January 31st 2017
Startups are emotional roller coasters that one minute make you feel like you’re changing the world and the next minute, that everything is falling apart. This guide about how to start a startup may help.
This is an update on my previous article I wrote back in 2014. Nearly three years have passed since the article and I wanted to update and give better, more up-to-date advice.
For 6 years, I worked solely at startups. My role was “the coder” — the person the brave hired to turn ideas into "real" businesses. I never had the inclination to start my own because why would I risk a comfortable life to pursue an idea that may not work?
Then 4 years ago, I dived into the deep-end by founding a startup — a code school teaching 5-day courses in London called Steer. I left Steer over two years ago to start SuperHi.
Before I start, I am not a startup expert. I don’t think anyone is a startup expert as everyone’s startup experiences are different. However, lots of people are new to both startups and to the tech scene, so I put this guide together for anyone interested in dipping their toes into the startup water.
There’s not always money in the banana stand.
The tech industry is the only industry where a business model is optional. Imagine a bakery that gave away freebies and had nothing customers could pay for - would putting adverts on the wall save the bakery? Tech businesses get away with this as they have the one thing other industries don’t: scale. The internet gives businesses the opportunity to reach potential customers worldwide.
My previous startup, Steer, taught classes in a physical classroom in London which meant our customer base was restricted geographically. SuperHi has online courses which means we have students from California to Australia, all due to the internet.
If your business model is based around having millions of users that don’t pay, there’s two things that may happen.
- Number one is that your startup makes it big and everything will be okay.
- Number two is that you’ll struggle and spend all your money. The first option is a lot less likely to happen than the second. For every Facebook, there’s thousands of failed social networks.
There’s a balance to achieve with your market. Too niché and you’re in danger of having too few paying customers, and too broad and you might not be solving a particular problem. Watch Simon Sinek’s TEDx talk about starting with “why?” and think about your idea starting with why you’re doing it.
Be passionate about your idea and be comfortable with the fact you’ll be spending at least a year with your idea. If you’re not comfortable being Mr Learning To Code or Ms Taxi Hiring Service, reconsider. The worst founders only want to be rich and fail because of the lack of a mission.
Don’t keep your idea to yourself.
It’s tempting to keep your idea to yourself. Others may steal your idea, but if you’re not confident in the idea or that you can assemble the best team to execute the idea, then maybe that idea isn’t right for you.
If you’re making freelancers or advisors sign non-disclosure agreements (NDAs) before you tell them your idea, you’re not confident in your idea.
Let’s say everyone signs your NDA and you launch without your idea leaking... what’s stopping someone copying your idea and making a better version? Google was not the first search engine and Facebook was not the first social network.
One of our biggest rivals recently copied what we’re doing with our online course. The first reaction is always "what a bunch of cheeky bastards" but you learn to deal that companies, large and small, will try to copy you.
Your startup needs to be the best-in-class, not the first to market.
Are you going to consistently execute your idea better than anyone else?
Don't make people sign NDAs or I'll hunt you down. Photo by Olu Eletu
The first idea probably won’t be your final idea.
Some successful companies started out as different ideas. Flickr was originally a photo-sharing chat room for gamers, Nintendo sold paper playing cards and Nokia was originally a paper mill in Finland.
My first startup, Steer, was originally a careers advice website that pivoted into a code school when we realised we couldn’t survive with the original business model.
SuperHi’s original plan was to create a code editor for beginners and sell this to other code schools. We spent a year creating the editor but over time we listened to what our customers wanted – we use our editor for lessons but the overall idea for what the business is changed. We’re still trying to solve the same problem – making learning to code easier – but with a different direction.
Naming your startup.
Naming a startup is particularly difficult. With web domains in increasingly shorter supply, the current process seems to be...
- Step 1: think of a great name
- Step 2: check iwantmyname.com
- Step 3: see that all the best domains for that great name are taken
- Step 4: go back to step 1
Make sure that your customers can spell the name within 3 tries (think of Led Zeppelin or The Beatles) and if possible, get the .com version at the start if it’s cheap enough - domain sellers will put the price up further if you become successful.
It doesn't have to be completely obvious where the name comes from - SuperHi is from information superhighway, a nod to the early web (and not smoking anything too strong). Steer came from looking through a thesaurus then checking if there was a good domain available.
Once you have an idea, the next thing to do is sketch everything on paper. Draw every page or screen. Don’t skip any interaction — if you have a link or a button, what happens when you click it? Draw it out.
