The Right Way to Startup

Defining Your Target Market

Clearly defining your target market is a very important step in any startup’s initial days. Not having a defined target market leads to a loss of money and resources.

There are 3 steps in defining your target market.

Step 1: Start out with identifying the use cases for your startup.

Step 2: Once you have the use cases, define the users who would most likely use the product/service offered. Try to be as detailed as possible in defining users by stating demographics like age, sex, income levels, status etc. , whichever are relevant.

Step 3: Lastly define the location you intend to target in different phases of your growth.

Once you have the target market defined, it becomes easier to come up with a marketing plan which can be focused and targeted so as to get the best return on the marketing spend.

HALLLP’s JOURNEY – Feedback from a Mentor

I got an opportunity to speak with Mr. Pushpendra Thakur, Cofounder at Mishtag. This was through an event conducted by 91 Springboard. He was overall happy with the idea and felt that there is a genuine need for it. He also said that using a top down approach was a good way to approach this category.

His advice to me was to focus on 3 things primarily.

Getting Initial Buyer Postings – He felt that if we can get initial buy side leads/posts, getting sellers would not be a big problem.

User Stickiness – He said that since the app is meant for students initially, building stickiness or repeat usage would be a challenge.

Spam – He felt that if not currently, moderating spam postings would be a challenge we will need to address at a later point in time.

The Stealth Startup

A stealth startup is one which tries to avoid any public attention. So why would a startup try to avoid any attention because as we know, the more attention a business gets, the more potential customers.

The reasons for a startup operating in stealth mode can be the following.

Protecting the Idea – We all know that ideas, once in the public domain, get copied. Filing a patent is a lengthy and expensive proposition. Hence some entrepreneurs prefer to run their startup in the stealth mode upto a point where they are able to gain sufficient traction and headway over others who might look to copy the idea.

Product – Entrepreneurs running in stealth mode also look to keep fine-tuning their product before it goes into the public domain. Generally the product is tested with a small group of people who generally are asked to sign an NDA.

With these advantages comes some disadvantages of running in stealth mode.

Attracting Stakeholders – Without publicity, the stealth startup may find it difficult to attract stakeholders like employees and investors. The startup’s public image plays an important role in getting these stakeholders onboard.

Testing – Since the startup prefers to limit usage to only a handful of users, there may be a risk of getting results based on data which is inadequate and biased.

BloomReach is a startup which serves as a good example. They started out in stealth mode as they were trying to offer SEO as a service, a service which requires a lot of investment in the product and which could be copied quite easily. The team realised that good execution is more important than being out there early on itself. When the startup launched publicly, it was a great success.

Big City Startup vs. Small City Startup

Starting up in a big city differs a lot from starting up in a small city. No matter what business model, there are certain fixed differences when you start a company in either case.

Costs – Big cities tend to have higher costs of living and an entrepreneur will find it more difficult to sustain himself/herself.

Availability of Talent – A startup is as good as it’s team. Finding the right talent is crucial for any startup. Bigger cities tend to have a higher number of better and specialized colleges (though this cannot be generalized) and hence the availability of a good talent pool is higher. Also talent from bigger cities generally avoids settling in smaller cities due to the loss in lifestyle.

Regulation/Support – Bigger cities tend to be some years ahead in development as compared to smaller cities. The regulatory and support systems in bigger cities tends to be stronger for new entrepreneurs.

Market Size– Bigger cities have a bigger population, which implies a bigger target market for the startup.

Competition Levels – Startups in bigger cities tend to have more competition as compared to startups in smaller cities (this can partly be attributed to the bigger market size).

The Chicken & Egg Problem of Networking Startups

This is a problem which is prevalent in startups focused on building traffic or user networking. Getting the first set of users is difficult as the incentive of these users is dependent on some factors which in turn are met only once these users come onto the website.

This would clearer with some examples.

Facebook faced this problem initially. A user would not see the value of the website until he/she had atleast 10 friends. The challenge the startup faced was to get a group of friends collectively so that they could experience the benefits the portal had to offer. Most social networks have faced this problem and require a minimum threshold of people to join before users can see the benefits and get engaged with the platform.

For a classifieds site like Craigslist, this was a problem as well. Buyers of goods/services would not want to come and use the website until they knew sellers were there on the platform and vice versa. Only getting both sides together could enable users to experience the potential benefits of engaging with the platform.

Dating apps like Tinder also face a similar situation early on. Boys would like to enroll only if there are profiles of girls on the platform and girls would start enrolling when profiles of boys were there on the platform.

For a new entrant in either of these business models or similar to them, this ‘chicken & egg problem’ has to be thought off and addressed in the initial days itself.

The 4 'Investments' Required in a Startup

How much investment do we need to startup? A lot is required but not necessarily in monetary terms. Investment in a startup can be done in many ways.

Time: This is the biggest investment required. The more the number of people investing their time, the better the chances of the business taking off.

Skills: Investing time is good. If the invested time can carry a better weight, i.e. the time is from people having great skills, the better it is. The more the skills backing the time invested, the bigger the investment.

