Budding founders on the path of entrepreneurship are more likely to create successful startups if they keep a few key ideas in mind, according to Matthew MacFarlane, investment director of Yuuwa Venture Capital.
Matthew MacFarlane will speak at the forthcoming Perth Founder Institute event, Startup Funding 101: How to Work With an Investor.
Below are MacFarlane’s four tips on how entrepreneurs can develop good startup ideas, as described by Rose Powell in an article on StartupSmart titled Top four tips from a venture capitalist on how to develop a good start-up idea.
Commercialization and customer understanding before product
A prevalent quandary startups struggle with is conceiving a viable business model around a preexisting product. MacFarlane says that founders should not build anything before establishing how it will make money.
The biggest challenge for many startups ideas is people are more focused on the product than the commercial potential. They’re excited about how cool the technology is but haven’t worked out how it’s actually ever going to make money.” - Matthew MacFarlane
Make sure your potential customers actually care and maybe even cry
Founders should go a step beyond merely asking what their potential customers want, and determine if customers would cry if a product or service was taken away. A definitive demand for a product or service needs to be ascertained prior to effectuating a business model.
You need to know how badly do customers need what you’re offering so you can work out what would they pay for it. The more likely they’ll cry, the more they’ll pay. You need to aim to create something where if you told them your service was shutting down, there should be an outcry.”
Go to a Startup Weekend if you’ve never developed an idea into a product before
Startup Weekends are propitious for growing startup ecosystems, and product developers have found them immensely helpful.
One of the absolutely best ways of learning how to start-up is go to a Startup Weekend. Because in two days of your life, you realise exactly what steps a startup needs to go through to take an idea to execution.”
Don’t avoid the emotional stuff
Co-founders who don’t resolve personal issues and clearly delineate the division of responsibilities run the risk of encountering obstacles in the future. Getting tough conversations about roles and equity out of the way prior to any startup endeavor is crucial.
The other challenge that is relevant for all entrepreneurs is the issue of co-founders and sorting that out early. People tend to ignore this because it’s emotive and touchy feely, but when you do, it almost always causes problems.”