Through my experience as CEO of simplefox GmbH, an IT and software company based in Kiel with a focus on web and mobile development for leading companies, SMEs and startups worldwide, I got to know a lot of startups from diverse industries and get new ideas and concepts on potential developments every week.
The focus here is on web platforms, e-commerce stores, business websites, software as a service models or mobile apps, which we have specialized in developing over the last few years. As a technical service provider, we implement such ideas and concepts in close cooperation with founding teams. I would like to share our experience with you at this point.
1.Business idea. Often I receive encrypted or only partially revealed business ideas from founders to your startup, as these are treated as top secret and confidential – this is then usually the first mistake. The idea itself is worth nothing and you can be pretty sure that also exactly this idea already exists several times and was most likely already pursued further. From the idea, to the implementation, to the functioning product, it is a long way with many obstacles and only with the idea itself, you have not yet overcome any of these hurdles.
Tip #1 Don’t block yourself and your project by keeping your idea or concept under wraps. Extensive feedback and well-founded criticism is elementary for the evaluation and elaboration of your business idea – talk about it and capture important experiences and opinions of others to evaluate and improve your concept.
2. concept / business plan After the idea for a possible startup is set, the concept phase begins. In this point, startups differ decisively. Some are very involved in the collection of a concept, others, however, do not have a business plan to date and will not need it in a written form. Basically, it is important in any case to work structurally and to record the essential considerations and key figures of his idea. In this process, the team becomes more intensively involved with the project and often first encounters essential considerations.
I don’t think much of a business plan that has been worked out down to the last detail, since it will almost certainly be upside down again after just a few months.
Tip #2 Work with concept, structure your considerations and calculate as best as possible. Do not forget to remain agile and adapt to different scenarios, because very likely things will turn out differently than initially planned.
The most important questions to collect and elaborate your business plan: To put your startup and your business idea through its paces, I recommend you answer the following questions in detail. Should there be significant difficulties here, this would be the appropriate time to rethink the idea again quite rationally.
- What stage (phase) is your startup in? (more about the different stages you can find here.)
- Has your startup reached certain milestones, regardless of revenue or profit? For example, are there already customers or users? Are there already contracts with employees or suppliers?
- What is your main business model?
- What basic target group should your product or service serve?
- What do you think is the unique selling point of your product or service?
- What is the main problem of customers who might find your product or service interesting?
- How does your startup solve this problem?
- Are there already known competitors or are you the first on the market?
- What do you estimate is the annual percentage growth in your target market over the next five years?
- In which market will you mainly sell your product or service for the time being?
- How much capital do you need for your startup?
- How many investors have already invested in the startup, who have shares in the company, or will it be possible without investors?
- What will the collected capital mainly be used for?
3. Founder & Team Set-up. The most important factor with the greatest potential for conflict is the set-up of the founder team. Already with the analysis of the founder team and the collection of the competence areas a large part of the future success rate can be made out and exactly at this point it usually fails, before the project gets rolling at all. A typical example here: “We have an innovative idea for a new app, currently we are four people in the team: two business students, a law graduate and then someone for sales and marketing…now we are looking for someone to develop the app for us.”
Without evaluating the different competencies in more detail, this composition of the founding team is very unlikely to be a success giant.
It is often assumed that the founding team must already cover all areas of competence, but this is a misconception and virtually impossible to realize.
Tip #3 Analyze your team. Successful founder teams usually consist of no more than 2 founders with excellent areas of expertise and an inseparable harmonious cooperation.
4. Motivation / Commitment / Perseverance. Elementary for a successful startup is the motivation and commitment. Too often the thought arises that a successful startup can be opened on the side, possibly even in addition to a regular 40-hour work week. This is not the case and requires absolute dedication with full commitment.
If this is not possible due to lack of time and financial circumstances, this would be another point at which the dream of a startup should better not be pursued further.
In addition, it is said that a startup needs at least five years on average until sufficient stability is created or until sufficient revenues are generated to support the company including all employees and fixed costs. I can only confirm this, even if I would not have believed it at the beginning.
Developing a marketable product takes time, plus building networks, establishing the brand and generating enough customers.
For many very large startups, it is precisely investors and annual financing rounds that play an essential role in this. In the digital age, this is the only way to achieve the necessary reach through large sums of money for marketing purposes. The strategy behind your business should therefore be carefully considered in advance.
Tip #4 A successful business does not develop along the way. Only with full commitment and long perseverance with constant optimization over many years can a stable company behind the product emerge.
5. the budget – how much is needed? There is hardly a point that is more difficult to calculate for a startup at the beginning. Especially around the web and mobile development often lacks the expertise and experience to clarify the necessary budget issues in advance.
From the idea to the first functioning product (MVP), there are many milestones and many obstacles that require a detailed calculation. This makes it all the more important to have experts in the field on board in your own team or as a professional and reliable advisor, in order to grasp the budget issue in the best possible way in advance.
What does a mobile app or a business website actually cost?
As you can imagine, this always depends on your list of requirements and your technological demands. In web and app development, products can be developed for any budget.
Tip #5 Here are the most important points for budget entry:
- First develop a prototype in your own ranks
This process helps you to capture your product in detail.
- Focus on the MVP (Minimum Viable Product).
The important thing is to work on the customer as quickly as possible and start with the first marketable version of your product.
- In addition to the budget for development, plan enough budget for the roll-out.
Attention! You should calculate here with again 2-3 times the budget that you have already planned for the development, this is far underestimated in 80% of cases.
- Start with a free version that already includes all the essential features.
This has been by far the most successful model for several years and is the only chance to generate enough prospects for your product. Premium subscription models based on premium features allow you to convert users into paying customers in the end.
6. the search for investors. Finding suitable investors is a difficult topic and unfortunately almost indispensable for a successful app or web development nowadays. In this sector, budget is needed and even if, for example, a web platform or mobile app can already be developed from its own ranks, it often comes to bottlenecks at the latest when it comes to roll-out and marketing. Without paid advertising you will hardly have a chance to make your product public nowadays. I myself have experienced this case countless times, despite careful discussions in advance. The budget for the development was there and a first marketable product was created, only the liquidity for proper marketing and distribution was missing. But be careful, the search for investors must be approached with caution.
Tip #6 Here are the most important tips when looking for investors:
- Investors do not invest in an idea, but in a functioning product. Therefore, don’t get your hopes up that you will only find suitable investors on the basis of your business plan. There are also matches for this case, but such “cooperations” should be treated with great caution.
- Don’t sell yourself up front for a sum you can’t really estimate at this point. A million sounds a lot, doesn’t it? Would you give up more than 50% of your shares for that?
- Not only the investment amount, but also decision-making power that often arises as a result plays an important role. Significant conflicts can arise here, which can be avoided by a careful selection of suitable investors. Quick money flow should not be the only factor, but also the character and vision of the investor plays an essential role in later cooperation.
Afterword I hope this article brings you a bit further and helps you to avoid first mistakes and to master the first milestones successfully. If you need advice or help, feel free to contact us. We ourselves have successfully gone through all the steps mentioned in the last few years and are currently in the 5th year after the foundation.