Passion: The passion is what keeps all other investments going. Investing your passion into you startup ensures that the other investments will keep getting co-invested along with it.

Money: Money is required in any business.

So the first investment an entrepreneur makes is Passion, which is followed by Time, Skills & Money. Even if you do not have very many skills or much money as of now, investing passion and time can ensure that you keep moving and can take you to a stage where the other two investments will automatically start coming in.

Steps to Actually Startup

The following are the exact steps one should take in order to actually start up.

Finalise the Idea

Build a Founding Team

Register a Company

Start Building the Product/Prototype

Get Other Licenses (such as tax registration numbers, licenses etc. wherever required)

Build a Business Plan (focus on the early stages of the business)

Hire Team Members (for marketing, sales, product development etc.)

Launch

Am I Ready To Startup?

To answer this question, you need to analyse how you stand on the following:

Idea – Do you have idea which is robust and sustainable? Is the market big enough for you to enter? Anaylse your idea thoroughly. Read more about Vetting your Idea.

Team – You need to have the right skills to implement the idea. This is where most startups fail. Identify what skills are required to execute the idea well and build on those which you are lacking in. Read more about Finding Co-Founders.

Passion – You need to be fully convinced in your mind that the journey is going to be a long and tough one. Be mentally prepared to last it out. Only your passion and zeal can push you through it.

Sustaining Capacity – Your startup may not be able to give you any money for a long period of time. You need to know how you will sustain in this period so that at no stage do you feel the pressure to close down.

If you have all of these going for you, do not wait or overthink it. Startup Now!

Choosing the Right Investor For Your Startup

When your company gains some traction and you suddenly find yourself in growth mode, you may also discover that your cash reserves are dwindling.  But when it’s time to raise outside capital, remember this cardinal rule: All money is not equal. 

Freya Estreller, co-founder of gourmet frozen treat maker CoolHaus, and her partner, Natasha Case, decided to work with an angel investor they believed was a great fit for their growing company. “He'd invested in a cookie company that was a co-packer of ours, so we believed he'd be a good strategic investor,” Estreller recalls.

But the partners were mistaken. While the investor certainly had interests that were aligned with CoolHaus, he was concerned about the day-to-day operations and not willing to let the co-founders make mistakes, Estreller says. “We mistook common interests for common vision,” she notes.

Fortunately, the investor agreed to convert his equity to debt. Estreller's lesson: Be clear about the value, beyond money, that your investor adds to your business.

Estreller and Case recently landed $1 million in funding from former Cherokee Group CEO Bobby Margolis, who's credited with turning around and building that brand. “He thinks big,” Estreller says. He focuses much less on the day to day and more on helping the partners be the next Ben & Jerry’s. 

(taken from this link)

Developing a Habit of Following Up

You don’t have to spend every waking moment immediately responding to the chime of your email, but when you do allow time for this task, make sure you respond to everyone. If you don’t have time to give a long reply, then at least respond with a brief note telling your contacts that you received their messages and reviewed them and will get back to them soon. Then make sure you follow up.

In a startup, you’re building relationships with vendors, customers, investors, professionals and other entrepreneurs. That little bit of effort of responding to messages will go a long way in helping you build and maintain relationships.

(taken from http://www.entrepreneur.com/article/271335)

Your Business Card

Your business card is the first impression you make when you meet someone for the first time. It speaks a lot about your company and it's culture. The designation you mention, if you do, gives an idea about how your company is structured, again pointing to the culture and value system of the company.

It's important to make a good business card which is in harmony with the working style and culture of your company. This first impression does play a role in building new relationships.

"A good business card should feel like a good handshake – flexible but firm"...Manish Sharma, Printo

Keep your Churn Rate Low

Churn Rate is an annualized percentage at which a business having recurring customer base (customers hooked onto a plan offered by the business such as subscriptions etc.) loses its customer base. For example, a churn of 5% means that the business loses 5% of its customer base during a year.

So why it is important? This is going to happen in any business and we can always get new customers.

This thinking is wrong and can prove expensive for the business. We focus so much on customer acquisition that customer retention tends to get ignored. It is a proven statistic in any business that acquiring a customer is much more expensive than retaining your existing customers. Hence it becomes important to focus on customer churn. Rather than spending all of our marketing budgets in acquiring new customers, we should look at spending a significant amount on retaining the existing ones. A business cannot get onto a sustainable high growth trajectory merely on the basis on new customers.

How do we reduce churn?

To retain customers, we need to look at customer experience and feedback. Customers will keep coming to you if you build trust first and can subsequently offer a service which is equal to/better than your competitors. Focus on how users interact with your product, what they like, what they dislike, and use these metrics to keep enhancing their experience over time.

Start up and Stick it out!

Your time will come. You need to stick it out till then. Keep at it and don't give up!!!

Build a Prototype First

A good prototype is very important for a startup as it is the first offering by the startup which gets to interact with the target market. The most important deliverable we can get from this is good, authentic market feedback.

