What components create a successful tech startup
How to Startup: 10 Steps to Get Started
# 1 How to Startup: Do I Have the Founder Gene?
In order to be successful in founding a company, you have to have a number of special characteristics. Starting with a high level of motivation, a healthy level of willingness to take risks, a high level of resilience and the ability to motivate people. In addition, you should be adequately armed professionally to survive in your market. In addition, factors such as your family situation, your current professional status and your financial situation also play an important role.
Don't worry: very few founders optimally meet all requirements. It is much more important to know your own strengths and weaknesses from the start. Only then can you work on it. Accordingly, we have created a start-up test for you, the result of which is a strengths and weaknesses profile and tips for your start-up situation. But what applies to you also applies to the entire team, which ideally complements each other and makes each team member stronger. After all, investors often place even more value on the team than on the idea itself (see also # 5 in How to Startup).
# 2 The idea as the cornerstone of any development
Founders are passionate about their ideas - that's a good thing. After all, the idea is the starting point for a hopefully successful journey. Step 2 in How to Startup is looking for the right idea. Some start-ups have successfully discovered a niche in the market, others are on the road as copycats. At least the start-ups are actually implementing a completely new idea.
The search for a good idea begins with looking at successful business models that are already established on the market and then developing your own idea from them. For example, by improving an existing product or service or introducing it in new markets. As inspiration, we regularly present business ideas that have already established themselves on the market.
Incidentally, you can practice developing ideas. Creativity techniques that rely on brainstorming or mind maps help to find new approaches. Here you can get to know numerous creativity techniques and examples for generating ideas.
But despite all the enthusiasm for your own idea: In the end, the customer decides whether it will be successful or not. If the market doesn't exist or is too small, the best idea won't help. Because not every idea is also a business idea. This is why step 3 in our "How to Startup" lesson is so important.
# 3 Develop a valid business model
Many founders like to talk a lot about their idea. But they often find it difficult to summarize the idea in 3 to 5 sentences. So our tip: record your idea.
In the next step, you must critically check whether this can actually be implemented, i.e. placed on the market as a product or service and whether it promises long-term economic success. A proven method for structuring the concept and checking the feasibility is the business model canvas. Nine central key factors that are important for your own business model are analyzed, linked, visualized and further developed until a viable model is available. The strengths and weaknesses of your own business idea are examined as well as the economic viability.
The Business Model Canvas is particularly suitable for founders in the early start-up phase who want to put their concept through its paces. In our further development of the Business Model Canvas, the founder or the founding team is one of the most important factors in establishing a business. The following video shows how start-ups can easily and, above all, digitally create a business model canvas with the entrepreneurial hero:
Idea, business plan and start-up competitions offer start-ups valuable feedback, attractive prize money and initial PR. It's worth taking part - our guide shows which competitions are available.To the guide to start-up competitions
# 4 Feedback, feedback, feedback: start with the Minimum Vaiable Product
The "Lean Startup Method" and the so-called Minimum Viable Product are two major trends in start-up practice. In essence, it is about developing an offer, regardless of whether it is a product or a service, very close to the market or the target customer. Instead of relying on a long product development cycle and only bringing the finally developed product onto the market, what is known as a minimum viable product (MVP) is placed on the market at an early stage. This MVP is a simple version of your own product with minimal requirements and properties, which only contains the most necessary functions, but already offers potential customers added value. This is placed on the market to get feedback from customers. Based on this feedback, product improvements or extensions can be carried out - usually in several cycles.
This process can even take place in the business plan preparation phase. This is because start-ups often fail due to insufficient market interest in the product to be bought, especially when it comes to innovative business ideas for which there is as yet no empirical value about the specific need. Initially, a product is developed in a complex and costly manner over a long period of time, and after the launch it turns out that there is no need. The advantages of using an MVP can be summarized as follows:
- Faster and easier product development cycle: start-ups are faster on the market and therefore have the advantage of being a first mover.
- Significantly cheaper development: There are no expensive production costs, which is why lower development budgets are often required than with conventional product development.
- Lower market risk: Using an MVP reduces the risk of failure, as the needs of the target group are addressed from the start.
# 5 The right founding team determines success
The composition of the founding team is therefore a core component for the company's subsequent success and thus also one of the greatest challenges in the start-up phase. Because the success of a start-up stands or falls with the team. Therefore, for many investors, the team is usually even more important than the business model.
Although in most cases you cannot design a founding team on the drawing board, care should be taken when putting it together to ensure that the founders complement each other in their skills. This means that the members of the founding team have mutually complementary experience and skills. Here you can rely on the following rule:
- a technician (programmer)
- a merchant and
- a sales rep
It is also important for the founding team that the people fit together in an interpersonal way. Because especially in the hectic start-up phase, it is important that the founders continue to pull together. Often the members of a founding team have been friends before. In this case, it is important to separate business from private life right from the start so that the start-up is successful and the friendship continues.
# 6 Know the market and competitors in detail
"Our offer is unique and there are no competitors" - this sentence immediately raises the alarm bells among investors. And rightly so in most cases. After all, it means that the founders haven't done their homework. You should therefore know your own market like the back of your hand. Inadequate market analysis is one of the most common reasons for a start-up to fail. We have put together for you in detail how a detailed market and competition analysis should be carried out.
In the competition analysis, all available information about the most important competitors is collected and evaluated. The results should then flow into your corporate strategy. In addition to general information such as the number of competitors and their product range, the competitor analysis also provides information on the strengths and weaknesses of the competitors and shows future trends in your industry.
# 7 And still write a business plan
Even if the business plan is repeatedly referred to as antiquated, from our point of view there is no getting around it. After all, a business plan fulfills several purposes at the same time. First and foremost, you prepare yourself intensively for your start-up and deal with your business idea, the opportunities and risks and your goals. So you use the business plan to check your business idea for its economic potential.
