Start-ups are the exciting frontier of the business landscape. Just picture it. You and a few mates in a converted industrial loft, or a strangely air-conditioned garage. Wearing cool hipster duds. Drinking exotic blended coffees. And having that killer idea, that will transform your industry, and catapult you all into the Rich List by Christmas.
Well of course it does happen, but before you jack in paid employment and start plugging in the top five VCs into your speed dial, why not try these ten questions. And if you have already taken the plunge and you are not fending off eight figure valuations for your sweat equity, well maybe these might shine a light where its most needed.
One – your idea. Has it already been done? Have you come up with a truly original concept? These are rarer than most people think. Are you combining two or more ideas that haven’t been done together – these can be great businesses – look at Uber and AirBnB. Are you thinking of doing something that others are already doing but quicker, better or cheaper? Remember that there are loads of free ideas out there, and the difference that makes a difference is the ability to apply the idea, sell the idea and scale the idea.
Two – your customers. Are you sure that real people (who are not related to you), will pay real money for your product or service? What are they doing with that money at the moment? Have you assessed the real size of the potential and reachable market?
Three – your team. Do you have the right mix of skills in the founding team? What about the chemistry of personalities? Do you all respect and like each other? Have you decided who is in charge?
Four – the finance. How much money will you need before the business turns cashflow positive. Add at least six months cash burn to that and recalculate. Twelve months if your product depends on B2C internet marketing. What is the source of funds? What are the funders’ expectations?
Five – the technology. Whether or not your start-up is a tech business, you will be depending on technology at some level to make the business model work. To what extent are you using trusted applications in combinations that have been done before? If your business depends on the technology doing something that has never been successfully done before then this critical dependency should be your biggest concern.
Six – the timing. The market is full of examples of dominant players who got to critical scale first and beat off a better, but slower competitor. Who is moving in your niche space? How could the market change if a major player decided to camp on your lawn?
Seven – your family. Is everyone at home ready for this? A start-up is a bigger commitment than moving house, having a baby and starting a university degree all at once. It needs the whole back-up team to be on board, and ready for the difficult times.
Eight – the alternatives. How else could your idea get to market? Could you sell it to an existing player? Could you licence it? Could you enter a JV or strategic partnership with someone who has all the infrastructure, sales channels and client base already in place?
Nine – the personality. What about you? Do you have what it takes (see also our note about the entrepreneurial mindset)? Is this reality or wishful thinking?
Ten – the “must” factor. Taking all this into account do you feel a driving, compelling sense that you MUST do this? Well let’s get it going and good luck.