Starting a startup isn’t easy, and first-time entrepreneurs may feel like there is so much to do and be confused on where to start. In this post, Rajesh Setty shares the 7 key ingredients entrepreneurs need for a successful startup.
Rajesh Setty is a serial entrepreneur, author and speaker based in Silicon Valley. His latest startups include Audvisor, WittyParrot and MentorCloud. His latest book is called Gratitude. He maintains a blog with more than 1900 articles and a collection of tweetworthy insights. Rajesh is also a Mentor for the San Francisco Founder Institute.
The article "Seven Core Elements of Your First Startup" originally appeared on Rajesh's blog. It has been republished below with permission.
Your first startup is special for you and everyone else in your team. It is hard work in whatever way you look at it. I am not suggesting that this article will provide a full recipe for cooking up your first startup. That is not the intention. If after you read this, you will discover ONE or TWO things that you will pay attention to beyond whatever else you are doing, I have done my job.
So, without further ado, here are the 7 elements from my book:
1. Purpose
It seems like the Purpose question by saying you’re going to make a dent in the universe, change the world in some way. However, nobody is going to believe you and your startup will be dead on arrival (especially if you are a first-time entrepreneur). However, you start with an aim of changing the world for better for a reasonably large number of people in a particular niche.
For example, the following pitch will be a suspect:
We build productivity tools to save time for anyone using email.
A better pitch will be:
We build email tools to help busy salespeople become more responsive.
Make your startup purpose believable to the external world and keep upgrading it internally.
Ultimately, you should upgrade to the final version of your way to make it a truly world-changing cause.
The purpose in general answers the Why question. Simon Sinek who wrote the book “Start With Why” explains the power of Why brilliantly when he talks about Apple (today the world’s most valuable company) on their quest to always challenge the status quo and how they do it is by building awesome products. The key for Apple is the why – challenging the status quo. Insanely great products are a derivative of the Why.
Find Your Why as soon as possible as that’s the foundation for your startup.
2. Product
A product is a really good one that, once exposed, will be missed by the target market in their past.
Let me explain.
Let’s assume that you built an email productivity tool for salespeople. You showcase that product to a salesperson (one person out of your target market) and the moment the person experiences your product, he or she starts thinking how cool his or her life would have been if they had this product a few years ago – they start missing your product in their past.
A great product is one that’s missed by the target audience in their past
Nobody will miss your product in their past if it does not solve a REAL problem.
Most startups, unfortunately, have a solution that is waiting for a problem.
But your startup doesn’t have to be facing that problem. As Phil Libin, says, your quest has to be sufficiently epic. Why spend precious years of your life on something less than that?
And, last but most important, know that:
- It takes an insane amount of hard work to “stand out” when you have a good product.
- It takes an insane amount of hard work AND luck to “stand out” when you have a lame product.
3. People
After why (purpose) and what (product), next comes the who – the actual doers of taking the what (product) to realize the why (purpose) over a period of time.
Without the right people on your side, your dream will remain a dream.
Apart from being competent people in the right domains (it’s people 101 right there), you and your team members have to be 10 out of 10 on the following:
3.1 Passion Factor:
How do you know the core founding team is passionate about what they are doing? Well, you know it because you will be doing what you are doing for the right reasons – especially you will be engaged in it NOT for money but because you truly believe that what you are doing will be world-changing.
3.2 Persuasion Factor:
This is more important than ever because to take your company to the next level, you will not want help but you will NEED help. There is no other way. Real significant help will come from really smart people and you will need to persuade those people to come and join your cause. Tricks won’t help here as who you are persuading ARE smart people and they will see through your tricks. So, what’s the other option? It is to build real long-term relationships with the ecosystem you are building long before you need to persuade them to come and join your cause.
3.3 Persistence Factor:
You don’t need a lot of persistence if the plans in your head happily get translated successful in reality. You and I know that is rarely the case. Your plans are hatched in your head and you can never map the terrain and the reactions of the associated players in the real-life situation. So, plans need to be changed often and unless you have the right level of persistence, you will simply get frustrated and after repeated attempts, you will give up and move on.
4. Perfect Timing:
The best thinking about startup timing that I have heard is from my friend Phil Libin (founder and CEO of Evernote). It is as follows:
Startup Timing: Wait until the world changes so that an important problem goes from impossible to just really hard, then execute.
Phil talks about the timing for Evernote – smart phones on the rise, networks are ubiquitous, storage is cheap and more created a perfect opportunity to build Evernote.
It is easy to dismiss the timing argument with luck. You do that when others get their timing right – Yeah, they were at the right time at the right place. Sadly, that kind of attitude is detrimental in the long run because you shun the responsibility to design and craft a solution that leads to perfect timing.
Right now, assume that you can design for perfect timing. That will force you to think through what Phil brilliantly explains above:
- what was impossible before
- how has the world changed to make that something impossible to extremely hard
- how can you assemble a team of people to take advantage of THAT opportunity.
5. Partnerships
The right partnerships are amplifiers of your mutual capacity.
Your partnerships can extend your influence and/or enhance your ability to fulfill your promise and/or stretch the rewards and/or shorten the time to your goals and more.
No startup is an island and no startup can succeed as an island. it requires a super solid ecosystem to become super solid as a company.
Partnerships are harder to build than you can imagine. Why? Because the “good” partners are always busy because a LOT of companies are reaching out to them so that they can benefit from their ‘goodness.” On the other hand “not-so-good” partners are ready and willing to listen to you but succeeding in building a partnership with them is useless (and actually can be an opportunity cost) as finally it will lead to a “not-so-good” outcome.
Long story short – no partnership can give you a free pass, especially in the early stages as it requires a BIG investment from both sides to make this WORK. But it’s all worth it because the outcomes will be good for both parties.
6. Profitability
Profit in its simplest sense is revenues minus costs. So, if you are generating more revenues than it costs to deliver the promises associated with these revenues, you are already doing good.
However, it’s not that simple in the real world because you keep getting conflicting advice throughout the journey about your priorities. One person might tell you that you should not worry about revenues and profits until you get adoption and critical mass while another person might tell you that you should never lose sight of revenues and profits.
What should you do?
Well, it depends on what kind of a company you are building and what resources you have to get there.
If you are building a company that requires a massive user base and later you can monetize them, you need to start thinking about a PATH to profitability all the time. You also need backers (mainly investors) who believe that your team will be able to pull this off in the long run and willing to bet on that journey by funding you.
If you are not building the above kind of company, you better know how to reach profitability NOW.
7. Preparation
Startups always look simple from outside. First startups are insanely hard if you are not prepared for the journey that is involved.
It seems like there is a dilemma here.
How can you get experience in a startup until you are in one of them?
It seems like an impossible requirement.
Actually, it’s not. You don’t have to wait for your own startup to gain experience in a startup. If you are wantrepreneur, right now there are at least a dozen startups around you who are looking for a helping hand. They may not be able to “pay” you but for sure they will trade “experience” for your “contributions.”
Really, there are enough opportunities everywhere for you to get your hands dirty. Here is a bonus – If you are helping any other startups in your own quest to build your own skills, you will win twice – once via building your skills in a not-so-sandbox environment and twice by accumulating good karma. Both will go a long way in your quest to build a world-changing startup.
