what to know before starting a tech startup

April 03, 2022 Posting Komentar

Actionable 7-Step Guide to Kickoff a Tech Company (With No Money)

Written past Robbie Richards

Here's a question we get asked a lot:

How exercise you start a tech company with no coin?

Well - permit's merely kicking things off by saying the boilerplate survival rate for a startup is around 10%. That's right -- 90% of startups are shuttered before they grow enough to sustain themselves.

Why?

As research from a big database of startup postal service-mortems shows, failure often centers around a few major mistakes:

Almost half of failed startups shut the doors because they didn't brand a product people really needed. Some failed because they ran out of cash, others because of an ill-equipped team.

While the stats paint a bleak moving picture, noesis is on your side. Past knowing the biggest traps to avoid, and having a solid gameplan in place to build, market and sell an app people actually want to employ, your startup has a fighting risk for survival.

So, where do you start?

In this commodity, nosotros'll cover an actionable 7-step plan to start a successful tech visitor:

Build an MVP the market place wants
Validate the app with early adopters
Iterate to meet product-market fit
Build a skilled and unified founding team
Become the funding you need to grow
Develop and practice an active methodology
Generate funding and scale squad

This guide is rooted in lean startup methodology, so let'south look at an introduction to how winning startups think before diving into the stride-by-stride guide.

Don't Overcomplicate, Beginning Lean

For a tech visitor to brand money, you'll need a market place that'due south set up to purchase, the right feature fix to solve the pains of those users, pricing your marketplace can beget, and a hundred other things that you can't maybe know at the outset without doing painstaking research and spending a truckload of money:

That'due south why startups perform best when they're grown iteratively, based on user feedback from a constantly-improving app. Eric Ries outlines this successful methodology in his book The Lean Startup. This radical guide to getting a low-cost engineering concern off the footing before you run out of money has go the startup bible.

To run a lean startup, don't get bogged down in creating an LLC direct away. It'southward unnecessary legal baggage.

Truth is: you can go into business with a general partnership and co-founder. This keeps your costs downward, and saves you dealing with issues like organizational structure and taxes before you even accept a production to sell.

In the lean startup methodology, the tech is far more important than the structures that back up it. Your product is what's going to brand you lot coin, subsequently all, so kickoff with the build.

If y'all have the skills or are willing to acquire to code, you tin can kickoff laying the foundations for a new tech startup as a side hustle, allowing the day task to pay the bills. This will give yous an early image you can take to other potential co-founders.

As a non-technical founder, nonetheless, you need to sell your vision to a prospective CTO (chief technology officeholder) -- this mode, the technology costs aught but time.

Ok:

At present that you lot take the bare business essentials in place, and at least one technical squad member, it's time to set the wheels in move.

7 Steps to Build a Successful Tech Visitor

#ane. Shortlist the core features of an MVP

Most swell startup ideas are the issue of a founder being unable to find a proficient solution to their pain. In the words of Paul Graham:

"The verb you want to exist using with respect to startup ideas is not 'think up' but 'observe.' At YC nosotros phone call ideas that abound naturally out of the founders' own experiences 'organic' startup ideas. The most successful startups almost all brainstorm this fashion."

If you're developing a product based on your own pain, yous might be the most qualified person to list its core features. Merely, assuming that others share this pain and are looking for a solution, you can bring on early adopters to assistance refine the value proposition.

Nailing down the features, collecting feedback and validating the concept is disquisitional to ensuring your product roadmap is pointed in the right direction.

Since 42% of failed startups close down because of poor product-market fit, making informed choices at this stage is critical to survival.

You can utilise a unproblematic framework like this to define user goals and see how different hurting points map to cadre product features:

What is the overall idea?
Who are the customers?
Who are the cease users?
Why would they want information technology?
Why are nosotros building it?

You have to be very selective when building an MVP.

Focus on providing the minimum ready of features users need to achieve a goal or realize value; your project management app needs attachment uploading more than it needs support for custom emoji.