This process gets the idea out of your head and on to paper. It also helps anyone else working with you understand what you’re creating. For co-founders, it means that you can come to a consensus about what the idea is. For designers and developers, sketching helps them picture what they need to and how long it'll take.
A photo of you, sketching and not skipping any steps. Photo by Green Chameleon Photography
Validating your idea.
How do you actually validate the idea that you’re working on? Customer development.
It’s tempting to believe the hype when it comes to your own idea. Whenever you talk to any potential customers, 80% won't give you critical feedback, because humans like to avoid conflict and are polite. It’s even more tempting to ignore the real, critical feedback the other 20% will give you as "they didn't get it" or "they’re just stupid". Maybe they didn't get it, but if so, your idea may be too complicated or you haven't sold it to them well enough... yet.
Start small with your idea. Don't build anything just yet. Use your sketches to learn what your customer’s problems are — don't tell them the solution, remove your own biases and ego — then using this feedback loop to design a solution that fits their problems.
Be prepared to learn like crazy. Learn as much as you can from your customers so that tomorrow you can execute your idea better than before.
Find co-founders you trust.
People are the important part of your startup. Good founders know how and when to change things if it isn't working. Ideas are worthless. Execution is everything.
You can do things as a solo founder but it’s harder. Some investors don’t like investing in just one person but there are examples (Tumblr, Mint, Alibaba, etc) of how to go it alone. If you are considering it, make sure you get support on areas you’re weaker on. For example, if you’re a businessperson, find design and tech advisors to give honest advice.
I'm a solo founder. I enjoy the dictator-like role of running all parts of the business but it does get tiring and having just one person slows down the progress of the business. It also means that I'm a single point-of-failure.
It’s always easier to work with your friends rather than searching for someone to be your co-founder. You trust them and you have faith in their abilities. However, startups will strain even the most solid of relationships.
If some co-founders do the same role — for example, you’re all businesspeople or all designers or all developers—make your roles very clearly defined. If you all hate doing accounting or chasing up invoices, whose role will that be?
Co-founder fallouts are more common than most realise. I left my first startup due to co-founder fallout. We ended up not being able to agree and falling out every day. It happens and you all move on. There’s two good articles on Mark Suster’s blog Both Sides of the Table on The Co-Founder Mythology and The Perils of Founder Fighting.
How to find a tech co-founder.
When I was freelance, I was asked weekly if I could join a startup as the technical co-founder (CTO). I generally didn’t know the person asking so I always said no. You wouldn't get married to someone you didn't know.
Us coders can be arrogant and they believe that they can build the whole idea on their own but coding the idea is only a tiny part of doing a startup. There’s design, sales, marketing, admin, operations and plenty more. But at the moment, you will need the tech co-founder more than they need you.
How do you differentiate yourself from other “idea people”? Do a lot of homework. Do lots of research, draw sketches, get branding done. Do a business plan. Do anything that a coder doesn't do. Prove yourself.
Secondly, learn some skills to sell yourself to developers. Learning the basics of code and/or design, so that you know what you’re talking about. You wouldn’t start a bakery if you couldn't bake. It doesn't mean you'll be coding the site or app, but the more knowledge of how it works, the more useful you'll be.
How to find investors.
You need a “runway” — the amount of time you need from starting your startup to being profitable. This is going to be an estimate as most startups never lift off the metaphorical runway. Expect this time to be twice as long as you first predict so raise the money accordingly. It’s easier and time-saving to do one big raise than several small ones.
Raising money will also take longer than you plan. Usually it’s between 3-6 months to raise money but I’ve heard it taking a year to raise a small round of money. Prepare for the worst.
There’s also "smart" and "dumb" money. Smart money is from people who have expertise in the sector you’re in or have a good track record of investing in successful startups. Dumb money is people with money but can't or won't help you beyond giving you investment.
For early-stage startups, you will be looking to raise seed investment. Don’t bother trying the bigger companies like Index Ventures and Balderton just yet. For instance, in London, investors like Passion Capital are great for early-stage investors, and in New York, Collaborative Fund.
How much to raise again depends on your runway, your investors and your location. First rounds (also known as a "seed" round) vary between $300k-3m in the US, whereas in the UK, you'd be looking more towards £150-500k (a lot less than the US). US investors tend to accept more risk than UK investors too.
Talk to people who’ve done it. Make contacts at startups who can advise you and talk you through the process of investment.
How to hire the best people.
