How to Start a Technical Startup: Essential Tips for Founders
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Introduction
Starting a technical startup can seem daunting, but it doesn't have to be! In this guide, we'll explore the fundamental steps needed to launch a successful technical startup. From forming the right team to understanding your market, we'll cover it all. Whether you're brainstorming ideas or preparing to raise investment, our insights will help you navigate the startup landscape effectively.
Structuring Your Founding Team
Number of Co-founders
To successfully start a technical startup, the first step is to assemble a solid founding team. Ideally, you want to have two to four co-founders, with at least 50% of them being engineers. This ensures that you have the necessary technical skills to develop your product.
Financial Preparation
Each co-founder should ideally have enough financial cushion for about a year. However, this does not mean living lavishly; it can mean having enough to sustain a frugal lifestyle, like eating ramen noodles. This financial stability allows for focus on the startup full-time without external pressures.
Commitment is Key
A common misconception is that having a robust idea is the most critical aspect of starting up. In reality, no idea is required at the outset. Rather, what matters is the team’s commitment and the ability to brainstorm ideas collaboratively.
Brainstorming and Idea Validation
Finding the Core Idea
It's beneficial for the team to start with brainstorming sessions to see if a member has a kernel of an idea. Before solidifying this idea, it helps to share it with all co-founders. This encourages buy-in and ownership from each member, fostering a strong team dynamic.
Focus on Solving Daily Problems
Investors prefer startups that aim to solve personal problems. Thus, your startup should focus on daily or weekly issues rather than monthly or yearly ones. For example:
- Uber: Solves the problem of transportation multiple times a day.
- Car sales websites: Address a need that arises much less frequently (once every several years).
Understanding Your Market
Conducting Market Research
Investors are interested in startups operating in sizable markets. Hence, it’s crucial to conduct thorough market research. Understand whether your target market brings in billions of dollars, and try using competitor products to identify gaps.
Legal Incorporation
If you're looking to raise money in the US, incorporating your startup is a must. Fortunately, this process involves minimal costs, around $250, and can be accomplished via services like clerk.com. This simple step is vital for engaging American investors.
Developing Your Minimum Viable Product (MVP)
Importance of MVP
Creating a minimum viable product (MVP) is crucial. Many startups delay their launches, hampered by a need for perfection. The advice is simple: launch! Ideally, you should aim to get your product to users within two months of starting.
Growth Metrics
Once the launch happens, focus on growth metrics. For Silicon Valley investors, growth is often the primary metric for raising funds. Consider these strategies:
- Experiment with ads, but it's generally the least preferred option.
- For B2B companies, cultivate reference customers to spread the word.
- For consumer products, ensure that usage equals sharing from the very start.
Mastering Public Relations (PR)
DIY PR Strategies
Many startups fall into the trap of hiring PR firms, which can be a costly error. Instead, manage your own PR. Understand that PR is similar to business development; you need to:
- Build relationships with reporters.
- Provide real news value (like launches or significant funding).
- Follow up to maintain these relationships.
Fundraising Without Pressure
One of the best ways to attract investors is to not need their money. Fundraising effectiveness increases when:
- You run lean operations.
- You create urgency and a buzz around your fundraise.
- You maintain tight schedules for investor meetings to create FOMO (fear of missing out).
Strategies for Success
Managing Operations
The most common startup failures arise from spending too much money. Therefore, adopt practices to:
- Spend less on unnecessary perks.
- Monitor expenses meticulously.
Hiring Practices
As the startup grows, pay close attention to your hiring strategy.
- Always aim to hire individuals who are smarter than you.
- Be transparent with salaries and stock options to build loyalty.
- Consider starting lean; it's possible to achieve a lot with a small, competent team.
