The simple startup play

John Felipe Branch, economicsentrepreneurship

I wish someone had told me this before. Even in that case, probably I wouldn’t have understood it, back at my beginnings in entrepreneurship. Now that I understand it, this is what an experienced person shared with me:

  1. First you need 10,000€. Yes, you need some money for the simple path, I said simple, not easy and for everyone, and a decent idea for a product or a service. Then you hire a programer from Poland or Ukraine or India, they get a first MVP - app done in 4 months. Then you get the first users, sign ups, loggings, gather some interest and it shows market acceptance. Yes, invest the 10,000€ and do not hire a cofounder in exchange for shares only (no salary) yet. Imagine you have this kind of cofounder, this person does not get paid, has a full time job, after the first discussion he will accept your decision and develop slowly and with low effort, probably ending in a far from good outcome.

  2. Now it’s the moment to get external financing, please yet it's a solo project, focus on business angels. Now we are at small scale investments rounds in the range of 20,000€ - 40,000€ - 60,000€ - 120,000€. You will be fairly lucky if you still have more than 50% of the shares, i.e. real project ownership, after all these rounds.

  3. Same time you are able to get a highly skilled and qualified cofounder for far lesser shares that you would have given to her 6 months earlier at a pre MVP stage.

  4. Investment funds, and have to move many efforts and due diligence processes (that means checking and justification for their shareholders - owners) so then they start to invest after the previous investments efforts and once there is some company structure, 2 co founders and some employees, a team.

Software usually is not economically viable until 3 years, being really lucky, probably 5 years, all this while having software engineers employed, a very costly team.

Time frame: 2 months for conception, 4 months for app development, 6 months for financing, 1 year of hard working, hard selling, and hard decisions. After year 2 you already know what you have and what is worth it, maths are not anymore complex.

If you don’t have money for the kick off and MVP, then of course there is not a simple play. A good idea, conception, and well designed path to success aren’t enough to get finance in risk averse countries. i.e. most parts of the world. Neither is it recommended, searching for a first money only for an idea is very costly in share terms and time passes by in the order of months. If you are a highly skilled individual in a first world country, work a few months for someone, save the money and follow the simple path. Business is not simple, keep going!