5 Tips for Building a Startup (before raising capital)
Apr 16, 2024Getting started on the entrepreneurial journey is a real challenge. Taking the right direction at the outset can dramatically increase your chances of success. Even if you are already a startup founder, it is worth reflecting on your startup’s foundations and on the essential steps for startup success.
We discussed this topic with Mike Bank, at the Meet.Capital Startup Podcast.
Mike is the co-founder of Underdog Accelerator for first-time entrepreneurs, and of Founder15 which provides 15-minute expert sessions to startup founders. He has been on all sides in the startup ecosystem. He started as an investment banker, co-founded two VC-backed startups, invested as a VC partner, an angel investor, and an LP in a venture fund, and built accelerators and venture builders.
Here are Mike’s 5 tips for founders beginning their entrepreneurial journey:
1. Understand Your Why:
Before anything else, take the time to understand why you want to become an entrepreneur, your true values, and your motivations. Without that, going through the ups and downs of entrepreneurship will be even more difficult than it already is.
Also, different motivations lead to different paths in business, and you should be deliberate about which path you want to take. Being in sync with your motivations will help you lead the way.
2. Identify Your Spike
It is easier to succeed when there is a good founder-market fit. Think about your strengths, network, and experience, and choose to operate in a space where you can excel. Your unique set of strengths, or your "spike," is what can differentiate you and your startup in a crowded market. To win big, you must be world-class, so aim for a space where you can be just that.
3. Pick Your Playground
The previous two tips will direct you toward choosing your target market, or your “playground.” Don’t expect everything to go smoothly, on the contrary, be ready to learn and correct course as you discover new things about your market niche.
Avoid the common mistake of changing target markets too soon if things don’t work out as planned. It is easier to correct course within a market niche you explored and understand than to start afresh in a different space altogether. By consistently working within a specific niche, you accumulate valuable insights and experiences, which can accelerate your progress and increase your impact within that domain.
4. Sell Before You Build
You don’t need to have a fully developed product to sell it. In fact, you should validate your business idea by engaging with potential customers before fully developing your product. This approach helps ensure that there is a market demand for what you are planning to offer. Otherwise, you might find yourself burning cash and time only to discover that you were building the wrong product.
5. Validate Before Raising Capital
Prioritize proving that your business concept works and that there is a customer base willing to pay for your product or service before focusing on raising capital. Demonstrating proof of concept makes it easier to attract investment, as investors are more likely to support a venture that has already shown potential for success.
The majority of founders, especially beginners, do not have the luxury of raising capital based on the promise of success. Instead, start by proving that what you are building is needed in the market.
