12 Considerations Before Starting a Startup

05 Jun 2015 - by @mrjk_

# This post is not yet finished.

Okay this is my first blog post on here and it’s also my first long form piece of writing since high school. I dont ever remember doing a long essay in uni for my software engineering degree! This is the story of me taking the plunge in startup world.

As I start my startup journey, I am being given advice left, right and centre from many people. It’s smart and important to get advice. So surround yourself with people that are experienced and smarter than you. This way you will excel and ensure an opportunity for success. Of course success really does come down to your own ability to execute.

The following are a list the most important tips i’ve been advised to follow from various people.

1: Startups are really hard! So be prepared!

Dustin Moskovitz, cofounder of Facebook, strives to set the record straight by citing some erroneous reasons for starting a startup. Firstly, startups are not nearly as glamorous as they are made out to be in shows like Silicon Valley and movies like The Social Network.

Secondly, they allow founders neither the self-management nor scheduling flexibility that people so often seek in transitioning to startups from “conventional jobs.” Finally, the statistical likelihood of making a huge impact and tons of money are slim to none. Starting a startup is not easy.

In fact, serial entrepreneur turned venture capitalist Mark Suster calls it “entrepreneurshit.” He states that positive outcomes prove exceedingly rare, despite the fact that the mass media only highlights success stories (survivorship bias).

Statistics show that 75% or more of all startups fail and that 66% of all venture capital investments are wasted. There’s clearly an ugly side to entrepreneurship, and a lot of your effort and willpower will just go towards hard work on the company.

Startups are stressful: constant engineering problems, customer complaints, and sales obstacles are part of daily life. All of this stress stems from responsibility; founders fear failure for themselves and all of those who follow them. In many cases, people depend on you to make a living, or in the case of a young team, they’ve devoted their youth to your company. So you’re now responsible for either their livelihoods or the opportunity cost of their time. You’re on call constantly and you have to stay focused and keep working because so much rides on your success. Additionally, media attention can be stressful: positive media is glamorous but negative, unwanted press is an extreme stressor.

Another source of stress that people never mention is how committed founders are. Startup employees can quit, just like they would a normal job. Founders could quit, but only at the risk of ruining their reputations and potentially crippling the company.

Moreover, founders are not the bosses of their own companies; instead, they have to cater to the media, employees, clients, and partners, upon whom their success ultimately rests. In fact, so much in a startup starts with the founders; if your commitment flags, the whole team’s will too, and that’s unacceptable in a startup.

Ultimately, your financial rewards are very strongly correlated with your startup’s impact on the world. Because of this, it makes sense to actually join someone else’s company unless you’re certain you’ll make a huge impact and earn over a billion dollars at your own (which you probably won’t). At a late stage company, you already have an existing user base. Additionally, you’ll also have access to that company’s resources and a team, where you can leverage your ideas into something great. Compare that to some untested, user-less idea floating around in your head.

You should start a company when you cannot resist the pull of your idea; you’ll need that passion to get around all of the roadblocks. That is to say, you should launch a venture because the world needs it; if your idea is important and will impact the world for the better, only then should you pursue it.

The other reason to start up is because the world needs you to do it; do you have area expertise or some other reason that you’re suited to tackle this problem? If not, your time might be better spent elsewhere because you might end up outcompeting a team that actually has the right skills; Outcompeting a better team will create a suboptimal outcome for the world, which you’ll have to bear forever.

When you have an idea that refuses to let you go, you have something worth starting up for. You should feel that you don’t own the idea, but that it owns you.

2: Be Narrow

Focus on the smallest possible problem you could solve that would potentially be useful.

Most startup founders start out trying to do too many things, which makes life difficult and turns you into a “me-too” person. Focusing on a small niche has so many advantages: With much less work, you can be the best at what you do. Small things, like a microscopic world, almost always turn out to be bigger than you think when you zoom in. You can much more easily position and market yourself when more focused. And when it comes to partnering, or being acquired, there’s less chance for conflict. Lets look at an example of starting small that has turned out big. Uber.

The story of Uber takes us back to 2008 when the co-founders then, still friends and not aware they’ll be at the head of one of the most successful startups up to date, were attending LeWeb conference in Paris. Travis Kalanick and Garrett Camp, like old pals, were complaining about the many crappy things we all have to deal with in life, including finding a cab when we’re packed with luggage under the rain and no taxi seems to pass by. It seemed like The Eiffel Tower or Paris’ finest restaurants werent enough to distract them from a brilliant idea trapped under the grey clouds, because next thing you know, these two “uber” kids were already brainstorming, thinking about ways to solve this global issue of finding cars at the right place, on the right time. Though by now only two things were certain: the solution had to be mobile, fast and the rides had to picked up from Jay Leno’s personal garage.