3 mistakes to avoid when building an MVP

Overcooking your MVP

The idea backside starting small is to kickoff quickly.

Your MVP doesn't demand to serve multiple audiences and utilize cases; it just needs to be validated by one niche. Get a small, highly-targeted segment of your market place to buy into the idea and you get the cash needed to expand an MVP and accept information technology to a wider marketplace.

Choosing the wrong market segment

Knowing who to sell to is only every bit important to building an MVP with marketplace fit. Getting an engaged customs of early on adopters to provide feedback doesn't happen if you're going subsequently the incorrect segment, and without those early adopters you lot won't get the time and insight needed to iterate and grow.

Refusing to pivot if the MVP won't stick

Even though you've done your research on the audience and feature set needed to compete in the market, it might exist that your MVP is merely being marketed to the incorrect customers or missing features that persuade customers to purchase.

"Failure in validating your MVP only invalidates a pocket-size mode to learn customers — not the whole concern model." -- Swarnendu De

#two. Pre-sell the MVP

A lead capture page for the GrowthHacker Projects MVP, which funneled qualified companies into a concierge demo.

1 way to combat the problem of running out of greenbacks is to bring paying customers on lath equally fast every bit possible.

This gives customers a financial stake in the success of the product -- they'll exist willing to help "co-develop" the product in return for getting the features that they inquire for (and will want to pay for) built.

Sales = validation!

One of the biggest inflection points for any company is finding out people volition actually pay for what you have, or program to build.

Here are the different types of MVP pre-selling strategies you tin employ to quickly validate a product concept:

Single-feature MVP. Focus on nailing one user goal, to validate the need for the feature and build early adoption.
Piecemeal MVP. Keep costs low by combining existing products and services to come with a unique offering. For example, your product could be the issue of some Zapier zaps or a code-complimentary prototype built with Bubble.
Concierge MVP. Do some or all of the software's work manually and work closely with customers to understand how best to improve. With that information, automate the manual work with engineering science.
Wizard of Oz MVP. An MVP that seems similar a software service, but its results come up from manual work. This is a way to validate the results your app volition provide and whether customers will pay for them.
Crowdfunded MVP. A lot of successful startups came from a video of a one-off prototype uploaded to Kickstarter -- with crowdfunding, you lot can generate buzz and become feedback on a product earlier you've put information technology into production. This keeps costs down while giving you money to survive on.
Smoke test MVP. Validate demand for your thought past sending paid traffic to a pre-release signup page. The number of signups will help you gauge the level of interest.

#3. Source talent with equity

Non technical? No trouble.

Y'all'll be able to find an excited technical co-founder if you have the right startup idea and equity offer.

You don't take to spend money sourcing talent -- instead, use a platform like VentureStorm to get connected with your perfect CTO or CEO.

In that location's a lot of debate over the thing, just startups typically offer technical co-founders around 10-35% in disinterestedness. This is considering future funding volition farther dilute equity, and then giving away a clamper shut to half can be a risk for CEOs looking for investment.

#4: Acquire customers

In one case the MVP has been validated and yous have iterated with user feedback, the next step is to release the product into a wider segment of your target market.

Yous tin meet all the right user goals with all the right features, just if no 1 knows your production exists y'all will lose out to a competitor.

In the world of SaaS, it's a state take hold of. You need to have the oxygen out of the room.

For startups that don't accept enterprise budgets, big-calibration paid ad campaigns and a well-oiled sales team are largely unattainable.

Lack of budget is definitely a disadvantage, but not a game-ender. Information technology just means yous have to get scrappy, and exercise difficult manual promotion that doesn't calibration.

This often involves finding where your customers hang out online, and getting involved in the conversation.

Generating early on buzz with online communities

Every startup remembers their first Hacker News dwelling house run or Product Hunt launch -- probably considering the amount of traffic it blasted at the servers took them offline.

A popular piece of content or well-received product launch that shoot to the acme of sites like Reddit, Hacker News, and Product Chase can ship tens of thousands of visitors to your site. It's a tactic used as part of regular content promotion and bigger product/feature launches.