At the same time, the business plan is also your planning tool. In the business plan you set your goals - usually for the next three years - and can later check the implementation based on the original planning. It is customary to revise the goals in the business plan regularly and adapt them to actual developments.
But the business plan is also the document that banks or investors rely on when they are looking for capital. Bankers or investors will scrutinize your assumptions and figures and measure you against compliance. It is therefore advisable to take great care right from the start. And if you are still not convinced, here are 10 reasons why a business plan is essential.
So that the business plan meets the requirements mentioned and can be used both for external purposes and as an internal planning and control instrument, the following structure is available:
- Executive summary: summary or brief portrait of the business model
- Presentation of the founder or the founding team
- Explanation of the business idea (product or service)
- Market overview / target group / sales opportunities
- Presentation of the marketing strategy
- Company organization (legal form, location, personnel)
- The financial plan (at least 3-year plan)
- SWOT analysis (opportunities / risks)
However: Writing a business plan should also be fun. X Word versions that are sent by e-mail and are hardly clear due to the change mode often prevent this. Accordingly, we have developed a business plan software that fixes all of these problems and makes working in a team child's play.
# 8 How to Startup: the right legal form
In principle, there are a number of different legal forms for setting up a company in Germany. When teaming up start-ups, in practice, in the end, the GmbH comes directly into question, as investors are often to be won over in a timely manner. A conversion from a GbR to a GmbH is possible, but not recommended. We have put together the important steps for establishing a GmbH. The entrepreneurial society is definitely possible as an alternative to start. Especially against the background of the search for investors, it is important to pay close attention to the articles of association right from the start. Legal support is advisable, as is the case later with the participation agreement.
# 9 Plan the first financing steps & pitch it
Start-ups usually follow a classic financing cycle that extends over the following phases:
|begin||Often not much||The founder himself as well as Family & Friends|
|Seed||Up to 500,000 euros||Business angels, high-tech start-up fund|
|Series A||1 million euros||Venture capital funds|
|Series B||up to 10 million euros||Existing investors, private equity funds|
|Series C, D, E ...||> EUR 10 million||Existing investors|
|IPO||Millions, sometimes billions||Private investors, institutional investors such as banks, funds, insurance companies|
Naturally, the first phases are the most difficult. Once things are up and running and the operational results are correct, later financing rounds are usually easier to implement. There are major differences in what investors pay attention to in the respective financing phase. We have put together the most important aspects for you under the heading Investor Readiness.
But how do you go about the first (difficult) steps? Even before it is founded, the EXIST funding program offers an attractive grant, especially for research and technology-oriented projects. The various accelerators and incubators are also good contact points for advancing product development. The High-Tech Gründerfonds is the largest early-stage financier in Germany - a pitch is definitely worth it. There are also more and more business angels in Germany - and in addition to capital, they also provide their knowledge and network.
And where can you find business angels and other investors? The best access to investors is without a doubt a recommendation through your own network. But first-time founders in particular often do not yet have these contacts. We therefore recommend attending pitching events that are as relevant as possible and presenting your own start-up, e.g. via elevator pitch. The pitch deck and business plan are then decisive for further contact with interested investors.
Especially at the beginning, bootstrapping offers an alternative to financing by investors. Here you finance the growth from the operative business. This usually takes longer, but has the advantage that you only have to give up shares in your own company later. You are usually in a better negotiating position because, for example, the proof of concept has already been provided and initial successes have been achieved. We show you what bootstrapping is all about in detail.
# 10 is it going? Or do you have to pivot?
If you have used the "lean startup method" and have tested the market acceptance of your product by an MVP, then you have probably already gone through several cycles by this point. And regularly improve your product based on customer feedback. But what if, despite regular improvements, the final product is ultimately not accepted on the market? Throwing in the gun and back to the permanent position?
You shouldn't give up that early! Because right now it is important to stick with it and analyze the results so far and possible errors. Because mistakes are part of everyday start-up life and the learning effects may be the starting shot for actual success. You should start again at the beginning, review the entire founding cycle (described here) and ask yourself the following questions again:
- Does the founding team really fit together?
- Is the business idea really suitable for long-term success in the market?
- Is the product too complicated to be accepted by the market?
- Are we lacking market orientation or are customer needs satisfied?
- Is the financial planning realistic and can the product be monetized?
- Are we setting the right priorities and are we focusing on the important points?
- Do we really have sales under control?
It may even be worthwhile to question the entire business model and start all over again. Numerous examples such as Twitter, which started out as a podcasting platform, Nokia as a rubber boot manufacturer or PayPal as a payment provider for the Palm, show that start-up pivots can sometimes be a strategic tool to actually be successful as part of a realignment.
Bonus tip: focus on sales right from the start
To put it bluntly, the difference in sales between start-ups from the USA and Germany can be summed up as follows: While nine developers in Germany are tinkering with the perfect solution and one sales person tries to sell the product to customers, one in the USA develops one Employees and nine sell the product.
Admittedly, the example is exaggerated. Nevertheless, it sums up a core problem: Many start-ups fail because too little attention is paid to sales. The view of things is very simple. Those who manage to sell their products to the customer achieve the necessary sales and earnings to be successful in the long term.
Therefore, ideally, a sales professional should be part of the founding team when the company is founded. And this founder shouldn't be concerned with anything other than building a functioning sales team from the start. At the same time, a sophisticated performance incentive system should ensure a high level of motivation. The rule here is: if you sell well and a lot, you can (and must) earn an above-average amount! It must be important to the founders to clearly signal that sales revenues will be rewarded accordingly.
Because only those who get their sales horsepower on the road right from the start are in the fast lane and will grow their business accordingly quickly.
As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.
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