ny+startupbeta

Step 1: Decision

Are you sure you want to start your own company?

Ok, first take some time to consider your purpose, passion, strengths, and goals.

Take the following steps:

  1. Read How to Do What You Love by Paul Graham.
  2. Read The Pathfinder by Nicholas Lore.
  3. Read True North by Bill George.

You should also consider that 50% of small businesses fail in the first 5 years (US Census Data) and 70% to 80% of Venture Capital-backed startups fail to meet their projected return on investment. Many people who start their own companies often need to work 16 hour days or longer and with no salary for a year or longer. .

Still want to start your own company?

Congratulations on eliminating one option on your journey to finding your true passion. This guide ends here, but your road is just beginning.

Ok, you've decided to start your own company, but is now the right time?

If you could pick any time in your life to start a company, when would it be? Generally speaking, the ideal time to start a startup would be when your probability of success is highest and your opportunity cost (salary) and other risk factors (personal, family, health, etc.) are lowest. The orange line below attempts to use these two factors to predict when - during the course of an average person's life - is the optimal time to start a startup. Of course, every individual is unique, so see below for details on how to determine the right time for you.


Consider the factors below to help you think through the right time to launch a new venture.

Probability of Success

According to data from the Founder Institute, older age correlates with more successful entrepreneurs up to around age 40, after which it has limited or no impact. It seems reasonable that as you gain more experience, your probability of success goes up. So that's good. But, the overall probability of success for startups remains low - according to one study, even VC-funded startups only have a success rate of about 20-25%. So, experience certainly helps, but launching a startup is still a risky endeavor at any age. Now consider what you're giving up as you're waiting to get additional experience.

Opportunity Cost and Risk Factors

As you get older, your opportunity cost and risk factors go up. Why? To put it simply, when you're younger, you have nothing to lose. Your salary is relatively low and your outside responsibilities (family, personal, etc.) are limited. With age comes valuable experience, but also additional responsibilities that affect your ability to take risks. Consider the following factors and how they may influence (whether positively or negatively) your ability to take a risk:

  • 27 - Average Age of Marriage
  • 30 - Average Age of First Child
  • 30s - Increasing Salary/Responsibilities at Work, Mortgage, Young Children, etc.
  • 40s - Children in College, Aging Parents
  • 50s - Increasing Savings and Financial Independence, Children Getting Settled
  • 60s/70s - Greater Independence, Retirement, Potential Health Concerns

Summary

So what does all this mean? It means that, in theory, if the average person could pick an ideal time in their life to start a new venture, it would be best start young - in the late teens or early twenties. This is not to suggest that older people cannot be successful entrepreneurs; there are many successful entrepreneurs of all ages and every situation is unique. But as you get older, you're giving up a lot more to take the leap, relative to your chances of success. So if you are simply waiting around to gain enough "experience" to start your own venture, then you may be doing yourself a disservice, and the right time may never come. One final note, studies show that the probability of success for repeat entrepreneurs is greater than that of first-time entrepreneurs - so even if you start a venture and it fails, your probability of success will go up for your next venture. Go ahead and take the steps below to determine whether now is the right time for you.

Ask yourself:

  1. What does my own personal "ideal time" graph look like?
  2. When do I expect my probability of success to be highest and my opportunity cost (salary) and other risk factors (personal, family, health) to be lowest?

It is likely that your ideal time is sooner rather than later. So what are you waiting for? You might as well get started!

Step 2: Immersion

Your next step is to familiarize yourself with the tech startup world.

Complete the steps below and you'll be in great shape to begin building your company:

  1. Read How to Start a Startup by Paul Graham
  2. Begin reading Startup Owner's Manual by Steve Blank.
  3. Begin reading Lean Startup by Eric Ries
  4. Attend the New York Tech Meetup
  5. Review ny+startup events for other events
  6. Review Startup Li.st
  7. Reach out to existing startups of interest

Step 3: Business Partners

Do you have one or more business partners already?

Are you a business person looking for a technical co-founder?

Do you know of a tech co-founder personally who would be willing to join your venture?

Note: If you are a business person at the idea stage and you don't know a tech co-founder personally who is willing to join your team, it is unlikely that you will get technical individuals to commit fully to your idea at this stage. You need to be able to demonstrate some level of traction on an idea. So, the best thing you can do for your venture is to stop waiting around for technical co-founders to bring your idea to life; rather, focus your efforts on making as much progress on your idea as possible, with or without a technical person. The rest will take care of itself.