For example, beneath is a 2007 Hacker News relic from Dropbox founder Drew Houston:

Not simply did this post get the attention of product experts, it also got thousands of users to counterbalance in on Dropbox.

For small-scale sites that could hateful a 60%+ increment in sessions overnight. Check out the Show HN category to run across what's hot, and try to replicate the formula.

Reddit is another site that consists of thousands of communities - everything from SaaS to information visualizations. It'southward well-known that Reddit hates self-promotion, but submitting content that's genuinely relevant and useful to a specific customs can be a way to get vital attending in the early on days:

This post links off to a promotional resource but gives the community the total text in a Reddit post -- this makes information technology easier for users to read and comment, and is seen as less spammy than simply dropping a link in the subreddit.

Four startups that grew by doing things that don't calibration

Tinder

(Source)

Apps like Tinder live and dice by the size of their networks. Information technology'due south a hyperlocal app, so it needed to onboard a lot of users in close geographical proximity for the pilot period.

Tinder launched a series of pop parties in California and made it mandatory to have the app installed to gain entry.

People attention the parties installed the app, and Tinder's user base of operations grew to fifteen,000 overnight. The "network result" broiled a viral loop into the product, helping to retain existing users and attract waves of new ones.

In 2019, information technology was announced that Tinder had five.9M paying users.

Quora

Developing a community-driven production without an bodily community is a tough inquire. In the early days of the site, Quora founders would start and engage in threads to provide an illusion that the customs was a lot larger than it really was.

Herd mentality took concord, and soon thousands of new users were flocking to the site to engage in the conversation. Eventually, it hit a critical mass and the founders no longer had to seed new conversations.

Generating a wide variety of question-respond content around different topics is also a way to rank in the search engines for specific long tail keywords. Past seeding Quora with a range of frequently asked questions in the startup/tech/coding worlds, it became wiki for information that could be expanded with different customs perspectives.

It's vital at the get-go to provide a mode for users to see how they should use the platform and why it's benign to them – the Quora staff did this by leading by instance.

Bonus resource: Bank check out step #12 in this guide to acquire how to mine Quora for a high-traffic threads. This is a corking style to appoint in the conversation, provide value, and generate targeted referral traffic to your tech startup.

Twoodo

It might not be a game-changer for a mature product, but 72 signups can make a massive difference for an early-stage startup.

Twoodo managed to attract 452 unique visitors which converted at a charge per unit of 16% with a strategy that involved the founder making targeted comments on forty blogs. The whole project took but 6.v hours, simply helped the company land its kickoff customers.

Stripe

(Source)

Stripe founders, now a hallowed duo in startup circles, got their product used by early customers with very hands-on tactics. The founders visited leads in person, where it was like shooting fish in a barrel to proceeds access to their computers and exercise custom set-up work for the Stripe API (call back what we were saying earlier well-nigh how an MVP can be partly transmission at first?).

"If you were interested in Stripe, they would set information technology up for you on the spot. They didn't go back to their office and send you a link past e-mail hoping you'd sign up. In that location was no selection. If yous said, "yes" to try Stripe, they would grab your laptop and ready it upward for you." -- Mikael Cho

Bonus resource: Want more inspiration? Bank check out this growth hacking guide that looks at the specific strategies and tactics 77 hyper-growth companies used to country their first paying customers.

#five. Await at the numbers

By pushing new users into the product funnel, you get data on how well the app performs in the easily of existent customers -- do they stick, or churn out speedily? What changes need to be fabricated?

While signups are great, merely they merely tell part of the story. If y'all tin can't become users to prefer the production, you'll leak revenue and notice it near impossible to get funding.

Here's a shortlist of the most important metrics every tech startup should exist measuring:

Active users

Active users regularly render to apply your production. They didn't log in and go out never to exist seen again -- they get existent value from the production, and are i of the most valuable assets for your business.

