So you want to start a startup?

Will Grant is a product design veteran and the founder or co-founder of 4 startups - 2 of which went well, the other 2… not so much. Will is a contributor to .net magazine, the author of 101 UX Principles, and currently works in the fintech sector as Head of Design.

It’s the start of a new year and for many people thoughts of new ventures spring to mind. If this is the year you’re planning on launching a startup, this post contains some key concepts taken from both personal experience, and inspired by (copied from) some of the most successful startup people on the planet.

Each section in this post could be expanded into a whole article (or a book), so treat this as a beginners' guide for starting a startup that may help you avoid some of the most common pitfalls…

One: Find a problem that people have

All successful products solve a problem for a user.

• Dropbox backs up all of your digital life, and syncs it across your phone and laptop, so you never lose a file.
• Uber gets drunk people home when it's raining.
• Stripe lets developers add payment to their products with a few lines of code.

The best problem ideas for startups come from the personal experience of the founders. There are a couple of reasons for this. Firstly, if it’s a problem you have - it’s likely that other people have it too - you’re not inventing an imaginary problem.

Secondly, you know the problem space (also called the ‘domain’) better than most other people, so you’re already better equipped than a layperson to solve the problem. 

Two: Find a problem that people already care enough about to solve by another method

There is a slight ‘gotcha’ to step one however. You’re not looking for a problem that nobody can yet solve - these problems are typically too hard for a startup to solve and in addition: there’s no proven market for the product.

Occasionally an entirely new product comes along which changes an industry and invents a whole new category of product - the iPhone, iPad, Tesla Model S, or Sony Walkman, for example - but these are the exception, not the rule. Build a teleporter and you’ll be a billionaire for sure, but your odds of successfully building the teleporter are... low.

You’re looking for a product which solves an existing problem that users already care enough about to solve in some other (usually sub-optimal) way. Validating Product Ideas by Tomer Sharon has several great sections on this.

You could get a taxi before Uber, but it was more hassle. You could get a date before Tinder but it wasn’t as immediate and fun. These products solved a problem people care about in a better way.

Three: Build an MVP of the product which tests the idea and solves the problem

The Lean Startup and minimum viable products have been well-covered over the years. One note to add is that your MVP must solve the problem. It needn’t do more than that, but it can’t do less. The Minimum in MVP is that your product solve the core underlying problem and therefore add some value to the users’ lives.

MVPs can be surprisingly minimal - it’s often possible to build the first version of your product without code just by using tools like: a blog, a hosted form, a mailing list - and human effort. It’s janky and manual, but it’s often enough to prove the concept and that’s all you’re trying to do at this stage.

Finding that you become swamped with enquiries and need to automate things quickly is a ‘nice problem to have’.

Four: Find that first person who wants to pay for it - do things that don’t scale

Your main goal as a startup - like any business - is to make money.

You should have a paid option from day one, and you should set about finding that first customer who’s prepared to pay for your product. Unless you’re a charity or a social interest organisation - your goal is to make money. If you don’t make money, you die.

Lots of people, from friends and family through potential investors, to hired test subjects, will tell you “Yes, I’d pay for this!” - this is not validation. The only validation that counts for anything is a user actually paying you for your product. This is a high bar to clear, but if you can do it - you’re on to something.

One way to do this is to employ methods that don’t scale: putting in extraordinary efforts to convince and cajole your first users into joining your product or service - and then paying you.

Five: Find the first 10 users who are prepared to pay for the product

You grind on, doing unscalable things and find that 10 companies (or 100 consumers) are happy to pay for your product. They’re loving it, telling friends about it, and asking for more features.

Now you have unlocked one of the most treasured achievements that every early-stage startup aspires to: product/market fit.

The product works, the market wants it and it solves a real problem. They say that 9 out of 10 startups fail, and the number one reason is a failure to get to product/market fit. You won’t be making a profit yet, but you can see how you might get there.

This is also the point where it's worthwhile investing in the development of your product and technology; hire the first engineer, move to scalable hosting, and develop the product beyond MVP by building your own tech where required.

Next, to scale this success up.

