In this article, we’ll look at a simple process and a few business ideas to get started with your startup.
Table of Contents
Startup success factors
According to Bill Gross, founder of Idealab, the five key factors influencing startups’ success are the idea, team, businessmodel, funding, and timing. Among them, timing is extremely important but can’t be controlled. That is why startups often need enough funds to keep going until the business becomes viable.
Among some of the factors that might affect startups’ success over time are timing, team, idea, business model and funding. It’s important to highlight that there are many other factors to take into account.
However, to get started there are a couple of things that we want to get right, and one of them is timing.
Timing matters because if you have a great product at the wrong timing, either you have the financial resources to get going until the market will become mature. Or a strong distribution network able to push through in a market that isn’t ready yet.
Or the ability to transform and influence a whole market (just a few businessmen like Apple’s Steve Jobs and Tesla’s Elon Musk have this ability).
Otherwise, you will find yourself stuck in a business that won’t be successful. But how do you know in which market condition are you operating?
Context mapping
Above the innovation matrix from Greg Satell’s “Mapping Innovation: A Playbook for Navigating a Disruptive Age.”
When it comes to innovation mapping he suggests to ask two basic questions:
First is, how well is the problem defined?For example, could you define a technical specification for this particular problem? If you can determine a technical specification, well, then that’s a pretty well-defined problem.
And the second question is, how well is the domain defined? Meaning what set of skills do you need to solve this problem? Again, sometimes you can define those domains very, very well, you can think exactly the job descriptions you would use to help staff up a project like that.
…So that’s the power of the innovation matrix is by narrowing down what set of solutions or what set of strategies are best fit to solve a particular problem.
The first step is to map the territory is to understand in which context you are going to operate. For instance, if you are about to launch a startup in the blockchain space, you know this is a space that still has a massive component of technological innovation (as of 2020).
Therefore, businessinnovation or the commercial killer application that will make the blockchain adopted at a large scale might still be far to come.
In that context, the key customer that can help you scale the business is not there yet.
This means that if you ask a simple question: how far is my key customer from buying my product/service?
Based on the answer, you’ll understand if a market does exist or if it doesn’t. In the latter case, you need substantial upfront funds to create, educate and eventually reach that new market.
In that scenario, asking for funds does make sense because you’re still at the technological innovation stage, but the market is not ready yet from a business standpoint.
You need to make sure to:
Have enough money to survive while the market builds up
Have enough funds to create the new market
Find a use case which is in fit with the current market
On the other side, if you’re operating in an existing market, where there is already a clear customer profile, you don’t need funds, you can bootstrap your idea right away. The market will be your best ally, and customers your best advisors to grow the business.
The general concept of Bootstrapping connects to “a self-starting process that is supposed to proceed without external input.” In business, Bootstrapping means financing the growth of the company from the available cash flows produced by a viable businessmodel.
Business model design
A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
Once you understand the context you can map on a single page the kind of business you want to build. You don’t need complex tools or business plans (unless you’re going to ask for investments, in that case, you need a solid business plan and a pitch deck).
Instead, a piece of paper with some key elements of how you want your business to look like will do.
You can map a few key elements initially:
What core problem am I solving? (problem definition)
Who are my potential key customers? (customer profiling)
Where can I find them? (distribution)
Venture capital-backed startups
If you’re starting a company in the AI or blockchain space, there will be more chances you might need to look for venture capital funds.
AI startups
The AI Ecosystem has generated a multi-billion dollar industry, and it all starts from data. Going upward in the value chain there are the Chips (GPUs) that allow the physical storing of Big Data (a dominant player is NVIDIA). That Big Data will need to be stored on platforms and infrastructures that SMEs can’t afford. That is where players like Google Cloud, Amazon AWS, IBM Cloud and Microsoft Azure come into rescue. At large scale, a few corporations control the Enterprise AI market; while nations like China, USA, Japan, Germany, UK, and France have widely bet on it!
Blockchain startups
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum). However, according to blockchain investor Paivinen due to ease of forking, incentives to compete and improved interoperability and interchangeability also in a blockchain-based economy, protocols might get thinner. Although the marginal value of scale might be lower compared to a web-based economy, where massive scale created an economic advantage. The success of the Blockchain will depend on its commercial viability!
Bootstrapping your startup
If you are launching in a defined market you can build your startup with minimum resources, no funding, and primarily your sweat equity. Some domains where you can start right away are:
SaaS startup
Software as a service (SaaS) is a model where a third-party provider hosts the infrastructure and applications and make them available through the Internet. This model leverages on web-based software and on-demand applications that run centrally on the server of the provider, while the company purchasing the service will use those applications based on need and without the upfront cost.
B2B vs B2C
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
Testing business ideas
When ready for the experimentation phase it’s important to take into account the risk associated with each idea by looking at the potential worst-case scenario.
In other words, in order to prioritize ideas and also the kind of experimental approach to have you might want to ask:
What happens in the worst-case scenario, which is the idea will fail badly?
And another fundamental question is about reversibility. In case the idea fails badly, would the previous scenario be restored? Is it reversible?
In the scenario, of an idea which carries high potential negative outcomes, and that is not reversible, even if the idea has high growth potential, that is too risky to undertake quickly.
It becomes therefore, important to slow down, test, measure thoroughly and only after careful consideration go on with a wider experiment and roll out.
In an opposite scenario, where there is no rough worst-case scenario, and the whole process is reversible, going with a fast-paced experimental approach works well!
Some ideas for a quick launch and experimentation
If you’re looking for a few quick ideas but low cash investments:
Some business ideas to start with little money are Affiliate Marketing, Infoproducts, Email marketing, Google AdSense, Consulting, Branded stories, Paid reviews, Banner Ads, Sponsored Blog Posts, Members Only Content, Paid Business Directory, Become a Coach, Accept Donations, Charge For ‘Premium’ Content, Sell Your Blog, Build your SaaS, Speaking Gigs, Create & Sell Your Product, Write Tutorials & Guides, Live Workshops, Find Sponsors For An Event, Generate ‘leads’ for other companies, Create a job board, Advertise pages, Host paid webinars, Writing Gigs.
Startup Success Factors: According to Bill Gross, the five key factors influencing startup success are the idea, team, business model, funding, and timing. Timing, though crucial, cannot be controlled by the founders.
Context Mapping: Understanding the context and market conditions is crucial for startup success. Mapping the problem definition and domain definition helps identify the best strategies to solve a particular problem.
Venture Capital-Backed Startups: Startups in AI and blockchain spaces often require venture capital funds due to the need for significant technological innovation and creating new markets.
Bootstrapping: Bootstrapping is a self-starting process where startups use their available cash flows to finance their growth without external input. Some startups, especially in defined markets, can bootstrap their ideas with minimum resources and no funding.
Testing Business Ideas: Prioritizing and experimenting with business ideas require assessing the potential worst-case scenarios and reversibility. Careful consideration and thorough measurement are essential before implementing wider experiments.
Quick Launch and Experimentation Ideas: For low cash investments, there are various business ideas, including affiliate marketing, infoproducts, email marketing, Google AdSense, consulting, and more.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