How to calculate agile users

Active users are usually analyzed by fourth dimension period. Then, your monthly active users (MAUs) are those who have logged in inside the last xxx days. Every app promotes dissimilar usage frequencies.

Twitter hopes you employ the product every mean solar day, considering at that place'south ever something new to run into and it makes coin from ad impressions. Something like Sumo is a tool users might need to use much less frequently, because once y'all've deployed a pop-up course you lot don't need to log in and adjust it every single day.

To calculate active users, you'll need a gratis tool similar Google Analytics or a paid, dedicated customer data platform like Aamplitude or Mixpanel. The calculations are done with user IDs and event tracking.

Retention charge per unit

Retention rate is frequently depression for apps. Small improvements make a big difference.

Retention rate is the metric yous demand to improve if you desire to grow your agile users. It measures the percentage of users that log back in later on signing up. If your retention is low -- eastward.g., no one that signed up a calendar month ago nevertheless uses your product -- you lot're meliorate off putting money into retaining customers than generating leads because it costs 6-7x less to retain an existing user than it does to concenter a new i.

What'south the signal in attracting new users if they're only going to stick around for a month?

How to calculate retentivity rate

Retention charge per unit tin be calculated with this formula:

Customer Retention Rate = ( ( Number of customers at the terminate of a period - New customers created in that catamenia ) / Number of customers at the start of that period ) * 100

Like the agile users metric, thirty days is a good guideline. Diving deeper into the data, yous can also find correlations between customer profiles and behaviors that promote retention.

For example, a user that invites their team might be more than likely to retain than one who only uses the product by themselves.

Net Promoter Score (NPS)

How happy are users?

The NPS metric gives you the respond:

As the image hints, users that participate in this survey are divided into 1 of iii buckets depending on their response. With feedback of nine or 10, a user is an asset to your visitor -- they're doing marketing work for yous - probable sending high-converting referrals your way each month.

Users scoring 1-half-dozen are detractors who are unlikely to accept much good to say about your production, whereas the neutral scorers (7-viii) could go either way.

What exercise you do with this data?

Well, your overall NPS score is a solid measure of user happiness. The higher the score, the healthier your client base. You can as well market place differently to each NPS segment -- for example, launch campaigns to convert neutral fence-sitters into product evangelists!

How to calculate NPS

The first step is to deploy an NPS survey. This tin exist done over email, during support sessions, or inside the app itself. Tools include Delighted, Promoter.io, and Wootric:

Each data point you get back from a survey is but a number between 1 and 10.

To summate NPS, use this formula:

Internet Promoter Score = (% of respondents scoring nine or 10) - (% of respondents scoring one to 6)

#vi. Stay Active

The Agile Manifesto and the world of literature that surrounds it is ever essential startup reading!

Collecting metrics and crunching numbers is groovy, but at this scale it'southward piece of cake to get bogged down in data that might matter less than just improving your product.

With user feedback and reports on cardinal metrics like retentivity and activation, it's fourth dimension to brand product, feature, and marketing iterations that affect your bottom line. This ways making decisions based on limited information and voices of a few dedicated customers -- it can feel like a leap of organized religion, only the former Facebook mantra of Move Fast and Pause Things is even so a valuable lesson for startups.

Your team and product will abound as it gains traction, but you need internal processes and structure to back up that.

For many successful startups, that means:

Working in sprints. Iterate on the production in ii-calendar week bursts, evaluating functioning at the finish of each sprint and having open up discussions about what went incorrect and what went well.
Taking user feedback logging seriously. User feedback is and so vital to startup success, but it's often mismanaged. Create specific tags in your back up ticketing tool that describe the feature or aspect a user is talking about (#feedback-sidebar-ui), or at least diligently upkeep a Google Sail with the latest snippets of feedback.
Killing features or campaigns that don't move the needle. You have such express resource that you can't beget to press on in the wrong direction. Does the data say that a beta feature you're pushing difficult isn't getting much adoption?

#7. Fund and Calibration

The mistake a lot of startups make is thinking that footstep #seven is really pace #one.

