So you have an idea for a startup.
That's great
and you might be wondering "What
do I do now? I mean how do I get started?
I can imagine a lot of things I could
do. It's kind of overwhelming."
Hi I'm Steve Morris.
That's the question I'll be tackling
today a very common question we get from first
time entrepreneurs.
How do I start.
I'm going to describe the eight steps I
suggest an entrepreneur go through when
they have a new idea for a company.
I did not want this to be a two hour video
so I'm going to touch on each of the eight
steps pretty lightly
but I promise we'll have more videos
that go into each of these in more detail
with very practical step
by step how-do-you-do
all of this.
So with that let's get started
with step 1.
So step 1 is to be
disruptive.
Now what I mean by being a disruptive
startup? I mean disruptive in the
sense of disruptive innovation
as described by Clayton
Christensen in his book The Innovators
Dilemma. In
many markets what happens is
companies keep competing head to head.
They keep making their products better
and better and better
and they get to the point where a lot of people
get left behind.
Left behind in the sense that they don't
need all that capability that
all that competition is developing
and they can't afford it.
They would be totally happy
with something much less capable
and lower cost
or something that was easier to
use.
And the problem is that's
usually not available.
All a disruptive innovation is a
product that takes advantage of
those under served customers
customers that got left behind
with a product that typically is less capable
but also less expensive
but good enough.
Now,
why do you care about being disruptive.
There is research that pretty
strongly suggests that startups
that utilize a disruptive innovation
are more likely to be successful.
That's probably a good reason to be
disruptive.
So it's a good idea to assess your
idea is it a disruptive
innovation. Are you addressing
a customer segment that got left behind.
That once a capability that other people
have
but they don't have access to it
probably because they can't afford
it or because it's just too inconvenient
to get too.
On to Step Two.
Step two is to take the time
to validate your startup idea.
Way too many entrepreneurs get an
idea check
with a few friends
and then jump in and start developing the
product or service.
Please don't fall into that trap.
You are miles ahead
if you take the time to test
your idea
and your odds of success will
be higher if you do that.
What I mean by testing or validating
your idea number one I mean
talking to customers to figure out
essentially whether
or not they'll buy it if you if you go ahead
and build it.
This is called customer discovery.
It's not perfect
but it's the best way to get
a better idea as to whether
or not there is a market for
your idea.
But there's more than just testing it
with customers.
The other question is just does the business
model make sense.
There are a lot of factors
that are tied up in the revenue
opportunity on the one hand
and the cost involved
on the other hand. You need to understand
those to get an idea as to whether
there might be a profitable business here.
So take time - take time
to validate your idea.
Your odds of startup
success will be significantly
higher.
Step 3 you're
using a disruptive innovation
strategy. You've validated your idea.
You're reasonably confident that there is a
there there that if you build it they will come
and you can sell it for a profit.
This is a good time to set up a legal
entity. So first you'll have to choose
what kind. Probably a choice
between an LLC
and a C corp
and an S corp.
Talk to an attorney.
Make the decision.
My non-legal OPINION is
the most important thing is to just decide
and do it - get an entity
set up - because there are so many advantages
in having a legal entity.
It can own intellectual property. It can have a checking account.
It can sign contracts - lots
of advantages.
So go ahead
and get a legal entity set up.
That's step three.
Step four organize
your startup get organized
early on when it's easy
and that comes down to really a couple of key
things. Number one your records.
If you've set up a legal entity you already
have some important records - you have your corporate
or LLC records.
File them - create
a filing system
and over time keep maintaining
it. So as you get more
and more important documents they get
filed so that you can find them.
Down the road when it's time to do
due diligence with a banker
or an investor,
it'll be much much
easier to do that if you can
actually find the documents
that you need to find.
So huge advantage if you
get organized early on
when it's easy.
The second thing organize your finances.
You'll want to,
very early. talk to an accountant.
Get a chart of accounts set up for your business.
Get set up on some kind of an accounting system
like probably Quickbooks is the most common
one and start capturing
your transactions.
It's easy to do early on - there aren't
very many each month when you're small.
You can do it yourself.
You don't need a bookkeeper.
But as you start capturing those transactions
you're capturing your financial history.
Down the road when you need
to do financial statements - which you
will when you talk to a banker
or an investor - it'll
be much much easier to
do if you've captured all
of that financial history.
So start today when it's
easy and just keep it up
over time to maintain your
own financial history.
Get organized today.
Don't put it off.
Step five protect your intellectual
property.
Every startup has intellectual
property it needs to be protected.
You'll have things you should protect
with copyrights
and with trademarks
and with trade secrets
and maybe some other things like trade
dress protection
and maybe even patent protection.
property. It's important to get educated
about what things need to be protected
and what you need to do to protect
that intellectual property because that's a
key asset for your
startup.
You've set up an entity. Again,
You've done the right things to protect your intellectual
property. You're ready to build a team
now. Now there's a lot involved
in building a team.
You know initially you may work
with some contractors. You need to make
sure that you own the intellectual property
that they develop.
You may bring on some cofounders.
You have to be careful about how you go
about distributing stock
and make sure that stocks are protected just in
case they leave the company early.
You need to think about other
team issues down the road like employees
and staying out of trouble.
It's easy to get into trouble by having bad
hiring practices. And
whatever your startup is doing you have important intellectual
eventually you'll probably want to put
a board of advisers in place
and eventually a board of directors.
Lots of bases to cover
when it comes to building a team.
And of course team is critical you
know being careful selecting
the right people
and if you make a mistake fixing that
sooner than later - all
of those are important.
So a lot of topics around team.
But once you've done the basics of getting
the legal entity in place
and protecting your IP you're
ready to start building your team.
Step Seven develop a funding plan.
Now this one is more of a challenge
but it basically comes down to
developing the set of fundable
milestones for your
company. Milestones are
key because they give you something
to focus on. Startups - there are
always things happening that will distract
you. Having a key milestone
in front of you to keep you
and the entire company focused is very
important
but it's not just a milestone.
It's a fundable milestone.
What do you need to accomplish
so that that will give you enough credibility
to access the next
source of funding.
Initially you might just have your
own resources
and your founding team resources.
But what can you do to make
enough headway just
with what you have so that
maybe you could raise a friends
and family round.
Or maybe you could do a crowdfunding
campaign. Whatever it is that's
that next fundable
milestone.
So think about the fundable milestones
that you can identify going out for
at least a couple of years
and do some basic cash
planning to figure out really how
much money would you need to raise
in order to hit each subsequent
milestone. That's the basic idea in a startup funding plan.
And finally that leads us to step 8
which is execute.
Focus on that first milestone that you
identified which again is
a fundable milestone right?
Focus on that,
nail it,
and by definition that means that
hopefully, being a fundable milestone,
you then have access to that next
level of funding which will
allow you to then tackle
the very next more challenging milestone
and continue to build your company.
Those are the eight steps
that I suggest you pursue when
you have a new idea.
We'll tackle all of these in more detail
and follow in videos so please hit the subscribe
button so that you don't miss any of those.
And if this was helpful please hit the Like
button too. That helps immensely.
And if you have any questions
or comments about what I've said
or suggestions for
future topics to tackle please
leave a comment.
And finally if you'd like a document
that summarizes everything I've talked about
in this video in the show notes
you'll find a download link where
you can get a cheat sheet that
lists all of these basic
ideas.
That's it for this time.
Again please hit subscribe.
Hope you'll join us for the next video.