Conclusion
Starting a technical startup requires careful planning and execution. Assemble the right team, dive into market research, create a viable product, and manage your expenses wisely, all while focusing on growth. Remember that the path may not always be smooth, but with the right strategies in place, you can navigate the challenges of launching a successful startup. Keep these key points in mind, and you’ll be well on your way to achieving your entrepreneurial dreams!
but this is it like literally this is all the smart stuff I know period and it's all in like maybe 14 slides so it's
co-founders at least 50% engineering they all have to have somewhat around a Year's worth of money in the bank but
that doesn't mean a Year's worth of money living in a one-bedroom apartment like in a high-rise that means a years
worth of money eating ramen noodles and being very poor and everyone has to have quit their job
this is what you need to start a startup notice no idea is required you just need this that's it second idea I always
think that it's better to start brainstorming with your teammates typically one member of the team has the
kernel of an idea that'll become the company but it's always best before that gets too solidified to discuss it with
your teammates so that everyone Buys in and gets ownership we tend to like companies who are trying to solve
personal problems every investor says that the real thing is we like companies where the founders know what the hell
the companies are doing and know what the problem is so if it's not solving your problem it should be solving a
problem that you're very very aware of and then the other thing I tell Founders is try to focus on daily and weekly
problems as opposed to monthly or yearly problems it's a lot easier to do something like uber the typical person
in America has to figure out how to get somewhere three times a day it's a lot harder to do a car sales website the
typical person in America only buys a car once every seven years try to focus on daily and weekly problems it tends to
be a lot more successful Market this is an area that like people talk so much about do an hour of research figure out
whether there are billions of dollars being made in your Market um and use your competitors product after that I
don't care legal if you guys are interested in raising money in the US you're going to have to incorporate in
the US that is a very very very simple process for $250 and clerk.com you can have an American company and you can
raise money from American investors yeah it's that's easy let's the mystify that mvp most viable product this is where
most companies will screw up actually sorry where most companies will screw up is on team this is the second place most
companies will screw up how can you get something into people's hands I can't tell you I've done this many times
myself the number one piece of advice we give to YC companies before they launch is launch I can't tell you how many
people will just sit there and iterate and iterate before users ever see anything so when I ask a company how
long is going to take to launch I always just ask them why does it take longer than two months like I don't care what
it is I don't care if they haven't started yet you should be able to build something in two months and get it in
front of users this is just saying it one more time you're nothing into your launch so how do you achieve growth I
would say that for the typical Silicon Valley investor this is the number one metric for determining whether you're
going to raise money it's not team it's not past experience it's not fancy investors its growth so
um typically you're going to go one of three places one you're going to experiment with ads I tend to like that
strategy the least the second if you're B2B you really want to focus on reference customers the customers who
you can provide amazing service to who's going to talk to other people in their industry and spread the word about you
the last one if you're doing anything related to Consumer whether it's consumer services social media Etc usage
should equal sharing I can't tell you how many Founders I've talked to said oh I'm going to make my thing go viral well
if you want to make your thing go viral it doesn't mean just adding a share button the very fact that people are
using your product has to create some type of sharing that has to be built in from day one and so don't think of
sharing as an extra activity or a side activity think of it as 100% part of using your product all right press a lot
of people think that they need to hire someone to do their PR at Justin TV me my co-founder had a little competition
on how much money uh we've wasted and we'd write it up on a whiteboard and every time we wasted money we'd write it
up there and add it up uh I've wasted over $150,000 on PR firms so I'm giving those
advice because I don't want you to do the same thing 99% of PR in the early stage you can do yourself the best piece
of advice I've given I've been given about PR the thing that completely changed my whole perception is that PR
is exactly like business Business Development when you're trying to do a BD deal you get a warm introduction you
follow up you build a relationship and you provide something of value when you're dealing with press it's the exact
same thing you need to get an introduction from someone hopefully who that reporter is always written about
you need to be able to structure your pitch so that it's real news something launching money being raised a
significant higher a significant new BD deal you can't just expect the profile piece and what you need to do is make