Getting funding to calibration should come later in the startup journey. Beginning, you demand to found production-market fit, get early on adopters, and iterate fast before implementing a large scale go-to market strategy:

"Funding is appropriate for products that take some traction in a large market. For the 99 percent of companies that don't fit this bill, external capital can be a recipe for disaster. If y'all're at the invention stage, just remember that necessity is the mother of invention, not money." -- Dave Bailey, VC and serial founder

Scaling too early can hurt a young startup. Boris Wertz of Version One VCs advises that at that place's null damaging about scaling up things that serve many users for little cost -- like better server infrastructure or cocky-serve acquisition -- simply scaling up on things that burn through money without producing reliable results, like large sales and marketing initiatives, is often a factor in failure.

For these reasons, seek out funding when you've already got a validated MVP and a list of active paying customers. This will split up your concern from the many others vying for investor capital.

Here are some of the funding options available for early-phase startups:

Crowdfunding

Alongside accelerators and angel investors, crowdfunding is i of the few funding options bachelor in the early on stages before a product generates real revenue.

Services that tin can help crowdfund your startup include Kickstarter, IndieGogo, and Fundable -- the options available are either pre-selling an MVP, or selling percentages of company stock to investors.

Angel investors

Affections investors are ofttimes ex-founders that accept a combination of startup experience and tons of cash from their final large exit. They tend to invest in companies that have valuations of effectually $3m, and volition typically invest effectually $150,000.

Accelerators

Accelerators don't just offer money. They offer connections, mentoring, and opportunities that would otherwise be out of accomplish for well-nigh startups.

When a startup's application to an accelerator is accepted, they will usually give upwards around 7-10% of their visitor equity in substitution for $25-$125k.

While most accelerators take a sizable chunk of equity, MassChallenge takes a 0% cutting and still offers $3m in cash annually to startups as part of its accelerator programs.

MassChallenge is a not-for-profit customs of investors with access to angel groups, law firms, marketing agencies, PR firms, venture capital firms, and corporate executives -- everything a startup needs to get set up and get to market.

Founding teams also have access to staff training sessions and workshops on strategy, marketing, fundraising, and squad alignment.

Interested? Annals here.

Ready. Set. Build.

It'due south obvious from the stats that starting a tech visitor is no walk in the park. With something as circuitous as software and as unpredictable as team chemical science, there is bound to exist a large margin for error.

Nevertheless, if you follow these steps you lot're prepare with a boxing-tested framework that successful startups like Dropbox, Uber, and Buffer have all used to build, validate, and market.

To epitomize:

Ascertain what your MVP volition and won't be. List the features, and think about the lightest way to solve ane important user problem.
Pre-sell your MVP. Leverage connections, crowdfunding, and fume tests to build buzz and raise cash.
Offering equity to build a bully founding team. Tech startups demand a CEO and CTO at the bare minimum. Employ talent-sourcing sites to detect a co-founder with the correct skills, energy, and vision.
Hustle to accomplish your first few customers. Without user feedback, software tin exist built in the incorrect direction, wasting resources and ultimately killing the company. The money your get-go few customers pay is important, but their input on what features to build next, and why, is priceless.
Analyze your data and pivot (or don't). Utilise customer analytics tools to capture the ways users use your app, measure retentivity, and other success metrics. If something's broken, find out what it is and fix it.
Do agile methodology. As your team and product scales, it gets too complex to manage informally. Agile helps startups build products in quantifiable sprints of piece of work, and in short enough cycles to adjust to customer feedback.
Get funded, scale your squad. If y'all've made information technology this far, you have a validated idea. To make coin and grow, you just need to double down on what works. That's what funding gives you the freedom to do.

It's a long road, but when yous think about how fraught with pitfalls it is, the fact that ten% of startups survive is a skilful matter, because with the correct action plan you'll position yourself alee of the bulk of other businesses trying to build the tech company the wrong way.

This post has been updated form the original that was published in Febraury 2019.