How To Start Up A Start-up
Posted March 12, 2015, by Vivien Luu
Ever had a business idea that kept you up at night? Or dreamt about your own start-up, only to be stumped by how to actually get your ideas off the ground?
Entrepreneurship is a tricky and idiosyncratic career path that’s less path, more untraversed terrain. It’s a career trajectory that not only demands but requires you to forge your own way, rather than follow in the footsteps of those before you.
So for those of you with an entrepreneurial fire in your belly, we thought we’d look at what it takes to start up a start-up, making it that bit easier for you to nurture your ideas into fully-fledged companies and products.
Risky business: know what you’re getting into
First things first, let’s be clear. Being an entrepreneur comes with huge risks. The odds are simply not in your favour. While it’s easy to fixate on the success stories, the reality is, most start-ups fail. And nobody really likes to talk about it.
Harvard Business School lecturer, Shikhar Ghosh, says venture capitalists ‘like to bury their dead very quietly … they emphasise the successes but they don’t talk about the failures at all.’
Ghosh recently led a study on start-up mortality and found that approximately 75 per cent of venture-backed firms in the US fail, while a report by analytics firm, CB Insights, found start-ups typically die 20 months after their last financing round and after having raised $1.3 million.
It’s why Drew Houston, CEO and co-founder of Dropbox, likens being an entrepreneur to ‘jumping off a cliff and having to build your own parachute’.
The risks are huge, the payoff is unknown, and you’re always a nanosecond away from either soaring to great heights – think Facebook – or crashing spectacularly down to earth – think Friendster. Friend who? Exactly my point.
To succeed you need to, ironically, accept that you may fail. In saying that, if you do manage to succeed, the payoff can be astronomical.
Survivors guide: The dos and don’ts of start-ups
So, still dreaming the start-up dream, even after those bleak stats? Here’s some sage advice from start-up experts and established venture capitalists.
1. Have co-founders: two heads are better than one
Don’t go it alone. A study led by the MIT Entrepreneurship Centre found that for each additional co-founder (up to four), the odds of a company’s success increased. ‘Two to three co-founders seems to be a sweet spot,’ says Y Combinator partner, Paul Buchheit.
Having other co-founders will:
- Validate your business idea and make it easier for others to believe in you
- Support you through the inevitable rough patches that come with being a start-up, making you and your start-up more resilient
- Make investors more willing to commit, especially if your co-founders and you have tried and true relationships
2. Make stuff you’d use, solve problems you encounter
The best start-ups are the ones that set out to solve problems – real problems – that make founders think, ‘Gee life would be so much easier if X existed or if Y were available!’ When you do this and care deeply about your product or service, it’ll give you drive and passion – two things that’ll excite investors and make them want to jump on board with you.
‘It’s really about having a passion for the problem you’re trying to fix,’ writes angel investor, Ben Yoskovitz. ‘I’ve got to believe in your passion and dedication to the problem you’ve set out to solve, otherwise there’s a good chance that some future shiny object will catch your attention.’
It’s the exact approach Mark Zuckerberg took, who attributes the first pieces of Facebook’s code to the side projects and products he created for himself as a teen.
3. Put the user first, always
‘Companies that win are the ones that put users first’, says Paul Graham, the co-founder of start-up school, Y Combinator. Graham lists three rules when it comes to thinking about users and what your attitude should be like towards them:
- Always build and develop products with a specific user in mind
- Your users are your sounding board. Listen to them and they’ll show you what is and isn’t working
- Never sacrifice users or user experience for the sake of profit
4. Find the right location
Strategically placing your start-up is absolutely crucial, and where you set up shop will depend largely on what sort of start-up you are. For tech companies, Silicon Valley is without doubt the place to be, while fashion labels often flock to New York City.