sure you treat that as a relationship once you have a reporter who's written about you you've got to follow up with
them that becomes a very very important relationship that can continue to provide value if you continue to follow
YC and ask how do we start fundraising and the number one thing we say to them is that if you don't need
money people love to give it to you so how do you put yourself in the position of not needing money one let's not start
the company with a $1 million marketing and advertising plan right that's you need money for that um think about how
you can structure your company so all you have to do is pay for the living expenses of your co-founders that's it
hopefully your MVP requires so little money to get up and running that you can produce some growth without needing it
the second thing is that people don't quite understand that speed when it comes to fundraising is extremely
important um when you have meetings with investors you want them to be scheduled as tightly as possible like one week
every single introduction meeting you have with an investor um the purpose of this is that one it creates Buzz around
your fund raise two It lines all the investors up so if one investor wants to take a step forward you can contact
everyone else you just met in the previous week and said hey look we've got someone on hook here do you want to
come along or not the biggest mistake we see people make is doing invest ing these investment meetings serially I'll
take one this week I'll take one next week I'll take one the week after that investors move because they have a fear
of missing out fomo you're not creating a fear of missing out if you're only talking to them one at a time the last
thing is have growth having growth is like the solution to every single problem the more you're growing the more
investors are going to invest time finding you as opposed to other way around so you're having problems
fundraising how many people right now are looking to fund raise in this audience okay all right beautiful four
things to think about one are you growing I should have asked have you launched if you have a launch
plan that requires fundraising change it two are you talking to the Press it's investors jobs when they wake up every
morning to find a company to invest in that's their job they try to trick you into thinking that their job is to sit
at their desk and wait for you to walk in the front door but that's not their job so you need to be getting the word
out about your company so that they hear about your company from someone else not just you three build momentum make sure
you're talking to his as many investors at the same time as possible sometimes this means cheating like often times
this means doing stuff like telling the investor you're really busy and you can only meet a month from now so you can
spend a whole month lining up other investors for that week that's totally fine that's totally fine the last thing
is that try to focus on people especially for your first money people who understand your problem because
they've had it or they have it right now oftentimes customers and potential customers can be great initial investors
early stage so operations super super fast the number one problem that companies have is they spend too much
money that's the number one problem they have Su spend less money pay yourself less get a crappier office just suck it
up and use less money um this is the number one way you can extend your Runway and it's 100% dependent on you no
one else the second thing and I can't tell you how many people do this look at how much you spend every month it's very
simple just go to your bank account download your you know the the spreadsheet that says exactly every line
item what you spent and read it every month if you're the CEO and you don't know what your expenses are you're not
doing your job then figure out how to spend less money that seems pretty simple all right hiring one of the goals
I like to kind of instill in people in hiring is figure out how you can increase the average Talent with each
hire often times Founders think that they are like the smartest people in the universe Founders tend to be pretty
smart but very very very willing to take on risk and so your first couple employ employees should be a lot smarter and
just a little bit more risk adverse than you are if when you're hiring someone you don't think you're increasing the
average intelligence of the company you made a mistake because those people are basically your hiring advertisement if
those people are smart other smart people going to want to come to your company if those people are not smart
everyone knows it so don't I mean one of the things I always think about is like if you can't hire someone who's smarter
than you just do it yourself you know it doesn't hiring a lot of people is not not required um be fair and transparent
when you give someone an offer you need to tell them how much stock they're getting they should get stock need to
tell them how much stock is outstanding need to tell them whether their salary is you know typical for what you give
and if not be honest a lot of the times your first employees are your most viable and if you show them loyalty
they'll show you loyalty back and then the last thing is higher slow my second company social cam had three founders
when we sold we had three founders no employees we didn't necessarily want it to be that way but we were able to grow
a product to over 20 million downloads with three people so don't tell me that you can't do a lot with just your
founding team you can do a whole lot I think Instagram sold for a billion and they were under 20 so high or slow you