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How To Start A Startup
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Starting a business is a process I'm going through myself, so I'll share the best of what I've found. As with anything involving advice on entrepreneurship, there is an overwhelming amount of garbage out there, and google results for anything related to starting a new business are basically worthless. So I am going to keep the signal-to-noise ratio as high as possible; everything on this lens I personally vouch for. What follows is a complete guide on how to start a business.
Good Luck!
Quick Tips
The odds of going from idea to IPO are 6,000,000 to 1. Your job as an entrepreneur is to eliminate as many of those zeroes as possible.
Writing a business plan alone increases your chance of success 1,000 fold.
What is the definition of a good business plan? One that gets the money!
How do you know if your business plan is good or not? If it gets the money!
Should I share my secret ideas with anybody other than my dog? Yes! The only thing worse than a paranoid entrepreneur is a paranoid entrepreneur who talks to his dog.
Writing a business plan alone increases your chance of success 1,000 fold.
What is the definition of a good business plan? One that gets the money!
How do you know if your business plan is good or not? If it gets the money!
Should I share my secret ideas with anybody other than my dog? Yes! The only thing worse than a paranoid entrepreneur is a paranoid entrepreneur who talks to his dog.
Three Stages of Product Launch
- Sell the product
- Design the product
- Build the product
Stage 1: Sell the Product
Before you can solicit interest in your product, there are two things that you need to do. The first step is to obtain a provisional patent for your invention. The best resource for this is the Patent Pro Se book on Amazon. Not only does it teach you everything you need to know to file your first patent, but it even includes all of the necessary forms included a pre-addressed envelope to the patent office!
After you finish writing up your provisional patent I would recommend getting a real intellectual property lawyer to check over it. You should be able to get a competent IP lawyer for about $350 an hour, and you are probably looking at two to four hours of legal work. Be sure to come to an agreement upfront so if there is something drastically wrong you don't end up with a $10,000 bill! For technology products, lawyers in Silicon Valley tend to be much less expensive than those in New York City. Some will even help you with your provisional patent for free, with the expectation that you will use them to file the real patent when it comes time.
Once you submit your provisional patent you have one year to file for a real patent. This can easily run $10,000 to $15,000. This is why you want to spend the year a provisional patent gives you looking for customers, to see if you will make enough revenue to offset the costs of proceeding further with your idea. Note: A provisional patent only secures an earlier filing date. If you don't file a real patent within a year then you can still file one later, but you lose the earlier file date. This means that if someone submits a similar patent after the provisional expires but before you file a real patent then you may lose patent rights.
Once you have your provisional patent you should talk to as many people as will listen about your idea. Once you get some good feedback it is time to write the business plan. This is what you will need to show investors before you can get money. It is best to give your pitch a few times before writing the business plan, because it is much easier to the pitch than it is to change a full business plan.
After you finish writing up your provisional patent I would recommend getting a real intellectual property lawyer to check over it. You should be able to get a competent IP lawyer for about $350 an hour, and you are probably looking at two to four hours of legal work. Be sure to come to an agreement upfront so if there is something drastically wrong you don't end up with a $10,000 bill! For technology products, lawyers in Silicon Valley tend to be much less expensive than those in New York City. Some will even help you with your provisional patent for free, with the expectation that you will use them to file the real patent when it comes time.
Once you submit your provisional patent you have one year to file for a real patent. This can easily run $10,000 to $15,000. This is why you want to spend the year a provisional patent gives you looking for customers, to see if you will make enough revenue to offset the costs of proceeding further with your idea. Note: A provisional patent only secures an earlier filing date. If you don't file a real patent within a year then you can still file one later, but you lose the earlier file date. This means that if someone submits a similar patent after the provisional expires but before you file a real patent then you may lose patent rights.
Once you have your provisional patent you should talk to as many people as will listen about your idea. Once you get some good feedback it is time to write the business plan. This is what you will need to show investors before you can get money. It is best to give your pitch a few times before writing the business plan, because it is much easier to the pitch than it is to change a full business plan.
The Big Picture
What to start a business in
- Hamster Burial Kits & 998 Other Business Ideas
- A great list of 999 business ideas.
- Startup Ideas We'd Like to Fund
- A list of startup ideas that Y Combinator would like to fund.
Business plans that Get The Money
- Executive Summary -- This is your elevator pitch. If you read it out loud it would take thirty seconds. Sentences should be short and snappy, and should be written plainly enough for any third grader to understand. This isn't the place for facts and buzzwords. Your pitch should be an emotional call to action that inspires. Sell the dream.
- Investor Relations -- How much money you want and what you're going to do with it. One or two paragraphs should be sufficient.
-
Description of Business -- Explain the goods or services you are going to sell. Make sure it's clear how your product or service does the following three things:
*Solve a customer's needs or fulfill their desires.
*Provide more value than it costs the customer.
*Sell for more than it costs to make. - Sustainable Competitive Advantage -- Your unfair advantage is how you prevent competitors from copying your idea and stealing your customers even though you are dumber and less well funded. If you have a patent then this is where you mention it.
- Competition -- Explain the other offerings in the marketplace and why yours is better.
- SWOT Chart -- Strengths, weaknesses, opportunities, and threats.
- Timeline -- What you are going to do and when.
- Financials -- Make up numbers and put them into excel. This is the hardest part for most people because there is no way to know what they will be. This isn't cheating or being unethical, it's expected. Some people feel bad about this anyway. Don't.