There are many ways to build your tech startup if you’re not technologically skilled. You can either hire full-time staff, you can hire freelancers or you can outsource it to an agency.
Without stating the obvious, on the giving-a-shit scale, agencies are going to give 0–3 shits out of 10, freelancers 3–8 shits out of 10 and full-time staff are going give 7–10 shits out of 10.
With agencies, you will be one of many projects in their queue and their aim is to get you out of the door as quickly as possible. There’s a common saying that "agencies are only ever two contracts away from closing down". Agencies will be the most expensive option.
I used to teach a 5-day beginner Ruby on Rails course at Steer. On the course’s last 2 days, I taught how to create a marketplace website like AirBnb, Etsy and eBay. I anonymously contacted a few London agencies about how much they’d charge for all the features on the project. Three agencies replied with quotes between £35,000 and £60,000 (around $80k or €75k).
Freelancers are a better option than agencies. They’ll be cheaper, care more and be more receptive. I asked a few freelancers quotes for the marketplace website again and I received quotes between £8,000 and £25,000 ($35k, €30k) - under half of agency prices. Freelancers will also be more likely to have the flexibility to help you out longer term.
Hard working staff. Photo by Ilya Pavlov
The last option is full time staff. They’re the hardest to find out of the options but potentially the cheapest in the long term. They’ll be a big part of your team and really care about what you’re making.
Junior designers in London will cost very roughly £18–30k, senior designers £30–50k, junior developers £20–35k, senior developers £30–60k (where junior means less than 5 years experience).
Junior designer in New York will cost between $40-80k, senior designers $80-150k, junior developers $50-100k, senior developers $100-250k. Notice the huge difference in cost between New York and London salaries. This is one of the reasons US startups have to raise more money.
There’s also equity (shares in your company) to consider. Most equity "vests" which essentially means it gets handed out over a couple of years. The staff member gets it based on how long they stay or if the company is sold. How much equity to give depends on what stage the startup is at, how qualified that staff member is and how much money you’ve raised. There’s a great guide to stock and equity in tech startups here.
How to find good people.
When someone works for a startup, they’re giving up a lot of stability and potentially taking a pay cut to work with you. However, good people are not solely motivated by money, otherwise everyone would be working at banks and being management consultants. Good people want to be part of a mission and a belief that what they’re doing will make an impact. It’s your job to convince them that your startup will make that impact.
The best way to find people is as always by networking. Ask friends or make friends in the tech scene by going to events. Social media, both personal and company accounts, is a good way to find people too. Followers and friends will either be looking themselves or know others who are.
Startup job fairs can be great — I met a previous employee (hi Louise!) at Silicon Milkroundabout — but if you do exhibit, make sure you make a big effort. Don’t just turn up with those awful banner stands. Stand out and get attention. Be honest with the attendees too, they won't appreciate it if you pretend you know what you’re doing and they suss you out later.
Design is as important as development.
A lot of soon-to-be founders ignore a big part of startup process — design. If you look at any popular site or app, you will notice how much effort has gone into not only the branding but the whole user experience too.
If you’re not planning to hire a full-time designer, I would definitely suggest getting a freelancer to create a brand identity for you. A strong brand is essential for standing out in a crowded market. A litmus test of a good logo is can other people draw it from memory?
I would advise against using something cheap like 99designs or Fiverr. Pay peanuts, get badly-kerned logo. Try suggesting a skill-swap with a designer if you can’t afford them.
Next, read up on user experience. Read Don’t Make Me Think by Steve Krug, browse Little Big Details and Siteinspire then scrutinise everything about your site. Make sure everything works as simply and flawlessly as possible for your users. Use services like UserTesting to check out any prototypes.
First versions have a tendency to be too complicated. Be wary of adding more features and keep it as minimal as possible. Read (or re-read) The Lean Startup by Eric Ries.
As an example, at my previous startup, Steer, we launched with 7 courses. Four courses competed against each other and we quickly learned that customers were getting confused. We trimmed them down to just 2 courses which sold far better than having 7. Keeping it simple works.
Even at SuperHi two years after starting, we constantly revise what we’re doing. Do we drop in-person classes? Do we add another class? It’s consistently on our minds.
In the words of Gordon Ramsey, “the more dishes, the lower the standard” – the linked article has great information, even for tech companies.
If you are tempted to add features (and you will get tempted), do it one by one. It’s a lot easier to test if that feature works and is liked if you change one thing at a time rather than releasing several features at the same time.
