Note: This article is from 2014. It’s a little bit out of date now. There’s a updated version for 2017 over on the SuperHi blog here:
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.
For 6 years of my professional life, I worked only at startups. I saw myself as “the coder” — the guy that the brave hired to turn their ideas into real businesses. I never had the inclination to start my own… why would I risk a fairly comfortable life to pursue an idea that may not work?
But then two years ago, I dived headfirst into running a startup — a code school in London — without really knowing what would happen. It was a fascinating, stressful and occasionally scary journey. In a few weeks time, I’ll be doing it all over again with a brand new startup.
I am not a startup expert and I don’t think anyone is as everyone’s startup experiences are different. However, there are a lot of people who are new to both startups and the tech scene, and I’ve put this guide together for anyone who might be 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 you don’t need a business model. Imagine running a cake shop that gave away free samples but had nothing customers could pay for? Putting adverts on the wall wouldn’t save your bakery.
Tech businesses can get away with this as they have the one thing most industries don’t: scale. The internet gives tech businesses an opportunity to reach potential customers thousands of miles away from their base.
However this can be an illusion. If your business plan is based around having millions of users that don’t pay for things (or “eyeballs” as it’s called), there’s generally 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 slowly struggle and spend all your money. The first option is a lot less likely to happen than the second. For some startups, it might be worth pouring your money into buying lottery tickets — it’s a lot quicker, less painful and has more chance of making your money back.
There’s a balance to achieve with your market. Too niche 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 or at least be comfortable with the fact you’ll be spending at least a year with that idea. If you’re not comfortable being Mr Baby Product Shop or Ms Taxi Hiring Service, reconsider your idea.
Don’t keep your idea to yourself.
It’s tempting once you have your idea to keep it to yourself. Other people might steal it, but if you’re not confident in your idea or that you can assemble the best team to execute the idea, then maybe that idea isn’t right.
I don’t expect you to tweet your idea but 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.
When I was freelance, I refused to sign NDAs as it could possibly affect any future work that I may get.
Let’s say you NDA everyone so they can’t even talk about it and you launch without your idea leaking, what is to stop someone seeing your idea and making a better version? Google was not the first search engine and Facebook was not the first social network. Your startup needs to be the best-in-class, not the first to market.
There is one great piece of advice in Tim Ferriss’s Four Hour Work Week which is to validate ideas by using Google Adwords. Set up a simple one-page site, check how many visitors it gets through Google Adwords and see how many of them sign up to a mailing list or click through to a fake buy page. It’s a quick, cheap way to see if people are interested in what you’re doing.
The first idea probably won’t be your final idea.
A lot of successful companies start out as different ideas. For example, Flickr was originally a photo-sharing chat room for gamers and on the extreme end of the scale, Nokia was originally a paper mill in Finland. My first startup was originally a careers advice website that mutated into a code school when we realised we couldn’t survive with the original business model. It’s common to change direction. Again, it comes down to what problem you’re trying to solve.
Naming your baby.
Naming things is hard — children, cats, dogs, plants — but naming a startup is particularly difficult. With web domains in ever shorter supply, the current process seems to be (1) think of a great name (2) check iwantmyname.com (3) see that all the best domains are taken (4) go back to step 1.
Make sure that your customers can spell your startup within 3 tries (think Led Zeppelin or The Beatles) and if possible, it’s worth getting the .com version at the start if it’s cheap enough as domain sellers may put the price up further once you become successful.
Once you have an idea, the next thing to do is sketch everything. If you’re making a site, draw all of the pages, and if you’re making an app, draw all the screens. Don’t skip any interaction — if you have a link or a button, what happens when you click it? Draw that too.
This process gets the idea out of your head and on to paper. It also helps anyone else working with you, be it co-founder, investor, designer or developer, understand what you’re creating. For co-founders, it means that you can come to a consensus about what the idea is. For investors, they can picture what they’re giving you money for. For designers and developers, sketching helps them picture what they need to and how long it will take.
Find co-founders you trust.
