How to build a successful start-up
The goal of a founder who wants to create a big company is to find product/market fit in a large market – one that is at least £0.5B/$0.75B in size. Much smaller than that and a venture investors won’t be confident that he or she will get 10x on their investment (and note that it doesn’t matter at which stage you’re working, as if an early stage investor like us, we need to believe that we will be able to sell you onto a Series A/B investor who also has to believe he or she can get 10x and so on). It’s not right all the time, but it’s a rule of thumb.
The Lean methodology, thought up by Eric Ries and then evolved by many others, is the best way to work through the early stages to product/market fit.
We like Running Lean by Ash Maurya for a clear outline of what this entails:
What Ash excludes from his thinking is in-depth customer observations, as developed by IDEO, the design firm founded by David Kelley in Palo Alto, right next door to Stanford University, my alma mater, and a clear definition of “strategy” for the start-up.
(Overly) Simply put, we think a founder needs to take the following steps:
- Generate an idea (but remember that it’s worthless)
- In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users”
- Document your Plan A
- Identify the riskiest parts of your plan
- Systematically test your plan
- Get to Release 1.0
- Reach product/market fit
- Define your strategy (Goals, Scope, Competitive Advantage, Logic)
I will write a barebones explanation for each of these 9 steps with as many links and references as I can so you can read better writers’ thoughts on the subject.
And please note that at some point on this journey you need to find a co-founder. It’s pretty rare for a solo founder to manage it all on his or her own. It happens, but it’s rare. I’ll write about that as an additional point 10:
10. How to do the co-founder thing
And the last thing that you absolutely need is a great culture.
11. What is a great culture?
1. Generate an idea
Ideas aren’t worth much, if anything. Awesome execution of an awesome idea is worth a lot. But you have to start with the idea and then get executing (and iterating) fast. Remember that ideas can be stolen, but execution and passion can’t.
Where do ideas come from? The best ideas tend to come from in depth experience in a market/field*, but they can come from careful observation of a market/field you are familiar with, but not an expert in. Lots of travel sites were started by casual travelers – not expert travel agents. Plenty of great ideas come out of research labs at universities (there’s a site called Google….).
What should you do with your idea? Don’t hide it in a cupboard in your mind. Talk to people, especially potential customers, other entrepreneurs and investors about it. They won’t steal it. They’re already too busy. But they will tell you about others doing something similar, others who have tried to do it in the past and all sorts of other useful stuff. Potential customers will help validate that the idea has value. We’ll get into that in more detail below, as it’s the most important activity you need to do with your new idea. If you can’t find the beginnings of a market for your idea, there’s probably no market for it. Can it and move on.
Thanks to Peter Thiel and Tom Hulme for the above cleverness
Keep in mind that there may be a gap in the market, but make you ask yourself: is there a market in the gap?
Other useful sources on idea generation:
Chris Dixon: http://cdixon.org/2013/08/04/the-idea-maze/
*A study (A Garage and an Idea) by Pino Audia & Chris Rider at Haas School of Business showed that 91% of startups are related to founders prior expe