As Tech City UK’s Tech Nation report 2017 highlighted, the tech sector is growing – fast! We’re hit with daily news of massive funding rounds, IPO’s and mergers, leaving a lot of people on the outside wanting in. But how hard is it to create and grow a viable digital business?
As the founder of two previously failed startups, I’ve learned a lot about what it takes to get a startup from conception to your first raise.
Here are my 8 chronological steps to streamline your startup’s path to success…
1. Google – Google is a great way to do a brief competitor analysis. Search 5-10 different phrases related to your idea to see if anyone has beaten you to the punch.
2. Research Key Figures
Before you go any further, you must know the key figures that will determine your startup’s success and investability. Research:
- Market size: The number of people who could potentially use your product.
- Your Competitor’s Customer Lifetime Value (CLTV): The monetary value an average customer is worth to your competitors in revenue over their lifetime.
- Opportunity: Market Size x CLTV = your opportunity, the monetary amount you can obtain if you have 100% dominance of your niche. This figure will be very important to angel investors.
- Customer Acquisition Cost (CAC): The amount it will cost to acquire a customer, on average. Use Google’s Keyword Planner to see the ‘Cost Per Click’ for the keywords in your niche. This will give you a rough idea of your CAC.
- Market Attainability: Lastly, roughly estimate how much of your market you will be able to obtain in %. If you’re entering a small/niche market with established competitors, you may want to rethink.
3. Validate Problem
Next, find out if your idea is solving a problem that is real. This can be achieved using various methods:
- Google’s Keyword Planner: Use Google’s Keyword Planner to see if people are searching for solutions to the problem you are solving.
- Landing page: Build a landing page using Unbounce, drive relevant traffic to it using Google AdWords, and see if people sign-up. Check out the landing page we are using to sign-up barbers to Cutter’s Club.
- Survey competitor’s customers: You may have to think outside the box to reach a decent number of these customers. Why not check out your competitors Facebook page and contact people who’ve liked it? Keep this simple, concise and open-ended. Ask them what problems they faced when using your competitor, how they’ve tried to solve these problems, and if they would stop using your competitor if your service solved these problems.
- Feedback: Speak to as many people as you can about your idea and try and get their honest feedback. Don’t be shy, and don’t worry about people stealing your idea. The benefits of feedback far outweigh the risks.
Most ideas will fail here. But, that’s a good thing! This process will save you time and money down the line.
Once you’ve validated your customer’s problem you must find the most effective, marketable, and profitable solution possible. There are a number of things you should do/plan at this point:
- Name: Use domain availability as the main factor in deciding your startup’s name. Above all else, you want to find an available ‘.com’ and ‘.co.uk’ domain with as few syllables as possible. This can take a lot of work, but compiling a list of root and permutation words and combining them, or checking out Google’s Keyword Planner to see what phrases your potential customers are searching for, can help. Don’t jump on the bandwagon of intentionally misspelling domain names as it makes it difficult to identify your website through word of mouth.
- Brand identity: Keep your logo and typography simple and scalable so it looks good at all sizes.
- Disruptive business model: Think of novel ways to monetize your product, and if you can, make it free to the end user. This can include advertising, products (your own or affiliate marketing), subscription (freemium) etc.
- Disruptive marketing model: Identify your target market, and think of novel ways to access them directly. This can include SEO, CPC adverts (search engine, social media, website), content (distributed by social media, blogs, email) etc.
- Competitor analysis: Use Google’s Keyword Planner to identify 10-15 of the most popular search phrases in your niche. List the competitors who appear naturally and who advertise on these searches and note their position and price.
- Market analysis: Take note of any industry trends and barriers to entry.
- Other: Register company, Copyright/Trademark/Patent etc
5. Build Your MVP
Once you’ve researched, proven and planned the core aspects of your business, it’s time to execute them with a Minimum Viable Product: a cheap and quick to produce prototype with only 1 or 2 core features necessary to satisfy early adopters. I would strongly advise any development to be undertaken in-house. From here, you should run a Lean Pilot Program: a multi-cycle feedback and iteration program run around a handful of early adopters, possibly captured during problem validation, with the goal of tailoring your product to solve the problem your pilot group is facing. Ideally, you want to charge early adopters to prove to future investors, and yourself, that people will pay for your product.
6. Build Your Team
If you’re a sole founder, or are without a CTO, now you’ve captured some traction, it’s time to build your team. Having team members with relevant industry experience is key for investability, emotional support, idea formulation, and most importantly, motivation/momentum. Use LinkedIn to search for your competitor’s previous employees and organise meetings. Best-case scenario: you find a team member. Worse case scenario: you gain a contact and valuable insight into your niche.
7. Connect With Angels
Your idea is now likely to be attractive to angel investors. Put together a thorough and well-structured pitch deck and business plan, and reach out to investors in your network and online. Google, Twitter and LinkedIn are great resources. Keep it simple: your message should have a personalised hook (e.g. I see you like X band, I’ve been to one of their concerts!), a personal bio, a product summary, and a meeting request.
At this point, research SEIS, short for Seed Enterprise Investment Scheme, a government scheme that offers tax reliefs to investors who buy shares in your company, pitch to investors, and raise your seed round!