Garrett took the lead and went on playing around with a couple of ideas, prototyping several solutions and engineering a mobile app for the iPhone that would revolutionize the very ide of getting around. It didn’t take long before Travis joined the ride to work with him on what would later be known as, Uber. Fast forward to January 2010 and Uber was already rolling a couple of black cars in the city of New York to simply test the service out. With just a few cars and even fewer people knowing about the startup at the time, Uber proved to be a hit. Soon after San Francisco joined in to host Uber, and the rest, the rest is history.

This is all so logical and, yet, there’s a resistance to focusing. I think it comes from a fear of being trivial. Just remember: If you get to be #1 in your category, but your category is too small, then you can broaden your scope—and you can do so with leverage.

3: Be Different

Ideas are in the air. There are lots of people thinking about—and probably working on—the same thing you are. And one of them is Google. Deal with it. How?

First of all, realise that no sufficiently interesting space will be limited to one player. In a sense, competition actually is good—especially to legitimise new markets.

Second, see #2—the specialist will almost always kick the generalist’s ass.

Third, consider doing something that’s not so cutting edge. Many highly successful companies—the aforementioned big G being one—have thrived by taking on areas that everyone thought were done and redoing them right.

Also? Get a good, non-generic name. Easier said than done, granted. But the most common mistake in naming is trying to be too descriptive, which leads to lots of hard-to-distinguish names. How many blogging companies have “blog” in their name, RSS companies “feed,” or podcasting companies “pod” or “cast”? Rarely are they the ones that stand out.

Lets take the example of Nest. The connected thermostat company.

Nest Labs assembled an elite team of machine learning, medical technology, software and consumer product specialists and gave the world its most beautiful, high-tech … thermostat.

“Why a thermostat?” the tech world collectively inquired when the stealth startup announced its first product in October 2011.

Anticipating this response, Nest had already dedicated a section of its website to the question. Thermostats matter, it argued. They control about 50% of Americans’ energy bills and as much as 10% of all U.S. energy.

The Nest thermostat ($249) saves money and energy by automatically learning user behavior and adjusting itself accordingly. It can be controlled remotely via a Wi-Fi connection, and it’s easier to read, adjust and install than most other programmable thermostats. All this, and it’s a looker, too. Co-founders Tony Fadell and Matt Rogers, both former Apple engineers, are fond of calling it a “jewel on the wall.”

Nest went out and saw an opportunity to make something that was better than the incumbent. The so called “dumb thermostats” didnt do anything for the household. So instead, they went out and disrupted the thermostat and subsequently started a revolution in smart home devices. Now everything from toasters, vacuums to garage doors are interconnected in the internet of things. And if the latest Gartner reports are anything to go by, in 2020, there will be 25 billion connected things!

4: Be Casual. Be Now.

We’re moving into what I call the era of the “Casual Web” (and casual content creation). This is much bigger than the hobbyist web or the professional web. Why? Because people have lives. And now, people with lives also have high speed internet.

If you want hit the really big home runs, create services that fit in with—and, indeed, help—people’s everyday lives without requiring lots of commitment or identity change.

Flickr enables personal publishing among millions of folks who would never consider themselves personal publishers—they’re just sharing pictures with friends and family, a casual activity. Casual games are huge. Skype enables casual conversations. The rise of many inter-connective applications and services is all about the casual user and the need for things now.

As the new generation comes into age, they expect things to be available to them now and when ever they want. Recently, Dominos pizza in Australia launched a “GPS Pizza Tracker” that has given people the ability to quickly see their delivery. But interestingly, it has also given rise to the casual worker. You can see plenty of examples of where ad-hoc immediate services are popping up every where.

5: Be Picky

Another perennial business rule, and it applies to everything you do: features, employees, investors, partners, press opportunities.

Start-ups are often too eager to accept people or ideas into their world. You can almost always afford to wait if something doesn’t feel just right, and false negatives are usually better than false positives. One of Google’s biggest strengths—and sources of frustration for outsiders—was their willingness to say no to opportunities, easy money, potential employees, and deals.

I’ll give you a personal example. My adlesiure wear startup Vice-Roy (yes I just made up a new fashion segment), could provide everything to everyone at the start. However that will no doubt kill us immediately. Instead we have created a product roadmap and clearly mapped out when we want to launch new products. We made a calculated decision to start with selling high quality sunglasses for the adventure inclined. Why? We wanted to ensure that our target customers could get a hold of something that they could use in multiple scenarios and adventure situations. Sunglasses are just that. We could have picked clothes. But then there are multiple types and styles of clothes for different adventure. Wet clothes, dry clothes, anti-wick clothes, warm clothes. The choices are endless. Starting with sunglasses gives our customer a dip into what we can produce. It gives them an idea about the quality, the image and the lifestyle they would like to be a part of.

