The number of startups that fail is staggering. I’ve heard estimates of up to 95% of startup companies go belly up. Who doesn’t want to succeed with their start up? Obviously we all want to, but the reality is we all probably will not succeed with every idea we have.
Just like your favorite cookie recipe, you need the right ingredients to get a delicious final product. Startups are the same as cooking. You need the right ingredients in order to take your big idea to the next level.
There are dozens of valuable ingredients you will need to succeed, but today we will focus on three I feel are extremely important. The three we will talk about today are ones you can’t live without!
During the early days of your startup you need to prove that the business model is going to work. This can be done in a few ways. If your business is web or app based then providing a concept may come easy. Web-based businesses must prove that the model works in beta long before it goes to market.
Checking out the traffic that comes to your website and getting valuable feedback from customers is a huge piece of the proof of concept. Most successful startups have some sort of beta test that they use to vet their systems.
If you’re bootstrapping your startup the proof of concept phase, or beta test phase, may prove so successful that second round or even first-round funding becomes unnecessary. This is because your idea might just be that wonderful that you may move directly into the acquisition phase after beta.
Proving your market or business model must be done before investors are willing to lay down lots of cash to get you going. Once your business model has been proven it makes investors feel more easy because you’re less risky. It also gives you the opportunity to drive a harder bargain when fighting over trading equity for investment money.
There is a big difference when it comes to having a scaleable startup and scaling too early. The tech industry looks for the ability for startups to increase their technology as the system supports more users. Also, as the number of users increases, will you be able to grow your products horizontally as well as vertically.
There are also avenues to consider when it comes to scaling. Many startups fail to think about increasing revenues as the number of users rises. Investors will be very keen to learn about how the business model keeps growing and expanding revenues as the company blows up.
Facebook and Twitter are two Silicon Valley startups that are hard to scale. The number of users has gone through the roof, but has the revenue stream grown with them? Makeing your business as attractive as possible requires a lot of thought in the scalability department.
Startups need cash at some stage of the game, regardless of how well you have worked out your bootstrapping model. Having a business which is fundable is a very difficult question to address, but there are some basics you can cover to ensure your business can be invested in.
You must have a clear strategy to go to market with your product and generate revenue. Facebook has taught investors many things about enterprises which don’t have a clear revenue stream. If you plan on receiving money from investors they expect to be paid, plus 10X their investment.
If you get cash from investors, but no revenue model to show for it, you will die on the vine. You need to demonstrate that your profits can grow exponentially. Investors will want to see profits double each year. Not every business is fundable and that is just fine, but most startups are seeking funding and will benefit when the business model looks fundable.
Successful entrepreneurs can follow a strategy that can be replicated for success, but the ideas for successful enterprises are not easy to generate. Business plans, programming, spreadsheets, and apps all pale in comparison to the key ingredient that really matters most in the end…innovation.
About the Author: Robert Cordray is a freelance writer for income.com and expert in business and finances. With over 20 years of business experience, Robert is now retired and hopes others can benefit from his writing.