I’ve been working in small and large software startups for the last 20 years and currently have the privilege of being the CEO of a startup, Storage Made Easy, for the last 3 years. With the advent of 2015 I have not doubt that there will be many people considering whether to take the plunge and commit to founding a startup. There are a diverse number of resources on the web all offering advice and to that mix I add 10 tips of my own. I’ve tried to keep them to things I wish I had known before commencing my own journey.
1. If you’re not going solo, pick your partner carefully: Many people cast around for a partner or another person to build their startup with. This can be useful to help share risk but remember you have to share any reward it may generate also.
Firstly, be absolutely certain you need a partner and be sure of your reasons for contemplating one as it is one of the most important decisions you will make on your journey.
Also ensure that you can be as certain as possible of your partner. Believe me, it is like a marriage. You will fall out, you will have angry words, you may end up not speaking for a while. How will you cope with that ? How will you cope if your partner does not pull his/her weight in the business? What proviso do you have for this in your agreement ? I cannot stress enough how important this is.
2. Get advice on contracts: At the onset it is not unusual to take a ‘belt and braces’ approach to contracts. Don’t. If you ever need to revisit them you will be glad that you took time at the onset to have them framed correctly.
3. Only take funding at the start if you really need it: This has been said many times in other startup tips. Bootstrap for as long as you can, certainly until you have a minimum viable product. If you do intend taking funding, the more you have / can show, the more you have to negotiate with.
4. To VC or not VC : You should think really hard about whether taking Venture Capital is the right route for you or not. Obviously having money is great but it’s not guaranteed and pursuing funding in and of itself can be very defocusing.
You will need to understand the VC “model”, be familiar with terms sheets etc, and be able to run the numbers as to what you would need to exit for to make some money. As an alternative to VC keeping direct control means that you need to bootstrap until you have a viable business, but any exit cash comes directly back to the founders so the exit may be smaller but the rewards could be greater (obviously very dependent on the terms, valuation and exit).
Depending on where you take Venture Capital may mean that you have to move the company across to where the VC is located, and often asked for proviso for the VC being given. You should additionally be aware that you may not receive funding in one lump, you will likely be expected to hit agreed targets and can end up diluting even further if you miss these.
VC’s are likely to also add someone to your board and/or add an executive to your company, often in the role of CEO.
You need to consider all of this, and more, if you are going “all in” with VC based funding.
5. Consider crowdfunding / Angels / Private Equity: There are many reasonable alternatives to VC if you need capital, such as crowdfunding, Angels and private equity companies. Each of these can help boost capital whilst enabling you to retain more control of your business and are options you should consider before just deciding upon VC.
6. Find a mentor: In a startup your journey’s going to be tough. There are times you are going to want to talk things over and get some advice. Have a thing about your personal network and whom you hold in high esteem and would feel comfortable getting advise from. Approach them and ask if they would consider being your mentor. Outside advice from some not involved in the day to day running of your business can prove invaluable and refreshing.
7. Don’t ignore revenue: From day one plot a path to revenue. Many times you may hear that revenue will come if you amass a market, build the product correctly etc. The buck stops where the revenue starts. Never forget revenue, it puts control back into your hands. In my opinion it should be at the heart of the majority of your tactical and strategic thinking and decisions.
8. Don’t make do when hiring: Staff define your company. They define the culture and they, together, help you achieve your goals. Never just “make do” with staff. If you can’t find them locally look further afield. With modern communication technology there is no excuse when it comes to staffing your startup.
9. Don’t forget to delegate: When you work in a startup you learn to be good at everything out of necessity. This means you become above average in many things such as Sales, Marketing, SEO/SEM, Coding, Architecture etc. This can cause a problem further down the line as you find it difficult to find someone to take over parts of what you have had to do out of necessity. It has to be done if you are to grow and this means “delegation rather than doing”. Easy to say, hard to do, but essential to aspire to.
10. Don’t give up: There will be many times during your journey when all will seem lost. That is often the nature of being in a startup. When this happens seek outside advice, speak to your mentor, figure out whether you should stick with what you have, whether you should pivot or what your genuine option are, but don’t give up too quickly. Nine out of ten startups are estimated to fail so there is no shame in it but don’t fail because you gave up too quickly the first time you hit a bump.