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30 January 2013

10 Steps to Startup (or more)

Today I attended a session by Matthew Draycott (@DraycottMC) about how to start your own startup. I know, there are hell lot of entrepreneurial seminars, books and real-TV shows (Matt called Dragon's Den entrepreneurial pornography, because it has nothing to do with real life). Well, I was saying that I wasn't expecting much from the session, but that fact is, I found it very good and inspiring, so I wanted to share the main points of it here.

The first thing he said, is that unlike many other people, he finds recession a good opportunity for starting a business, it learns you how to start a learn startup, than can survive hard moments later on.

Now here are the steps:
  1. Research: You need to be an expert in your niche, and you need to research the following three things: Your customers, competitors and collaborators. Customers can be your best friends or worst enemies, and to sell your product you have to convince your customers why you are better than your competitors not why your competitors such. You still can learn from your competitors mistakes though. You need to ask "Who, what, where, when, why and how" about them, and keep a database of all them. A database can be your calendar, address book, twitter lists, but it has to be there.
  2. Business Model: He stressed that it is better seen as business model and business plan. Because market changes more quickly than you expect, so you need a model that is agile enough and can embrace those changes than a fixed plan. He referred to Alexander Osterwalder here, and his books about business models.
  3. Value: You need to create a value to your customers, and there are three pillars of value: Newsness (think of what makes iPhone 4S buys iPhone 5 ones it is out), Performance (think how Google Search just works as it promises to do) and a Brand (think of those people who pay £400 in a Johnny Cupcakes t-shirts, although they might cost few quids just because they like the brand and collect those tees).
  4. Channel: A business without a channel is just an idea. How are you connected to your customers? The channel can define your value:
    • Personal Assistance: Your value comes from knowing everything about your customers, they might be just few ones then, but you just know them that you can build custom products or services for them.
    • Self service: A lot of business nowadays, especially retails, are moving to make customers service themselves, cashiers are being replaced with machines. So, in this case, your value is to make people do their shopping quickly.
    • Co-creation: Your value is to sell your customers tools to build their products rather than selling the product itself. Think of 3d printing, Apple's app store from the developers point of view.
    • Automated Service: This sounded like Self service to me, couldn't get the difference.
  5. Revenue and Pricing: You need revenue to sustain as a person and as a startup as well, so be brave to step away when your business comes out not to generate a decent amount of money. As for the pricing, there are strategies for how to price your product:
    • Cost plus: Just add some margin to your cost
    • Skimming: You know there is a niche to buy what you make no matter what, so price based on that, to cover your cost, R&D, etc. Again, think of an iPhone.
    • Loss leaders: Be the cheapest ever. Think of Pound Land (now there is even 99P), but this is very risky strategy, and you cannot compete on prices all the time, and even worse, once people take you for that price, it is harder to raise your prices again to meet any future expenses
    • Penetration: Not below market value as Loss leaders, but below top market value. Think of LG to Sony, or Kia to Honda.
    • Freemium: Think of drug dealers, give you something for free, wait for you to get attached, then sell you more stuff. Play a game for free, but pay to download next level. 
  6. Resources: Know where to find them.
  7. Partners: No one can start a business on his own. 
  8. Break the model: Now after creating your model, you need to test it. Compare your assumption from the model to data from your research. And fee free to adapt the model.
  9. MVP: Minimum (start small, and keep it simple), Viable (Be cheap when it comes to your initial investment) and Product (Have your product ready). If you are into software development, think of it as Torvalds' "release early, release often". 
  10. Evaluate: Put your mode in the wild and test it. Look for criticism, because most of your friends, family and acquaintance are usually too decent to give you real criticism.
  11. Pivot or Persevere: Basically, if market reaction is negative pivot, if positive persevere. Yet, this is something you can only learn by experience from as much success as well as even more failures.
  12. Execute: Well, I am not live-blogging here, so I might have already explained some stuff in previous points.
  13. Scale: Always keep in mind that your aim is to grow. You don't need to be as big as Google or Microsoft, but just grow, and remember, cash is what keeps your business ticking, or capital is your new king.
  14. Repeat: If it is successful, do it again. But remember, market changes so copy your previous successes might not always succeed.
One final note, the session was way more useful and interesting than this post, and some points here might be more or less how I understod them not how they actually are, but I tried to summarise it for my own self. And here are the slides for Matt's presentation.