People are the important part of your startup. More than your idea. Have an uncommited or irresponsible co-founder and your startup may as well not exist. Good founders know how to pivot and change things when they’re not working. Ideas are worthless and execution is key.
You can do things as a solo founder but it’s harder. Lots of investors don’t like investing in just one person for various reasons but there are examples of going it alone. If you are considering it, make sure you get decent support on the areas you’re weaker on. For example, if you’re a businessperson, find design and tech advisors.
It’s always easier to work with your friends rather than finding someone to be your co-founder. You trust them, you know them and you have faith in their abilities. However, startups will strain even the most solid of friendships. Startups can be stressful and you may take your stress out on the nearest person.
If you and your co-founders do the same role — for example, you’re all businesspeople or all designers or all developers—then you have to make your roles very clearly defined in the business. If you don’t then you will fall out because one of you won’t want to do the shitty work that needs doing.
Co-founder fallouts are more common than most people realise. I left my first startup for that reason— it happens and you all just have to move on. There’s two very good articles on Mark Suster’s blog Both Sides of the Table on The Co-Founder Mythology and The Perils of Founder Fighting. Read them both.
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. I generally didn’t know the person asking so I always said no.
Coders can be arrogant and they believe that they can build the whole idea on their own. Which is true… to a point. Coding the idea is only a tiny part of doing a startup, there’s design, sales, marketing, admin and plenty more. But at the moment, you need them more than they need you.
How do you differentiate yourself from other “idea people”? First is do a lot of homework. Do lots of research, draw sketches, get branding done, anything that a developer doesn’t do.
Secondly, learn some skills to sell yourself to developers. Learning the basics of design and/or coding, so that you know what you’re talking about. You wouldn’t start a cake shop if you didn’t know how to cook — same thing applies to starting a tech company.
How to find investors.
You need a “runway” — the amount of time you need from starting your startup to it being profitable. This is going to be an estimate as most startups never lift off the runway. Your runway probably will be at least twice as long as you first predict so raise money accordingly. It’s easier and time-saving to do one big raise than several small ones.
Raising money will also take a lot longer than you plan too. I’ve heard of startups taking a year to raise a round of money. Prepare for the worst.
The best investors are advisors with money. What sort of investors will depend on what you’re creating. If you’re creating a tech product in a particular area, you can look for tech investors and investors in that particular area too.
For early-stage startups, you will be looking to raise seed investment. Don’t bother trying the bigger companies like Index and Balderton just yet. For instance, in London, investors like Passion Capital are great for early-stage investors (disclaimer: I’ve freelanced at companies funded by Passion).
How much to raise again depends on your runway, your investors and also tax schemes. In the UK, look into SEIS and EIS as investors will probably want these tax breaks as incentives for themselves. A finger-in-the-air figure for an average early-stage raise would be between £150k and £300k as 3–5 employees plus operational costs can be expensive (see next section for more on this).
As always, talk to people who’ve done it. Make contacts at startups who can advise you and talk you through the stages.
There are many ways to create a cat.
There are a lot of different ways to build your tech startup if you’re not technologically skilled enough to do it yourself. 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.
Agencies survive on getting things out of the door. You will be one of many companies in their queue and their aim is to get you out of the door as quickly as possible. Agencies are also going to be the most expensive out of the options.
I used to teach a 5 day long Ruby on Rails course. On the course’s last 2 days, I taught how to create a marketplace site where people could place ads and others pay for it. Think like AirBnb, Etsy and eBay. I anonymously contacted a few London agencies about how much they’d charge for all the features we do on the project. Three agencies replied and I received quotes between £35,000 and £60,000 (around $100k or €75k). Now, these figure were for a project I showed beginner coders how to make in 2 days. That version wasn’t all bells and whistles version but it wasn’t far off a minimum viable product.
Once you’re out of the door with most agencies, that’s it, no more help unless you’re on an expensive retainer. I’ve heard of horror stories of agencies charging £10,000+ a month in retainer fees.
Freelancers are a way better option than agencies. They’ll be cheaper, care more and be a lot more receptive to you. Rough quotes for the project I mentioned earlier from freelancers were between £8,000 and £25,000 ($40k, €30k). They will also be more likely to have the flexibility to help you out longer term if you need them.