As an example, we use Intercom for our live chat on the site. Talking with our customers helps us determine when information we’re missing on our site, what’s confusing customers and how we can make our products better. This feedback loop is incredibly important for us.
Sales and marketing are key.
Build it and they won't come. Unless you or a co-founder is well known in your industry, your launch will be a quiet one. The next step is to get your startup’s name out to your audience.
Read the great To Sell is Human by Dan Pink. Look into customer experience and why it matters too.
The Sense of Style by Steven Pinker is another book I recommend highly. It’s a book about clear, concise writing. It isn’t much to do with sales or marketing directly but it will help you write better copy and content for sales and marketing.
Depending on your startup and its industry, different techniques for sales and marketing will and won’t work for you:
- Partnerships with companies whose customers would benefit from your startup. For example, if you’re a e-commerce site for new parents, give discounts to bloggers who write about parenting.
- Internet advertising such as Google Adwords, Facebook ads and Twitter ads. It’s relatively cheap and easy to see what’s working and what isn’t. Spend small amounts per campaign and keep changing your adverts to see what works and what doesn't. You'll be surprised by the results.
- Old-media advertising such as newspapers and radio. This will only work if you want to focus on a particular town or city to begin with. It’s also great for brand awareness but may not convert into sales and customers.
- PR campaigns. I’ve seen many startups make the mistake of using PR campaigns to promote the founders rather than the business itself. Watch the ego. Being in the newspaper may not convert into sales. At Steer, we were featured in a national newspaper but it lead to no extra sales.
- Recommendations are the best form of advertising. If people love what you’re doing, they will tell other people. Focus heavily on customer experience and it will improve the likelihood of them promoting you. You have to make every customer buy in to what you do and be your biggest fan.
The Times Square approach to marketing. Photo by Ferdinand Stöhr
Startups are like ducks
My mum works as a counsellor and she says that no matter how calm or relaxed a person might seem on the outside, there’s a likelihood that they’re a panicked mess on the inside. The duck may seem like it’s sailing smoothly across the water but underneath its little feet are thrashing away wildly, trying to go in a particular direction.
You may feel that you’re the only business where everything is uncontrolled and falling apart. These feelings are completely normal. Welcome to startup life. Every other startup founder feels this. How you deal with it to the outside world is what matters.
The best companies make it look stress-free when it isn't. Try reading Hatching Twitter by Nick Bilton for proof that successful startups can still be full of in-fighting and dysfunction.
Coping with low periods.
I wanted to expand a little more on the feelings of everything falling apart. How do you make sure that you’re mentally okay when you feel like your startup isn't doing well?
- Firstly, have a life outside of your startup. I've seen a lot of founders who end up working 7 days a week, 8am until 11pm, on their startup. This is a recipe for burn-out. Make sure you have at least one day a week off and finish at reasonable hours most days. Work can wait.
- Have a hobby or something that isn't related to your business or industry. Your mind needs to think about something else for a while.
- Talk to friends, family and especially advisors about what you’re feeling. Your friends might not understand the founder lifestyle but your advisors may know exactly the feelings you’re going through and can help you.
- Look after yourself. Exercise and sleep are incredibly important. Don't replace sleep with mountains of coffee.
- If you’re still feeling stressed, try a meditation app like Headspace to help you relax – meditation isn't new-age and hippy, but a wonderful tool to help control your thoughts.
- Push through the low period. It’s hard to say but running a startup is like riding a rollercoaster — there will be intense highs and lows — the next high period could be tomorrow or next month but it will come.
The launch is just the start. Keep going. Keep iterating. Try out features. Change the design. Talk to your customers. Try to enjoy the journey.
Any founder will tell you, startups aren’t meant to be fun. It’s hard, stressful work and you’ll hit a lot of obstacles along the way. One day you might want to pack it all in, the next you’ll totally love it. You might become rich and famous or you might crawl out of the rubble of a failed startup.
Don’t be scared of failure. It’s better to try and fail than never try at all. Many successful founders have had companies shut down before getting the formula right.
I wouldn't class myself as a successful founder. Steer shut down a year or so after I left. No one died and no one became homeless. Your ego may be bruised but you can always get another job if you run out of money. Don’t think it as failure, it’s just a way that didn’t work.
This is your opportunity to make a dent in the world. It could be in a tiny way or a huge way. Getting a thank you email from a customer is one of the best feelings in the world. With a startup, you have a real potential to change the way that people live their lives.
Want to run your startup idea past me? Send me a message and donate to Black Girls Code at 21.co/riklomas.