A good prototype should

: convey exactly what the startup intends to do. Never confuse the product by adding features which do adhere to the core business idea. We tend to add more features to the product so as to make it more acceptable by our TG. For example, if I am trying to create a website to sell premium teas, I should not add other beverages to increase acceptance by the market. The aim of the prototyping stage is purely to get a feedback for the core business idea. So build a prototype which does exactly that.

: be a minimal product which can be easily modified. Sorry for being repetitive but the aim of prototyping is purely to get market feedback and make necessary amendments before going full steam ahead.

Prototyping is really important and is a stage which a lot of us tend to ignore completely. We go with our gut and end building a final product without taking any market feedback. This leads to a waste in resources as once we enter the market and get feedback, making amendments to a more complicated product is a much more costly affair.

The Devil is in the Details

I came across this article (taken from http://www.entrepreneur.com/article/271646) on how an entrepreneur should develop a skill of paying attention to details and going into the nitty gritties of the business.

'We’ve all heard the old saying -- “The devil is in the details." I personally believe it would be better to say, “Your ultimate success is in the details." Managing details is likely the most important skill of any successful business person. 

People who are weak in this area will tend to ignore the details. They will categorize them as “little things." But if you let enough “little things” build up, they will turn into a “big thing." Big things kill businesses! As the primary of your own business, you need to become an expert (and example to others) of how to deal with the details.

Examples of important details are reviewing, and understanding, your daily financial reports, emailing your key people with little “thank-yous” for a job well done, managing email in general and about 1000 more things.

If you are struggling in any of these areas, you already know it. Let this little piece be your slap in the face. Your company, and employees, are depending on you to make the venture successful.'

Minimum Viable Product (MVP)

Potential customers say, ”Give me feature X,” “Give me feature Y,” and sometimes you do what they want, maybe sometimes you’re going to do what you want, and then they get mad at you. Pretty soon you’re chasing your own tail a little bit because you’re not operating against a clear, long-term vision of what you’re trying to accomplish.

The idea of minimum viable product is useful because you can basically say: our vision is to build a product that solves this core problem for customers and we think that for the people who are early adopters for this kind of solution, they will be the most forgiving. And they will fill in their minds the features that aren’t quite there if we give them the core, tent-pole features that point the direction of where we’re trying to go.

So, the minimum viable product is that product which has just those features (and no more) that allows you to ship a product that resonates with early adopters; some of whom will pay you money or give you feedback.

(Interview with Eric Ries, published on http://venturehacks.com/articles/minimum-viable-product)

Having Too Many Co-Founders

A good founding team is a very important part of a good business plan. Co-founders bring in a multitude of skill sets which help in executing and growing the business idea. So does that mean the bigger the team, the better it is? The answer is no.

During Bitequest, I started it as a single founder. I soon asked a friend to join in. Sometime later we got another two to join us. Once we were 4 in number, the growth did increase but so did the conflicts. There were constant conflicts in how we should work and grow our startup. This led to a lot of discontent amongst the team members and eventually was a big reason for me exiting the startup.

Co-founders do bring their skill sets to the table. However, with the skills, they bring in their experiences, vision, mindset and emotions as well. These variables of one co-founders interact with the variables of the other co-founders. In big teams, with so many variables interacting, a conflict or clash of variables is bound to happen, leading to eventual destruction of value in some way or the other.

Personally, I feel a team of 2 is ideal. However, is there is a need of additional skill sets, the number can go upto 3 at maximum.

Your Business Idea Chooses You!

Read this amazing and thought provoking post by Brian D.Evans on how you and your business idea come together.

'I’ve realized over time that we DO NOT own ideas, in a spiritual sense, and that they aren’t “ours”. The idea owns itself. In fact, it’s looking for a host. And if you don’t act on that idea within a period of time, it’s gone. The idea is not “yours” and travels to you, rather than you are the unique creator of the idea.

I’ve heard it time and time again, “oh my god, that was my idea!”. People get so bent out of shape when they see “their idea” being done by someone else. That’s because you didn’t execute the idea. The idea moved on. It’s like not feeding your dog very well, it’s going to go looking for a better source of food when it’s hungry and sick of you not taking care of it properly.

The idea picked you because you were the best host. You have everything you need to execute on that idea, whether you believe it or not.'

(taken from http://www.influencive.com/not-idea-dont)

Validate Your Idea

Discuss your startup idea not only with friends, but also other people who are strangers to you. I promise that you will definitely learn a lot here. The concept of your idea getting stolen is 99.99% impossible. Visit barcamps, hackerspace, geek terminals and bounce your ideas to different people.

We failed to do this step and hence overestimated the Singapore market. We found that the Singapore market for such a service turned out to be very small. People are SMS crazy in Singapore, but that does not mean that they were ready to pay for the service.

Looking back I would say this is the most important step which we could have done to save a lot of disappointment later.

(written by Vijay Ganesan, founder of failed startup SMSnoodle)