According to Steve Blank, lecturer, entrepreneur and serial founder of Silicon Valley startups:
“A startup is a call. And if you’re not called, if you can’t get your idea out of your head […], forget it. Making a startup, doing it well, is not something for everyone. It is an all-encompassing experience but one that can give you great satisfaction. Like one of those, who knows, that change the world…”
Sure, it might sound intimidating, but if you’re sure you’re going down this tough path then it’s time for you to start a startup. But how do you create a startup?
The 7 main steps
Although there are many steps to follow to found a startup, let’s see together the 7 main ones.
1) Concept and development
The idea remains the starting point for creating a startup, although in the opinion of many, and with good reason, the initial idea is just one of the many hypotheses to be tested in the continuous search for a repeatable and scalable business model.
For others, having an idea is already something, but what really matters is the timing (time to market) and how it is done (execution).
Leaving aside the copycat, that is the practice of copying the ideas of others, it is good that your idea is innovative and has the characteristics of durability (is valid over time) and sustainability (is feasible). Better still if it is “disruptive”, a term coined by Clayton Christensen to indicate “devastating” and “destructive” innovations for an existing market or capable of creating a new one.
More commonly in Italy, the business idea was to innovate existing products, processes and services; produce new and / or aggregate and distribute existing products through innovative channels (e-commerce); focus on new markets with existing products and services; design similar business models but with greater added value.
If, on the other hand, you don’t have an idea yet, to be able to develop one, brainstorm:
- try to think what could be useful for you or for the people close to you or for a deficient or inadequate product / service;
- think about how to turn your hobby, or your specific skills, into a business opportunity;
- check if there are areas or market segments not yet sufficiently covered;
- if you are a company ask your employees for suggestions for new product ideas;
- if more than one, please list your product ideas. Reduce the list to a maximum of. two product / service ideas after evaluating each pros and cons, potential level of demand, existence on the market of similar products;
- ask friends, relatives and acquaintances what they think of each one and collect their feedback also through social media.
But in any case, remember that in order for an idea to turn into a business, it must solve a common problem, create convenience or discovery or satisfy a need.
2) Team composition
Whatever the idea, the success of your startup depends on the passion, competence and cohesion of the team that will then have to materially realize that idea or vision.
Finding the right people and forming the best entrepreneurial team possible is crucial for you. Therefore, the skills of collaborators must be carefully evaluated, which must be different in relation to the business model. These should also include those related to the knowledge and use of Digital Marketing tools, strategies and channels.
3) Choice of a business model
Once the team has been formed, the next step to create a startup is to understand if the initial idea is valid and can turn into a company in which someone can think of investing in it.
The summary tool that clearly describes the activates of a company (from the idea to its realization) the iterations between them and how this creates value, is called the business model. The best known and most used business design tool to build a business model is the business model canvas.
The model designed by Alexander Osterwalder is schematically divided into blocks, each of which shows one of the 9 elements necessary for the operation of a company:
- Customer Segments
- Value Proposition, which is the value created by your products or services
- Channels, i.e. the channels through which to reach the customer
- Customer Relationships, is the set of relationships that are established with customers
- Revenue Streams, are the revenues generated
- Key Resources that the company puts in place
- Key Activities
- Key Partners are the strategic partners with which the company intends to ally in order to create value for the customers
- Structure Cost, is the cost related to the resources, activities and key partners.
Schematizations in various charts will allow you to have an immediate and clear vision of what are the strengths and weaknesses of your project and to speed up the communication, design and problem solving processes. The canvas precedes the drafting of the business plan in which we recall only the economic aspects of the company.
The need for capital will accompany your startup throughout its life cycle: birth, development, expansion, maturity. Particularly for the initial or early stage of the startup where neither a product nor a sustainable business model is yet available, but the monthly costs to be incurred with the amount of available cash (burn rate) are certain.
Below is a brief description of the main funding channels you can use in the seed phase (for this reason called Seed Round or Seed Capital investments).
- Bootstrap (or bootstrapping): it is self-financing and therefore the founder’s own capital.