Ok, so you want to find business partners.

There is no such thing as an ideal team, but a strong founding team for a tech startup usually comprises of 2-3 people, representing technical, design, and business/industry expertise.

Below are the best resources for finding a co-founder (in order of effectiveness):

  1. Reach out to your personal networks (preferably individuals you've worked with previously, whether in school or at work)
  2. Participate in a Hackathon, Lean Startup Machine, Startup Weekend, or other project-based events
  3. Attend Co-founder events
  4. Attend general networking and meetup events

If you take the above steps, you should be able to find one or more business partners.

Great, you've found a business partner. Review the criteria below to ensure you have selected the right partner:

Ask yourself:

  1. Do our vision for the company and values/motivations align?
  2. Are our working styles compatible and skills complementary? (and could I spend countless hours with this person?)
  3. Are we both equally passionate and willing to commit full-time to the venture?

Did you answer yes to all three questions? If so, you may have a strong candidate for a business partner on your hands. If not, keep searching. Note: If your partner is not willing to commit full-time, determine his or her availability and exact criteria for committing full-time. If the commitment is less than 20 hours per week or the criteria is a salary close to what he or she is currently making, then you may need to select a new business partner, as it will likely require full-time effort from all partners to even get the company to a point where you can pay salaries.

Now that you have your team, it is a good time to discuss dividing equity.

Dividing equity at this early juncture may seem premature, but it is critical to avoiding problems later on. Everyone should be clear on exactly what they're committing to the venture and what they can expect to get in return. Plus it is a good first test of how you work together as a team and communicate regarding potentially sensitive issues.

There are a lot of misconceptions about how equity in a startup works. Make sure you take the following steps before proceeding:

  1. Read about how equity and vesting work
  2. Read about dividing equity
  3. Try this tool for dividing equity
  4. Read about equity dilution
  5. Try this equity dilution calculator

Of course, the above are just guidelines and it is always important to get proper legal guidance before signing any agreements.

Step 4: Ideas

A startup idea is worth surprisingly little. This is because anyone can have an idea; the real value is in the skills and execution it takes to bring the idea to life. Rather than trying to think of a "million-dollar" idea, most successful startups begin with a problem or hypothesis for a solution, and then test and adapt their solution based on real-world feedback.

Do you have a startup idea (or hypothesis) already?

No idea? No problem.

Startup ideas are everywhere. Most startup ideas come from a pressing problem that the founder either faced personally or was knowledgeable about. Just think about the everyday products and services you encounter (whether going to the bank, buying groceries, etc.). What frustrates you? What seems backwards? What could be faster/easier/more convenient? Any one of these problems could be the seed for a successful startup. Paul Graham recommends a technique in which you imagine ways in which you think our society today will seem backwards in the future.

But maybe you want a bit more of a structured approach to brainstorming and you're looking for a truly disruptive startup idea. In that case, consider this process developed by Professor Luke Williams, author of the book Disrupt. It uses an approach familiar to many innovation firms in order to generate truly disruptive ideas. The process is designed to expand your mind and think disruptively, so don't be afraid to let your imagination run wild. Some of the best startup ideas are the ones that sound crazy or even impossible at first.

Take the following steps:

  1. Select an industry segment that you care about
  2. Do some basic research on the competitors in that segment
  3. Identify the cliches - what are the most basic assumptions and conventions of this industry segment? (example: rental car industry - pick up cars at the rental agency, pay by the day, etc.)
  4. Change the cliches - invert, scale, negate - to produce "What if" statements (example: rental car industry - "What if you didn't have to pick up cars at the rental agency?" "What if you could pay by the hour?"
  5. Combine the most interesting or compelling "What if" statements into disruptive hypotheses (example: What if you didn't have to pick up cars at the rental agency and you could pay by the hour?"

You now have three interesting disruptive ideas for an industry or segment. Don't worry if some of the ideas sound a little crazy or impossible, that's what makes them interesting. You may have noticed in the examples above that Zipcar was one disruptive solution to the example hypothesis mentioned above. The point of this exercise is not to come up with "realistic" solutions just yet; it is to generate truly disruptive ideas, which you will then test against the market to produce actual disruptive solutions. You can learn more about this process by reading the book Disrupt.