Last, and definitely not least, are full time staff. They’re the hardest to find out of the options but probably 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). Salaries vary widely on location and experience.
There’s also equity (shares in your company) to consider too. Most equity vests (gets given) over a couple of years — i.e. the staff member gets it based on how long they stay or if the company is sold. How much to give depends on a lot of things, how old the business is, how qualified that staff member is, how much money you’ve raised. There’s a great guide to stock and equity in tech startups here.
Find good people.
Why would I want to work at your shitty startup? Okay, I am being facetious but the point still stands.
When someone works for a startup, they’re giving up a lot of stability and possibly pay to work there. However, good people are not solely motivated by money, otherwise everyone would be working at banks and management consultants. Good people want to be part of a cause and a belief that what they’re doing will make an impact. It’s your job to convince them that your startup is going to 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. For instance, in London there are events like Silicon Drinkabout. You may not find your staff there but you may find someone who knows others looking for opportunities.
Another way is to advertise. Sites like techjobsin.london (disclaimer: I created this site), WorkInStartups, Hacker Jobs, Smashing Magazine Jobs and Authentic Jobs are great places to find good staff.
Startup job fairs can be great — I met a previous employee at Silicon Milkroundabout — but if you do exhibit, make a big effort. Don’t just turn up with those awful banner stands. Stand out to get attention away from every other startup there. Be honest with the attendees though, they will appreciate it if you say that you don’t know what you’re doing over pretending you do and finding 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 of the site but the whole user experience.
If you’re not planning to hire a designer, I would definitely suggest getting a freelancer to create a brand identity for you. Having a strong brand is essential to make it successful in a crowded market. There are only a couple of tech companies I can think of that don’t have strong brands — Craigslist probably being the main one. Everything else has a memorable brand.
I would advise against using something cheap like 99designs. Pay peanuts, get badly-kerned logo. Suggest trying 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 scrutinise everything about your site. Make sure everything works as simply and flawlessly as possible for your users. Use services like UserTesting to check your prototype when you have one.
First versions of products always have a tendency to be too complicated. Be very wary of adding more and more features. Keep it as minimal as possible. Read (or re-read) The Lean Startup by Eric Ries.
As an example, at my previous startup, we launched with 7 different courses, including 4 that competed against each other. We quickly learnt that customers were getting confused between the difference so trimmed it down to just 2 courses which sold far better than having 7. Keeping it simple works. 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 if you change one thing at a time rather than releasing several at the same time.
Use services like UserTesting, Optimizely, Olark, Intercom, GoSquared, Mixpanel and KissMetrics to test, talk and analyse your customers. The more data you have, the more accurate you can be in your decision making.
Sales and marketing are key.
Unless you or a co-founder is well known in your industry, your launch will be a quiet one. The opposite of “build it and they will come”. 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 isn’t much to do with sales or marketing directly but it will help you write better 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.
- 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 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 that ego!
- 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.
Startups are like ducks
My mum works as a counsellor and she always says is that no matter how calm and relaxed a person might seem on the outside, underneath there’s a likelihood that they’re a panicked mess. 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 think that you’re the only business in the world where everything is uncontrolled and falling apart. Welcome to startup life. These feelings are completely normal. Every other startup founder feels like this too. How you deal with it to the outside world is what matters.
The best companies make it look completely stress-free when they’re not. Try reading Hatching Twitter by Nick Bilton for proof that the most successful startups can still be full of in-fighting and dysfunction.
A great podcast on starting a new business is Startup by Alex Blumberg — it’s something that I look forward to each week and it’s recommended listening for anyone wanting to start a business.
“Launching a startup is like taking the brakes off your car when setting off on a long journey”
The launch is just the start. Keep going. Keep iterating. Try out features. Change the design. Talk to your customers. 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. 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 it could be in a huge way, but with a startup, you have a potential to change the way that people live their lives.
Want to run your startup idea past me? Email me at firstname.lastname@example.org or tweet at @riklomas.
My new startup is called SuperHi! Sign up for it at http://www.superhi.com.