How to Start a Startup
“Our task today is to find singular ways to create the new things that will make the future not just different, but better…to go from 0 to 1.”
If you haven’t read Peter Thiel’s book, Zero to One, you should stop what you are doing and go do that right now. (disclosure: I am not being paid to recommend this book) Peter Thiel is regarded as one of the world’s foremost thought leaders on startups, technology and innovation. An in-your-face contrarian, he introduces concepts that swim upstream, when all the other fish are going with the current. He thinks this way for good reason. If we, as a human race, don’t continue to build new things and innovate, the world will remain the same as it is today. There wouldn’t be new products or technology, and what you know today will be the same in 100 years. The future doesn’t just come by the passage of time, we have to create it. The creation of new technology is what actually ushers in “the future”.
“In the most minimal sense, the future is simply the set of all moments yet to come. But what makes the future distinctive and important isn’t that it hasn’t happened yet, but rather that it will be a time when the world looks different from today.” Peter Thiel, Zero to One
If you are a fan of the film Back to the Future 2, like this guy, you were probably obsessed with hover boards as a kid (or maybe even as an adult!). The movie wouldn’t have been quite the same if Marty McFly and Doc Brown arrived in the year 2015 and it looked exactly the same as the 1985 they had just left. If we only saw the future date scroll across the screen, but there weren’t flying cars, hover boards or Nike high tops with power laces, it wouldn’t have made for very interesting film content, and certainly wouldn’t have felt like the future. Hollywood’s very representation of what the future looked like was due to the advent of new and innovative technology.
The idea that we can create the future by building new technology is empowering and challenging, all at once. If we don’t start startups, and build new technologies, the future will never arrive. Humans won’t make progress. And the world will remain standing still. The good news is that it is a highly unlikely outcome. As a human race, the dark ages are in the distant past and we have fully embraced our roles in the world as the creators of things. Starting a company, and creating new technologies are in closer reach than ever before. If you’ve been bitten by the entrepreneurial bug, and want to start a startup, that’s great! That’s also just the beginning. If you’re like me, your aspirations to create the future might immediately be followed by the obvious question: how do I do it?
Here are three of the big steps to starting a startup:
1. Think of a good idea. Having an idea for a new iPhone game doesn’t necessarily mean you’ve arrived at a good idea. It also doesn’t mean that your idea is something that the world wants or there’s even a market for. After you’ve brainstormed and you have your idea you need to validate it.As a general rule of thumb, a good product should solve a problem. Ask yourself what the world is missing, and build it. A good litmus test for determining if your startup idea is worth pursuing is the vitamin vs painkiller test. Is the product you want to build a vitamin or a painkiller? Vitamins are helpful, nice-to-have things, but aren’t essential to life. And they definitely don’t take away pain. On the flip side, painkillers are very real problem solving products. If you have pain, and you take a pill that removes that pain, that’s something you will pull your hair out to get, depending on how bad the pain is. A good startup idea should be a painkiller instead of a vitamin: something that solves a problem and alleviates customer pain.
“A good startup idea should be a painkiller instead of a vitamin: something that solves a problem & alleviates customer pain.”
2. Build an MVP. A minimum viable product (MVP) is the “version of a new product which allows a team to collect the maximum amount of validated learnings about customers with the least effort”, according to the Lean Startup Methodology by Eric Ries. Having a good and validated idea, that solves a real problem, is a big first step. The MVP stage takes that idea, turns it into something that real customers can use, and allows founders to garner the necessary data on what their customers really want and need. Sometimes the MVP will point you to data about your customers that you could never have learned unless you observed them using your product. Take Instagram for example. Instagram began life as a Burbn, a location based check-in app, very similar to Foursquare. What the founders noticed from their MVP users was that the photography feature of the app, with the now famous filters, was the most popular part of the app. So they pivoted, relaunched as Instagram, grew their user base at light speed and was acquired by Facebook for $1 billion two years after founding.
3. Raise funding. I’ll admit, this step isn’t always required. There’s even an ongoing topic of debate in the startup community of when and how and what companies should take investor capital. Jon Oringer, founder and CEO of Shutterstock, believes firmly that startups should grow their companies with profits, instead of taking venture capital. On the other side of the spectrum, there’s a far more dangerous point of view, and that is the culture of praising startups for their big fundraising round, as an achievement greater than building a successful business. There’s even a mindset among some startup founders that raising capital is their benchmark for success. That’s a pretty dangerous way of thinking. At the end of the day, all fundraising does is prove that you were able to convince people with money to believe in you and your product, and write you a check. The real work begins after you close on the fundraising round. Raising capital alone should not be viewed as a benchmark for success. Sure, you can celebrate it and have a night out with your co-founders after you get a signed term sheet. But don’t lose sight of why you raised the round: to build your business. I favor fundraising for your startup, because access to capital makes it possible to build and grow your business. The truth is you will always need more resources than you have, as an early stage startup. Raising money will allow you to hire and recruit the necessary resources to grow your business.
“Roads? Where we’re going, we don’t need roads.” – Dr. Emmett Brown
These three steps are not comprehensive of all the things you need to do in order to start a company – far from it! These are merely a few of the big pieces. If you take these steps, and you nail them, you are heading in the right direction: towards the future.
This article is a super simplified guide for starting a startup. Based on your experience, what other steps would you include?