The Startup FAQ - Post 2

This is in continuation to my previous post "Startup FAQ - Post 1" on this blog which I had posted on Dec 26, 2006 ... approximately 8 months back. Now, I'm not sure if you folks are even keeping track of this anymore, nonetheless, I'll try to be more regular now hoping to provide some value to the entrepreneurs out there.

• I think we should focus on investment first, right? Once we get investment, the revenue piece will get sorted out automatically.
  Having done this ourselves, I can give you some food for thought. Lets think about it for a moment ... a business ultimately has to earn revenue, Im sure you wouldn't argue against that. Think of investment as a buffer that will help you get to the point when you have revenue and you are self sustaining. So first you need to think about revenue, then comes investment or any other route that will help you get there.


• I have figured out the revenue model, now lets move on to investors?
  Waaaait a minute ... we know our revenue model so I presume we know our customers. The next step is not to go to investors, but to go to customers and ask if the service that you'll provide is of any value to them or not. If it isn't, then you need to go back and do more homework. If it is, then you need to ask them if they'll pay for it, and if yes ... then how much?


• I have customers and they are willing to pay, so Im all set?
  Well, do keep in mind that there is a little difference between willing to pay and actually paying. So you need to make sure they really mean what they are saying. One way would be to ask them if they'd be willing to pay a small token amount that would help build such a service ... and if they're willing to do that, you're all set


• Hmmm ... i see, is there anything else that I also need to do?
  One more thing ... a successful business has to solve 2 problems -
  1. Solve a need that exists,
  2. Enough customers should have that need.
  So problem 1 was solved by finding customers and making sure they are ready to pay. Now that we have done that exercise, the next step is to make sure that there are enough such customers in the world. This is important because you need to make sure that the need you are solving affects enough customers to give you that scale that will allow you to grow your business going forward ... makes sense?

... shall have more in my next post, until then Happy Entrepreneuring.

The Startup FAQ - Post 1

Wrote this on Dec 23rd, posting it now. Here goes:

Here I am on the flight from Delhi to Mumbai, the flight time was 615am in the morning, its already 915am and the flight is still in Delhi. Yes you guessed it right, its the fog. The winter season is delhi is accompanied by fog, always ... which means early morning and late evening flights are almost guaranteed to be delayed.

Well, I have talked on the phone, solved a few Sudukos, ate some stuff ... so what next? I just realized my dear friend "blog".

I have been thinking on writing about my experience on startups for quite some time ... so what could be a better time than this. So if you are a first time entrepreneur and an engineer, then this is for you.

• Passion is Step 1
  So here's the deal, the road that you are embarking on is a tough one, you won't get the nice office that your employer might have provided to you in the past, you won't get those multi digit paychecks, you won't get all those benefits, you won't get the work-life balance ...
  



• Everything sounds so negative, so whats my motivation?
  Thats right, the road is tough ... but the end is rosy, provided you make it. Most people drop out early, others struggle for some time and then drop out ... only a very few make it.
  
  The only thing that will keep you going in these tough times is the passion that you have for what you are doing. Hence I say, make sure you are very very very passionate about whatever business you have chosen.
  



• Okie, what next?
  Revenue, revenue, revenue ... don't think investment, don't think technology, don't think anything else, just focus on who your customers are going to be, why will they pay and how you will reach them.
  
  I know this can be hard, I have been through this myself. Being an engineer the thing that really excites me most is cool technology. But see we're here trying to run a business, and a business must make profits and for that you need revenue ... so really there isn't a way out.



• But lots of companies, e.g., many Internet companies don't have a revenue model when they do their first launch?
  Yes thats true, and this exactly what the 2000-2001 dot com bubble was all about, a lot of people have already made this mistake, you can avoid it and you should.
  



• But the Internet companies of today have an automatic revenue model called google adsense.
  Yes thats true, but do you know how much revenue that will get you exactly? Before you rely on it too much make sure you have done the math. Even google gets most of its revenue from google adwords (the ads that show up on its search page) and NOT google adsense and there is a good reason for that. So make sure you have done your research before you rely on it too much.
  

... shall have more in my next POST, until then Happy Entrepreneuring.