Being picky has allowed us to start small (see #1) and has allowed us to have really good focus. This focus enables us to ensure the quality of the product is high and the user experience is amazing, from the time you purchase to the time you receive and unbox the new pair of sunnies.

Being picky hasn’t excluded us from doing anything it has instead given us razor sharp focus. We still want to sell apparel and other clothes, but we needed to find a niche first, then broaden as we grow.

6: Be User-Centric

User experience is everything.

It always has been, but it’s still undervalued and under-invested in. If you don’t know user-centred design, study it. Hire people who know it. Obsess over it. Live and breathe it. Get your whole company on board. Better to iterate a hundred times to get the right feature right than to add a hundred more.

The point of Ajax is that it can make a site more responsive, not that it’s sexy. Tags can make things easier to find and classify, but maybe not in your application. The point of an API is so developers can add value for users, not to impress the geeks. Don’t get sidetracked by technologies or the blog-worthiness of your next feature. Always focus on the user and all will be well.

So how do you make this happen? Right from the start, figure out your product market fit. That is, get out of the house, garage, basement, office or where ever and talk to your freaking customer! Without their knowledge and input you have no idea what to build to solve a problem. YCombinator has an excellent set of startup videos that help new time entreprenuers get started. During lecture 4 – Building Product, Talking to Users and Growing, Adora Cheung specifically gives tips and tricks about how to actually go out to potential users and talk to them. Adora goes on to explain, “so say you have a problem and you are able to state it, where do you start and how do you think of solutions? The first thing you should do is think about the industry that you are getting yourself into. Whether it is big or whether it is huge, you should really immerse yourself in that industry.”

7: Be Self-Centred

Great products almost always come from someone scratching their own itch. Create something you want to exist in the world. Be a user of your own product. Hire people who are users of your product. Make it better based on your own desires. (But don’t trick yourself into thinking you are your user, when it comes to usability.) Another aspect of this is to not get seduced into doing deals with big companies at the expense or your users or at the expense of making your product better. When you’re small and they’re big, it’s hard to say no, but see #4.

8: Be Greedy

It’s always good to have options. One of the best ways to do that is to have income. While it’s true that traffic is now again actually worth something, the give-everything-away-and-make-it-up-on-volume strategy stamps an expiration date on your company’s arse. In other words, design something to charge for into your product and start taking money within 6 months (and do it with PayPal). Done right, charging money can actually accelerate growth, not impede it, because then you have something to fuel marketing costs with. More importantly, having money coming in the door puts you in a much more powerful position when it comes to your next round of funding or acquisition talks. In fact, consider whether you need to have a free version at all. The TypePad approach—taking the high-end position in the market—makes for a great business model in the right market. Less support. Less scalability concerns. Less abuse. And much higher margins.

9: Be Tiny

It’s standard web start-up wisdom by now that with the substantially lower costs to starting something on the web, the difficulty of IPOs , and the willingness of the big guys to shell out for small teams doing innovative stuff, the most likely end game if you’re successful is acquisition.

Acquisitions are much easier if they’re small. And small acquisitions are possible if valuations are kept low from the get go. And keeping valuations low is possible because it doesn’t cost much to start something anymore (especially if you keep the scope narrow). Besides the obvious techniques, one way to do this is to use turnkey services to lower your overhead—Administaff, ServerBeach web apps maybe even Elance .

10: Be Agile

You know that old saying about a plane flying from Sydney to LA being off course 99% of the time—but constantly correcting? The same is true of successful start-ups—except they may start out heading toward China.

Many dot-com bubble companies that died could have eventually been successful had they been able to adjust and change their plans instead of running as fast as they could until they burned out, based on their initial assumptions. Pyra was started to build a project-management app, not Blogger. Flickr’s company was building a game. Ebay was going to sell auction software. Initial assumptions are almost always wrong. That’s why the waterfall approach to building software is obsolete in favour agile techniques. The same philosophy should be applied to building a company.

11: Be Balanced

What is a start-up without bleary-eyed, junk-food-fuelled, balls-to-the-wall days and sleepless, caffeine-fuelled, relationship-stressing nights? Answer? A lot more enjoyable place to work. Yes, high levels of commitment are crucial. And yes, crunch times come and sometimes require an inordinate, painful, apologies-to-the-SO amount of work. But it can’t be all the time. Nature requires balance for health—as do the bodies and minds who work for you and, without which, your company will be worthless.

12 Be Wary

Overgeneralized lists of business “rules” are not to be taken too literally. There are exceptions to everything.

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