Ok, so you have one or more startup ideas. But how do you decide if these ideas are any good?

Ultimately, only intelligent market testing will validate any idea. But first, here's a framework to help you in deciding which ideas to test and the ones that will give you the best chance for success.

Ask yourself:

  1. Do I care about the underlying problem?
  2. Do I have the skills/experience needed to bring my idea to life?
  3. Does the market value a solution to this problem? (also consider the size of the addressable market and whether your solution is scalable)

Did you answer "Yes" to all three questions? If so, go ahead and start testing your idea. Otherwise, it's probably best to go back to the drawing board and select a different idea.

Step 5: Validation

Time to validate whether your idea actually solves a real problem. Be careful, this can be harder than it sounds!

You've accomplished a lot already. You've decided to do a startup, familiarized yourself with the tech landscape, found business partners, and generated an idea. Now comes perhaps the most important part of the process: testing and validating your idea. This is a critical step in getting from the idea stage to a proper launch. By now, you should be finished reading Lean Startup and the Startup Owner's Manual. This should give you a great background to perform customer validation. One of the best means to validate your idea is to attend a Lean Startup Machine workshop, which can teach you to validate an idea in only one weekend.

Alternatively, follow the basic steps below:

  1. Download a free validation board from Lean Startup Machine
  2. Identify your customer hypothesis - who is your customer?
  3. Identify your problem hypothesis - what is their problem?
  4. Interview customers to validate that they have the problem
  5. Identify a proposed solution (or idea) for the problem
  6. Identify all core assumptions that this solution depends upon (if any core assumption is false, the business fails)
  7. Identify the riskiest assumption
  8. Test your riskiest assumption
  9. If the test passes, test the next riskiest assumption; if the test fails, pivot to a new customer and problem hypothesis.

In this way, you can first validate the problem, and then validate your proposed solution. You must keep cycling through this process until you have basic validation for your proposed solution.

Step 6: Prototype (MVP)

Do you know how to code?

Assuming you are starting a tech startup, it is really important that you have at least a basic understanding of the technical side of the business. One option is to actually learn how to code. This will not only help you better understand your business, but also aid in recruiting later on. Besides, it's very empowering to know that you have the skills to bring your idea to life. It's not realistic to assume that you can be a skilled software engineer in a few weeks, but it is realistic to be able to learn how to build a basic prototype in this time.

There are many possible languages you can program in. If you are interested in building a web app, two popular frameworks are Django and Ruby on Rails. Rails has the benefit of having a particularly strong community and support resources, but either framework should be sufficient for building a prototype.

One alternative to coding a fully functioning prototype yourself is to build a basic mock-up or wireframes to illustrate your solution. There are some free tools available to help you do this (see below).

Take the following steps:

  1. For learning how to code, complete the Ruby on Rails Tutorial by Michael Hartl or The Django Book tutorial
  2. For creating mockups, try Invision (if you have designs already) or POP (if you don't have designs yet)

The tutorial by Michael Hartl is one of the best available. With some persistence and focus, you can use it to help you build a prototype within a few weeks.

Congratulations, you are in good shape. Your next step is to create a Minimum Viable Product (MVP). An MVP is "that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort." It is essentially a basic prototype that allows you to gather as much feedback and learning from early adopters as possible, so that you can determine how to change and adapt your solution before it is ready for launch to a broader audience. The prototype can be as simple as a landing page describing the basic features of your product or something more advanced, depending on the nature of your idea.

Take the following steps to gain a better understanding of how to create an MVP:

  1. Watch this video by Eric Ries on MVPs
  2. Read this Tech Crunch article on creating an MVP

Great, you've built your prototype! You are now ready to go off and start testing. The next step in your startup journey will be the most exciting yet.

Alas, this guide ends here, but there are many resources available to help you as you test your prototype, measure results, and adapt your solution to find the right fit between your product and the market. The road ahead is difficult, but well worth it.

Summary of Your Personalized To Do List

 

Did you like the guide? Share below or provide feedback:


"Really cool tool...I like the customized instead of one-size fits all approach."


"...certainly something that would have helped me back when I first jumped into the startup scene"


"pretty cool"


"neat"