Five B (optional): raise money

This is also the point where you might want to consider raising money from an investor. It’s extremely hard to raise money before you reach product/market fit - and even if you do, you’ll be selling a much larger chunk of your company to any investor. Paul Graham has a great essay on raising money which you should read.

Raising money can help you scale much more quickly - it's 'rocket fuel' for your already-functioning rocket - but at the cost of selling a portion of your startup.

Six: Scale up to a bigger market with tried and tested growth strategies

You have product/market fit and things are working. The goal is now to get as many users as possible to your product. Your market should be global: leverage the planet-wide nature of the internet and reach as many users as possible. There are very few reasons for not making your startup global, and it’s a big ‘own goal’ to shut off billions of potential customers by only operating in your home country.

First up, do the marketing basics listed here. These include; sales website, social media, an email newsletter, directories and review sites, a press release, etc - there are a hundred things you can do for free to generate organic traffic to your site.

Content marketing is a great strategy for most startups: deliver value in the form of free-to-read content which promotes your startups name and the services it offers, and is widely-shareable.

Paid acquisition - buying online ads - makes sense for most startups, and it’s a pretty simple formula. If the average amount it costs you to acquire a paying customer (CPA) is more than the average lifetime value (LTV) of that customer: go for it. It’s a process of trial and error initially, but if you’re diligent and focused you can tweak ad copy, keywords, etc and arrive at a paid marketing strategy that delivers users for less than you make from them.

There are lots more: affiliate schemes, referrals, partnerships, events, etc - at this point you should have hired a marketing person to work full-time on growing your audience and customer base, testing these strategies and working out which work best.

Seven: Work on activation

Millions of users are no use to your startup if only a few of them activate, ie: engage with your product, take advantage of its features, and use it regularly. You may well have paid to acquire this particular users, it makes sense to ensure they get the most out of the product.

There are many ways to encourage users to activate including on-boarding wizards, in-product tours, email ‘drip’ campaigns, video demos, and gamification ideas like ‘unlocking levels’ of the product. Once again, your mileage will vary and you’ll need to test and learn with these techniques to see what works best for your user base.

See Startup Metrics for Pirates by Dave McClure. The slides are ugly, but they’re filled with wisdom.

Eight: Work on retention

The next level beyond activation is retention. Some users will always leave your product or service, stop paying, or switch to competing products - your job is to minimise that percentage as much as possible. Ever notice how hard it is to actually cancel your account in some products? That’s not an accident.

Customer service can be a differentiator that prevents users switching, providing fast and friendly support and solving users problems is a powerful incentive for retaining customers.

Dissuading customers from leaving is a high-value activity. After all, you’ve spent money and effort to get them in the first place, as long as they stay subscribed they’re generating revenue for you - even if you have to offer discounts to keep a customer subscribed, it’s generally worthwhile.

Nine: Build a brand for the product

What is a ‘brand’?

It’s simply a ‘shorthand’ - a configuration of colours, visual design and copy that helps encapsulate how a user feels about your product or service.

As an example, when Google started out, they had no brand to speak of - but they dominated search by offering a better product than their competitors, almost despite their lack of visual identity or coherent brand.

Over time, the Google logo, palette, copy and vision evolved to build an emotional connection with users. Google is now one of the most-loved consumer brands that’s ever existed.

Once you’re at this stage in your startup’s evolution it’s time to build an emotional connection with users. Use this connection as a 'moat' around your product that prevents customers switching to competitors - and attracts new customers to the market to choose your product.

When you launch new products and services under your brand, users will associate the new product with the warm emotional connection they have with the existing brand.

Ten: Exit

The goal of most startups is to exit - returning value to their shareholders: founders and investors. If you’re not building your company with a view to exiting it, you’re doing it wrong.

You’ve built a product, solved millions of people’s problems and disrupted an industry - it’s evident that your startup is now worth a significant amount of money to the right buyer.

The exit might be a public share offering, a management buy-out, or a straight up acquisition by a bigger company or a competitor.

Next? Go back to step 1 and do it all over again. ??

Will Grant is a product design veteran and the founder or co-founder of 4 startups - 2 of which went well, the other 2… not so much. Will is a contributor to .net magazine, the author of 101 UX Principles, and currently works in the fintech sector as Head of Design.

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