Now is a great time to start a tech venture. The cost of rolling out a new business has never been lower – it only takes a few hundred dollars to incorporate a Limited Liability Corp (LLC) online, create your website, use social media to get attention, and you are in business. In the early Dot Com days, it would have cost a million dollars to get this far.
On the other hand, everyone is doing it today, so that means more competition, and the markets and technologies are changing faster than ever before. Thus you have to do your homework to stay ahead of the crowd. Those that do it right also have the unprecedented opportunity to join the elite ranks of 250 unicorns (relatively new companies with a current valuation of over $1 billion).
Even the homework is easier, with free and online access to more business assistance sources, market data, investors, and competitor details around the world. Yet, as an angel investor myself, I can attest that many potential entrepreneurs try to take shortcuts or ignore the realities of business. To avoid these errors, I suggest the following sequence of startup preparation steps:
- Create a business entity early to isolate business efforts. To reduce your legal risk and tax liabilities, avoid co-mingling personal and business funds. For little cost and time, you can use online tools to set up your business as an LLC or C corporation, which will serve you well in signing partners, intellectual property, investors, and revenue. Get a tax ID (EIN) from the IRS and open a business bank account early in the process.
- Prepare a pitch deck to organize and share your plan. Advisors and investors need to see your whole story in as few as ten slides. Make sure you cover not only your solution, but also the opportunity size, competitors, financial projections, and team qualifications. A full business plan and financial forecast can come later to add details.
- Validate your solution with a prototype and real customers. Ideas are not enough to gauge business potential. You need something real that investors and customers can touch and feel. Most investors expect a minimum viable product (MVP) sold to at least one customer. Investment before that time typically will come from you, friends, or family.
- Build a following and start a brand through social media. Before investing critical time and money, get customer advocacy and feedback so you can pivot your business if needed, setting it up for the best odds of success. You can do this by using the major social media platforms, including Facebook, Twitter, and Instagram, which allow you to reach millions of customers around the world quickly and at virtually no cost.
- Participate in networking platforms and events for support. You need to recruit advisors, key partners, and cofounders well before approaching investors. In addition to local business meetings, this can now be done online through startup matchmaking sites, including CoFoundersLab and LinkedIn.
- Build a quality team to complement your skills. Building and running a business is not a solo task. Technical entrepreneurs need to surround themselves with people who have the financial, marketing, and operational experience in managing a business. A good team will likely consist of a mix of remote employees, freelancers, and contractors.
- Find investors through online platforms and crowdfunding. To get funding, you’ll typically start with local investors acquired through warm introductions from friends and peers. Next, try approaching professional investors through online portals including Gust and AngelList. Another new online investor source is crowdfunding, with sites like Indiegogo and Kickstarter.
- Execute a pilot rollout before attempting to scale globally. A local pilot is a necessary move to test your operational, manufacturing, and marketing assumptions. Early pivots can be implemented during this phase at relatively low cost. Also, global scaling will likely require additional investors who will demand to see real revenue and customer demand.
With these steps, you don’t need a rich uncle or a benefactor in Silicon Valley to start your own business and keep ahead of the crowd. The resources online are tremendous if used correctly, and even small startups can have the same global reach as the big guys. The challenge is to do it right the from the beginning since time is of the essence in our culture of rapid change. That also means you need to get started today.