When talking about start-ups, the common imagination inevitably goes back toSilicon Valley and the idea of young guys full of enthusiasm and with the desire to change the world to the sound of codes and apps. But what is a start-up?
A particularly innovative company?
Any company in its early years?
A bunch of nerds with entrepreneurial ambitions?
Strictly speaking, a start-up is a new company that aims to develop a new type of business: not yet existing, repeatable and scalable.
According to the latest report by Mise, InfoCamere and Unioncamere on Startups, in the first quarter of the year Italian innovative startups exceeded 10,000 for the first time, settling precisely at 10,075 as of 31 March 2019.
In all honesty, I believe that no one, neither I nor anyone else, can offer the golden rules for starting a successful new business. But I think I can offer some useful food for thought for new managers and startuppers: my words are a direct interpretation of the experience gained over many years of dealing with entrepreneurs of different ages and experience, with whom I have discussed a now considerable number of new business projects.
How to Start a Successful Startup: The Basic Steps
1. Anticipating and seeking a clear position in the market
Identifying direct and indirect competition to the product/service you intend to develop is crucial to understanding the strengths of your solution: why should the customer choose you? Which problem do you answer? What makes you different from your competitors? The goal must be to bring one’s idea to the market knowing its realistic development and a realistic estimate of the potential market.
2. Precise timing and resources
One of the main mistakes is the approximation in calculating the economic resources and time required for the development of the start-up.Not realistically considering the limitations of the project, the difficulties and unforeseen events inherent in its development is a serious mistake because it leads to numerous cascading problems. On a psychological level, it can lead to frustration that negatively affects subsequent actions, which will then be experienced as mortifying corrections. In the dialogue with potential partners and financiers, faulty (or improbable) planning nips the credibility of the entrepreneurial project in the bud: partners and investors do not allow approximations.
3. Building an effective presentation
Working on a comprehensive and convincing presentation is the first real investment, and it is also an opportunity to put oneself on the side of those who will assess the goodness of the project.
Often startuppers do not devote enough energy to preparing the pitch , on the basis of which an evaluation will actually take place. The main mistake is to expect potential investors to say ‘how to do it’, whereas it is essential to consider every detail of the project, and not gloss over potential weak points, but address them comprehensively, identifying solutions clearly and realistically.
4. Or rather: 1. Finding capital!!!
The search for money remains the first real goal for a start-up in its initial state. Without capital, it is virtually impossible to start a new business.
n Italy, the credit system linked to start-ups is still at an embryonic stage and has not even come close to the dynamics that characterise other countries, such as the United States. In simpler words,in Italy it is very difficult to find financiers willing to put in large sums to launch a project even when, on paper, it could work.
The trend among investors? Aiming at the early-stage”: identifying ideas, even before business projects. “Sometimes there isn’t even a business plan,” Gill Cogan of Opus Capital – a fund managing a $1.7 billion portfolio globally – recently said during the latest edition of Tech Insight 2019. “We put up small amounts of money, even $50 or $100,000, to enable entrepreneurs to develop their idea into a business plan.
One thing is certain: the interest of investors is to get in where there is the greatest opportunity to generate big business, which is why they are particularly interested in massively scalable ventures.
There are therefore ‘marketplaces’, virtual and otherwise, where entrepreneurs and investors can meet. It is crucial for those seeking funding to fit into these contexts. Also in the area of seeking funding, many start-ups have managed to emerge thanks to “Crowfunding” and ”Equity crowfunding”. In the second case, the currency of exchange are equity instruments such as shares in S.p.A. or S.r.l. shares.
5. Following (and searching for) successful models
Document, read, study success stories. Even better:get into living contexts, talk in person with entrepreneurs, startuppers, managers, investors. There is nothing more fruitful and enlightening than talking face-to-face with those whose experiences differ from yours: they will offer you a new point of view, and valuable tools, that’s for sure.
Follow winning methods. The Lean Startup method is a milestone; it involves the development of a minimum marketable product (MVP). The idea is not to waste resources and energy on striving for perfection at an early stage: having the product tested when it is still imperfect, perhaps ugly, is preparatory to its subsequent refinement.
Tools such as the Business Model Canvas, allow you to structure your model and its possible developments with greater precision and awareness. Detailed projections of the start-up’s possible development can prove very convincing at the presentation stage.
Ensuring the validity of the business model on the basis of measurable metrics: is also crucial to convince investors to participate in the business risk! Collecting metrics is often difficult to do, but even small numbers still offer a statistic: look for ways to increase the number of tests as much as possible, record information, weave the data together, interpret it.
6. Balancing enthusiasm and awareness
Enthusiasm is a double-edged sword. It must never be missing, even in the most difficult moments and even in the most advanced stages of the business project. Enthusiasm is not lacking for those with a new business project and it is precisely at this stage that it can play tricks on them, because it can cloud the careful reading of phenomena. Are you sure that your idea is really innovative? Are you sure that no one else is already developing it, and perhaps has already gained a considerable advantage over you? Have you considered everything?
Leveraging enthusiasm too much can be counterproductive, especially when presenting one’s project to mentors, investors and partners, who may become alarmed and fear a naive entrepreneurial approach.
An entrepreneur will never tell you not to be fuelled by enthusiasm, but an equal dose of clear-headed objectivity must guide you.
Recommended readings
- Unioncamere, Report on Innovative Startups
- Official Gazette, Decree-Law No. 179 of 18 December 2012
- Eric Ries, Start off light. The Lean Startup Method
- Business Model Canvas
- Wired, 9 Italian start-ups to watch out for in 2019
- Il Sole24Ore, These start-ups will change the world during 2019
