to Start a Startup’ even if you have an established business. Feel free to explore new markets. It’s better to try and fail rather than not trying at all. Many successful entrepreneurs have failed and that’s how they came across the recipe for success.
As Josh Fetcher, Co-founder of BAMF Media puts it: Don’t say, ”My startup failed.” Say, ”I failed my startup.” Reframe your thoughts. Have more control over your life to get better outcomes.
Just remember that your determination and the right approach are the key factors to a successful startup launch.
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