- Fifteen pages is about the ideal length. A business plan should never be more than twenty pages, or else it runs the risk of not being read. Throw in some pictures of your product to help the reader visualize what you are trying to do. You'd be amazed at how much a few well done pictures increase your chances of getting funding.
Stage One: Free Resources
- Ideas for Startups
- An entertaining talk by Paul Graham on how entrepreneurs get ideas for startups.
- Presentation Zen
- The art of giving good pitches and presentations. Read through the archives before creating the powerpoints for your pitches.
- SCORE - Service Corps of Retired Entrepreneurs
- I personally haven't used this resource, but it is highly recommended from many sources. Basically SCORE will assign you a mentor who is able to help answer your questions and lend some free advice.
- Hacker News
- A news aggregator and community focused on startups and entrepreneurships. This is the place where everyone aspiring entrepreneur should be hanging out.
Stage 1: Recommended Reading
Stage 2: Design the Product
"Today we will talk about what you want to be when you grow up." The preschool teacher spots the child, silent, apart from the others, deep in thought. "Jonny, why dont you start?" Jonny looks around, collects himself, and stares at the teacher with a steady eye. "I want to code demos," his words becoming stronger, more confidant, as he speaks. "I want to write something that will change peoples perception of reality. I want them to walk away from the computer dazed, unsure of their footing and eyesight. I want to write something that will reach out of the screen and grab them, making heartbeats and breathing slow to a halt. I want to write something that they are reluctant to leave, knowing that nothing they experience that day will be quite as real, as insightful, as good." Silence. Jonny blushes, feeling that something more is required. "That or I want to be a fireman." - Grant Smith
View stage two as an opportunity, because done correctly you can bring enormous value to the table.
The books below will teach you how to create the kinds of products and brands that people fall in love with.
View stage two as an opportunity, because done correctly you can bring enormous value to the table.
The books below will teach you how to create the kinds of products and brands that people fall in love with.
Stage 2: Free Resources
- Hackers and Painters
- Another entertaining and informative talk by Paul Graham. Unlike architects (who figure out what to build) and engineers (who figure out how), great hackers and painters do both. Who makes a good hacker and how can you identify a good hacker/programmer in a job interview? Why is empathy an important skill for programmers? As a hacker who also studied painting in Europe, Paul may be uniquely qualified to write a book entitled Hackers and Painters. If you leave your day programming job only to get home and write more code, this is a great book for you.
- Seth Godin's Blog
- This is another must read blog. Many of the posts won't fully make sense until you have read Seth's books though. This isn't a problem though since all of Seth's books are on the must read list as well.
- Wikipedia on RFPs
- An RFP, or request for proposal, is an invitation to suppliers to bid on the creation of a product or service. If you plan on designing a product or service yourself and then outsourcing the actual production then you will need to create an RFP. This Wikipedia article contains links to examples you can use to help create your own.
- Magic Ink
- Probably the most insightful essay on website user interface design ever written.
Stage 2: Recommended Reading
Stage 3: Build the Product
Stage three is a Herculean challenge. Less than 1 in 100 startups which reach phase three will receive the venture capital to actually create and market their products. And of those that do, less than 1 in 10 make it to IPO. You maximize your chances by successfully completely stages one and two, and by learning as much as you possibly can. Even if you read every book mentioned on this lens you still won't have any idea what you're doing, but at least you'll have a fighting chance. Hopefully you have your personal network of advisors in place by this point so that you have plenty of people to ask for help and advice.
Remember, when submitting business plans to venture capitalists you should always reach out to them through their network. A trusted referral won't get you the money, but it will at least get your plan read. Reading the blogs of VCs you plan on talking to is also advisable, since each VC has a different set of things they are looking for in both the candidate and the pitch.
Remember, when submitting business plans to venture capitalists you should always reach out to them through their network. A trusted referral won't get you the money, but it will at least get your plan read. Reading the blogs of VCs you plan on talking to is also advisable, since each VC has a different set of things they are looking for in both the candidate and the pitch.
Stage 3: Free Resources
- Getting Real
- A very concise and absolutely brilliant book on how to turn your business idea into a real product. Written with web startups in mind, but probably applicable to businesses in almost any field.
- What business can learn from open source
- Paul Graham, popular author and Lisp programmer, discusses what business can learn from open source. According to him, it's not about Linux or Firefox, but the forces that produced them. He delves into the reasons why open source is able to produce better software, why traditional workplaces are actually harmful to productivity and the reason why professionalism is overrated.
- Guy Kawasaki's Blog
- An excellent blog on venture capital. Ignore it at your peril.
- Union Square Ventures
- The Union Square Ventures blog features the "venture capital cliche of the week," a weekly column on the most frequently made mistakes made by those seeking venture capital.
Stage 3: Recommended Reading
Misc. Free Resources
- Paul Graham's Website
- His essays on startups and his book Hackers and Painters are invaluable.
- The Startup Wiki
- A wiki that was created after Startup School, a great one day conference in Cambridge that was hosted by Paul Graham and Y Combinator.
- The Startup News
- A periodically updated RSS feed about the latest launches and buyouts of high tech startups.
- The Personal MBA
- Why spend $150,000 for an education you could get far $1.50 in late fees at the library? Josh Kaufman shares his book picks to help you do just that.
- Swagapalooza - A pro