For most graduates, being fresh out of college, their choices are limited. Most often, their decisions fall under the two obvious categories: choose a career path in a private company or join the family business. And here is another one – How about starting your own company?
And here is another one – How about starting your own company?
Most of us would simply balk at the prospect of starting a company, with reasons ranging from it’s too difficult, there’s too much red-tape, don’t have the right funding to don’t know where to start. Of late, these ideas are simple changing. Thanks to the bootstrapped model popularised by Steve Blank among others; startups are evolving all over the place. There is not enough reason to not follow your dreams. To state the obvious, what a man can be, he must be.
Starting a business is pretty tricky for the uninitiated. Most startups fail within the first five years. What you don’t know can be precarious for your business, so here are a few pointers to help you avoid some of the biggest pitfalls, quite common in startup failures.
Things To Know Before Starting Your Business
To begin with, start with something you like. If you’re passionate you will work harder. The harder you work, the more you succeed. In most cases, you will have to tough it out, if things are not going your way; and it is easier to lose interest if you are not passionate about your goals.
Ensure that you provide solutions to everyday problems that usually occurs when we least expect them. They blight our existence. If they are so common why are more people not working on them in the first place? Maybe, it is because they are too common in the first place. Just imagine the traction you will get for your fledgling business if you crack some of these common everyday problems.
Funded versus bootstrapped startup: Don’t go for funding unless you have some traction to show for your efforts. Go for funding only when you need to scale up quick and need the extra resources for liftoff.
Keep some money put away: Ideally, you should have a war chest to guard you while you’re working on your startup. The war chest should cover your living expenses, rent, electricity, computer hardware/software expenses, and others.
Related Article: Life Is Short. Get Set Startup.
Stick to a deadline: Make a deadline (“I will give myself two years to make this work) and stick to it”). If your business is not getting any traction at the end of two years, it never will. Most probably, you would have spent every penny of your war chest by then, so the decision should not be that difficult.
Things To Avoid
Overspending: This is a big no-no. You will have to exercise fiscal prudence worthy of a finance minister overseeing a massive fiscal deficit. You will have to be tightfisted and careful with your cash-flows. Don’t hire permanent staff or spend money on high-tech equipment.
Working without a contract: Anyone who says that you can work without a contract does not have a clue. Contracts insure you against scope creep (when client increases their expectations from you) client’s business going belly-up and clients who refuse to pay under some condition or the other.
Keep your professional and personal life separate: Draw a clear line between your personal and professional life. If you’re borrowing from friends or relatives you must lay down the terms of payment beforehand to avoid legal problems in the future. Don’t let friends and relatives interfere in your work just because they have provided seed funding.
Adding too many features: Keep it simple. Too often startup owners make the mistake of packing their product offering with multiple add-ons and features confusing the end user with no end. Avoid getting trapped.
How To Raise Funds
Early stage startup: Bootstrap. Use personal savings, credit card, debit card, bank borrowing.
While borrowing from friends and family, make sure they understand the terms of payments clearly, so there are no misunderstandings later on. The new trend is towards accelerators like Y Combinator and Kickstarter who provide initial capital (around $18K) required for reaching the takeoff or maturity stage.
Maturity-stage startup – Jumbo jets require a proper runway to take off. Similarly, startups require funds to scale rapidly. Not taking the funding route may cost you dearly when you are trying to ramp up your business model.However, not many venture capitalists will come forward without some amount of traction to show for your business.
Series A fundings are known to raise funds in excess of a million dollars. Besides money, a big name Venture Capitalist will raise the profile of the startup leading to endless networking and business opportunities.
Exits: Happen when startup owner sells their stake to a big company and uses the money to kick start a new company.
IPO: Extremely rare now-a-days, wherein companies list at the stock exchange by inviting the public to subscribe to shares of the company. Every share entitles the shareholder with certain rights and privileges including a share in the profits of the company.
How To Handle Emotional Challenges
You will have the time of your life. The uncertainty, the victory, the failures, the lessons you learn on the way will you a better person. It is an emotional roller coaster and you will do well to keep your personal and professional life separate from each other. Tackle every day with a sporting attitude.
It is important to have fun and take everything coming your way (the good, the bad and the ugly) with a positive attitude.
How To Pitch Your Ideas
Investors look into hundreds of deals every month. Therefore, it is important to pitch your idea carefully. Successful funding is about managing perception. You may lose out on a good funding opportunity due to negligence.
Before pitching for funds make sure that you have some traction for your business. Make sure you tell them enough about your competitors and your future plans to take on the market. Try to pitch for lead investors, because they are always good for your business; the best way to go about this is to prove to them that you have a solid business model. Don’t try to be a good seller on Facebook, Twitter or Instagram by just showcasing your product features.
Most importantly – show the world that you are a born scrapper.
[The author Saurabh Dayal is Growth Head at Knowlarity – a cloud telephony player in India and across Asia.]