By Jamie Pride
Startups are the new black. Approximately three startups are founded every minute. More than $50 billion in venture funding is invested in startups every year.
But nine out of ten startups will fail within three years of being founded. Not great odds. So why do founders keep at it?
A great startup can change the world. The device you are reading this article on now was made by a company that was once a startup. Almost every aspect of our world has been enhanced by technology and the startups behind that technology.
One of the most amazing things about startups is that there is a fairly low barrier to entry – almost anyone with an idea can found a startup. That is both a good thing and a bad thing. It’s great because it democratises the business landscape. It’s bad because a lot of founders start their business without a roadmap to guide them.
Scratch an itch
I believe a successful startup starts with the problem you are solving – and more importantly how you, as the founder connects with that problem. You need to have an authentic connection to the problem you are trying to solve. You need to be “scratching an itch” for yourself – meaning that you passionately care about the problem and want to solve it for yourself and others.
Founders who are genuinely connected to their problems have a level of passion and commitment that will get them through the tough times. And there will be tough times. If you care deeply about the problem, then you are less likely to cut and run when the chips are down, and you most likely have greater empathy for the customers you are trying to solve the problem for.
If you are just starting out, I suggest you take your time here. I often get approached by founders who are considering multiple ideas. My advice would be to pick the idea you care the most about – not the one you think you will make the most money out of. This may seem counter-intuitive – but you will spend an inordinate amount of time working on your startup. There is a statistical likelihood that you will fail.
Comedian Jim Carrey once said, “You can just as easily fail at what you don’t love – so you might as well do what you love.”
Don’t build a company
My second piece of advice in building a successful technology startup is to not build a company. Don’t panic. Of course you will have a company. However, your initial focus needs to be on your value proposition and business model. By thinking about and articulating your value proposition, you will focus your energies, define what problem you are solving, who you are solving it for, and how you are solving it.
An example of a value proposition statement could be:
Our ride-sharing service helps the mass market, who want to travel from A to B, by reducing the pain of owning a car and dealing with terrible taxi drivers, and increasing the convenience and quality of service, unlike regular taxi cabs.
This may seem self-evident. However, I see many startups without a clear value proposition or business model. Spend a disproportionate amount of time working through this. It will save you time and money in the future.
Now, I said don’t build a company. A startup can defined as a temporary organisation in search of a scaleable, repeatable, profitable business model. You search for that business model by building a minimum viable product and running experiments in the market with customers.
That means getting out of the building, speaking to prospective customers, understanding their needs and putting product prototypes in their hands to see how they respond. Adjusting course along the way.
It doesn’t mean hiring a head of HR, creating company policies, and leasing grand offices. You can do all of that once your startup has product/market fit and customers a beating a path to your door asking you to take their money.
Until then, most of your experiments can be run cheaply and quickly. Stay light and nimble. It will mean that any funding you do have goes further and you get more runway (time) to find a workable business model for your idea.
Jamie Pride is a serial entrepreneur and VC on a mission to help build better founders and a better VC ecosystem to support them. He is the Managing Partner of Phi Digital Ventures, and the cofounder of The Founder Circle, a NFP focused on improving founder mental health and wellness. His new book, Unicorn Tears: Why Startups Fail & How To Avoid it (Wiley) is now available.