- Friends, relatives and fools (3F’s): these are the capital requested from friends, relatives and the “fools” (that is, subjects who have a high financial availability but who are willing to invest it in a startup.
- Crowdfunding: is the collection of sums of money mainly through the web channel with the help of crowfunding platforms. Crowfunding takes place in 4 different forms (Donation, Reword, Equity and Lending).
- Business angels: they are natural persons (usually former entrepreneurs, managers, consultants, professionals, …) who invest in exchange for minority shares. Business angels can also invest in an informal or organized group.
- Venture capital startup: the investor of a venture capital fund (called venture capitalist) enters the company’s risk capital (quotas or shares) and remains there until the loan expires (3-10 years) or in the event of the sale of the company to another company (exit).
- Startup incubator: incubators are companies that offer physical and co-working spaces and some services such as: administrative and organizational services, training, consultancy (daimentor startup), access to financing and networking.
- Startup accelerator: it is an organization that accelerates and makes systematic the process of creating new businesses. Almost all accelerators invest in startups in exchange for equity.
- Bank loans: granted by banks through government guarantee funds for SMEs, competition or mortgages for new businesses.
5) Foundation of the startup and choice of legal form
Another fundamental step that you are called to take if you want to create a startup is that of choosing the corporate model which for startups mainly concerns that of joint-stock companies.
For this type of company our civil code provides for the following forms:
- Companies Limited by Shares
- Companies Limited by Guarantee
- Unlimited Companies
- One Person Companies (OPC)
- Private Companies
- Public Companies
- Holding and Subsidiary Companies
- Associate Companies
- Companies in terms of Access to Capital
- Government Companies
- Foreign Companies
- Charitable Companies
- Dormant Companies
- Nidhi Companies
- Public Financial Institutions
And all of these companies can be classified in various categories.
6) Minimum Viable Product (MVP) of a Startup
Dopo avere delineato il business model e definito una o due ipotesi di prodotto è ora di trasformare queste ipotesi in modo veloce e a basso costo nel nostro prodotto/servizio. Per farlo segui le metodologie Customer Development Approach di Steve Blanke e Lean Startup di Eric Ries.
After outlining the business model and defining one or two product hypotheses, it is time to transform these hypotheses quickly and at low cost into our product / service. To do this, follow the Customer Development Approach methodologies by Steve Blanke and Lean Startup by Eric Ries.
“Get out of the building” then, go to the street and talk about your idea to strangers, friends and acquaintances and then check the reactions in order to understand what problems it can solve and who your potential customers are. It therefore creates a “Minimum Feasible Product or MVP”, a product / service that has minimal characteristics, but sufficient to make it work.
Put the MVP on the market and have it tested by a specific target of consumers or your good customers (early adopters) and let them release feedback. Use tools such as the validation board and the feedback received to adapt the MVP to the customer’s needs and measure its effectiveness. Modify the MVP again if necessary based on the feedback received or develop a new version if necessary (pivot). Continuing to follow an “agile” approach, repeat the build-measure-learn cycle until the product / service is created.
If you need help creating your MVP, it being a website, an app or any digital platform, do not hesitate to contact us to get a quote and start building it immediately.
7) Market verification
At the end of the cycle we have validated our product / service, identified potential customers and the channels to reach them but we don’t know if they are willing to pay for our product. It is necessary to validate the customers and verify if the business model is dimensionally scalable (in terms of product, customer acquisition, pricing, channels). To do this, start your marketing activities and enter a limited quantity of product / service in selected areas of the market and evaluate if it sells (and if the sales are high or low).
If sales are high you have reached your product market fitting level. It means that customers express satisfaction with the product because it solves their problem.
The next step will be to provide the market with the right user experience and continue to invest in marketing so that demand grows. If customer validation does not work, it will be necessary to go back to the previous phase and find out what did not work or abandon the idea and move on to another project.
We hope this article has given you all the information you were looking for on how to create a startup. For any doubts or questions, visit our home e faq section, or if you want us to make an article on a specific topic, don’t hesitate to comment on the article!