Irrespective of where you land, experts all agree that you’ll increase your chances of success if you have a strong start-up ecosystem to tap into. Start-up hubs give you greater access to:
- A larger pool of investors
- More talent
- More resources like incubator and accelerator programs
- Experienced entrepreneurs who can mentor and guide you
Based upon statistics from the Startup Genome, Sydney is the 12th best start-up ecosystem in the world, trailing behind the likes of New York, London and Vancouver.
5. Time your launch perfectly
Don’t launch too early, but don’t launch too late either. It’s the perfect ‘Goldilocks conundrum’ of timing a launch just right.
Taking too long to launch creates all sorts of difficulties. It slows down momentum, can bog you down in perfectionism, and stops you from getting on with the real job: improving your service/product to increase profit. So there’s a big case for simply launching something fairly quickly.
Launching too early, however, also comes with its setbacks. The biggest danger here is hurtling into things, and throwing up a subpar product that early adopters reject. While nobody expects your first iteration to be perfect, it still needs to solve a problem or fulfil an actual need.
6. Be flexible, but stay focused
While determination and a stubborn streak are important traits in an entrepreneur, to succeed there’s no room for tunnel vision. You’ve got to be flexible and willing to drop your original plans when something more promising emerges. In saying that, switching ideas every second week can also be just as fatal.
Graham recommends looking towards users as a guiding post if ever in doubt. ‘If you’re thinking about turning in some new direction and your users seem excited about it, it’s probably a good bet,’ Graham says on his blog.
Starting out: I’ve got an idea, now what?
It all starts with a business idea, doesn’t it? But if you’ve got more ideas than business knowledge in your brain, we’d recommend getting acquainted with Australia’s start-up community, quick smart.
There are plenty of incubator and accelerator programs out there designed to help you network with investors, bounce ideas around with serial entrepreneurs, and steer your start-up dreams in the right direction.
Below are some programs and resources to help you get started:
ATP Innovations, Sydney
- Specialises in tech start-ups
- Provides mentorship for entrepreneurs and early-stage management teams
- Incubator community able to access serviced office space, laboratories, capital assistance and networking opportunities
- Has received $20m in government grants, and $80m from private investors
- Ranked 4th in the global University Business Incubator (UBI) index
- Applications open all year round.
- Click here for more details.
Melbourne Accelerator Program (MAP), Melbourne
- Grants fellowships that include $20k in funding, office space, mentoring and investor trips to Sydney and Silicon Valley
- Also provides support to start-ups still in their infancy through a dedicated feeder program, master classes and public forums
- Ranked 13th in the world according to UBI index
- Offers mentorships and seed financing to internet and software start-ups
- Five-month program offers: $50k in investment for 7.5% of each start-up’s equity, mentorship with successful entrepreneurs and two demo days in Sydney and Silicon Valley
- Notable mentors include founders of Atlassian, Hitwise and Spreets
- Get more info here
- Start-up accelerator program backed by Telstra
- Offers a six month program to help entrepreneurs get ‘investor-ready’
- The program accepts up to 20 groups annually and provides mentorship, training and $40k investment for 6% of each start-up’s equity
- Mentors include the founders of Freelancer.com, AppVillage and Pollenizer Global
- Strong focus on tech start-ups
- Offers three programs for start-ups in varying stages of development
- Germinate program offers up $20k in funding and a 3-month intensive program
- Incubate program gives new founders and early-stage companies office space and start-up friendly facilities
- Accelerate program provides high potential start-ups with up to $150k of funding
- For more info, click here
Springboard Enterprises (SB) Australia, Sydney
- Community-driven accelerator program that aims to connect female entrepreneurs with a highly-vetted network of innovators, investors and experts
- Sources, coaches, showcases and supports women-led growth companies who are looking for investment or human capital
- For more info, click here
Viv is a writer who enjoys researching and writing about creativity, how the human mind works, and neuro processes. She values creativity above all else and admires people who pursue their career dreams, no matter the sacrifice. In her spare time, she binges on HBO shows and epic fantasy novels.