From Idea to Startup
A Guide to Winning Over Investors.
Turning an idea into a successful startup is a journey filled with challenges and unique opportunities. This guide offers key steps and effective strategies to secure funding for your startup from Friends & Family and angel investors. By using real-life examples and statistics, we aim to inspire you on your entrepreneurial journey.
Validating Your Business Idea
Idea validation is a crucial initial step. According to CB Insights, 42% of startups fail because they don't meet a real need in the market. It's essential to use tools like Lean Canvas to develop your business model and conduct A/B testing of your MVP (Minimum Viable Product).
Over 490 founders revealed that 58% wished they had done more research before launching their first product/service.
Skynova
A notable case is Dropbox, which started with a simple demo video of its product, successfully validating market demand before fully developing its service. Airbnb's founders created a website showcasing professional photos of their own apartment and offered it for rent to attendees of a design conference. They not only validated the concept of sharing their apartment but also gained valuable insights into what potential customers look for in terms of comfort, safety, and trust.
Interviews conducted by Skynova with over 490 founders revealed that 58% wished they had done more research before launching their first product/service. Validating your market is not a task to be taken lightly; use creativity to find efficient, quick, and cost-effective ways to validate your market without needing a finished product or prototype. What you need is to implant the idea in your target client and observe their reaction.
The Importance of a Dynamic Business Plan
A well-structured and adaptable business plan is vital. Airbnb is a perfect example of how the continuous revision and adaptation of their business plan was key to their success. Your plan should include detailed analyses of the competition, exit strategies, and realistic financial scenarios. The second most mentioned advice by founders interviewed by Skynova was to create a solid business plan.
Detail your business model through a Business Model Canvas or Lean Canvas, translate your model into numbers, financial projections, and be realistic with your estimates. Dream about strategic partners who can help exponentially grow your business; there are countless stories of founders who met a key player in their market and found THE SYNERGY that helped them grow exponentially. Don't forget to deeply study the market and your competition.
Building an Effective Founding Team
The founding team should possess complementary skills, with a notable ability to learn and adapt. It’s crucial to find partners who share your business vision and are motivated to solve the problem your startup is addressing. Google demonstrates how a combination of technical and business skills can lead to extraordinary success.
Humans are complicated beings, but a common purpose and objective can unite people beyond business. In a startup, you need to find partners and collaborators you can trust and rely on to solve problems. Take time to search for the ideal candidates and trust your instincts.
The Power of Networking in Entrepreneurship
78% of entrepreneurs consider networking essential to their success. Participating in industry events, constantly seeking key players in the sector and interacting with them, joining LinkedIn groups and online forums to share ideas/opinions are key strategies to increase your visibility and find potential investors or strategic partners. One of the most important blocks of the Business Model Canvas is strategic partners, and without networking, you'll never find them. NEVER stop networking!
Initial Financing: Friends & Family
Your first round of funding will likely come from ‘Friends & Family’, those uncles, cousins, friends, and former colleagues who know you, believe in your capabilities, and will bet on you. It’s crucial to manage this stage with transparency, setting clear expectations and being honest about the risks and growth potential of your endeavor. Start with a small round that allows you to validate your market and develop your first MVP, which will enable you to access a larger next round of capital with more sophisticated investors.
Approaching Angel Investors: The Next Big Step
Angel investors focus on specific industries and business stages. Be prepared to answer tough questions and demonstrate with data how your product or service solves a real problem. A model to follow is WhatsApp, which attracted investors by showing its explosive growth in active users.
Feedback: Listening to Grow
Successful startups, like Slack, not only listened to their investors but also actively integrated user feedback. There’s nothing better to improve a product than listening to and interviewing its users, even when they tell you that you are on the wrong path. 40% of startups surveyed by Skynova had to pivot their business model and/or product, and 75% of these were successful after the pivot.
Instagram, which started as a check-in app called Burbn, is a clear example of how user feedback can be crucial for success.
Conclusion
Every entrepreneur has a unique path from an idea to a funded startup. The statistics are harsh, telling us that 50% of startups don't survive more than 5 years. However, following these steps will provide a solid framework to launch your startup, build foundations, and increase the chances of survival. With perseverance, adaptability, and a focus on continuous learning, we can all achieve success!
Written by Roberto Barrera, Managing Director at SALUS Capital | Strategy.
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