Minimum Viable Startup
There’s this thing they call a “minimum viable product” – it’s the smallest portion of your idea that can be launched as soon as possible. I love this concept! But what about the startup as a whole? Is there a list of things one should do to become a “minimally viable startup”?
Recent 1.5 months (I wrote this article in november) have seen how a weekend project has turned into a startup. Launching a startup from a garage While helping my father out in his workshop, getting him to pay my lunch, and programming + brainstorming on most of my free time, me and my cofounder have built a foundation for a new startup.
Basically – if you’d recruit me as the CEO for your very early idea startup then the following is where I’d aim our first milestone. It will bring you from the very beginning to the point where you can make the first steps to raise money. Please let me know in the comments if I’m missing some important stuff.
1. A bit about the product:
There’s this legend that it’s possible to raise money with just a good idea. After two years of empirical studies I’d like to emphasize that it didn’t happen to me.
Just keep in mind that most startups raising money these days already have either users or revenue. For the sake of this article I assume that you’ve built a minimum viable product.
2. Have cofounders.
Have them right now. I used to be the biggest fan of figuring all out by myself but these days there’s nothing I enjoy more than being able to talk with somebody about ideas (and quoting myself):
First sign of early traction is a cofounder. #mitgsw
— Martin Sookael (@martinsookael) March 25, 2013
If my awesome quote did not convince you to get a cofounder, then perhaps this article will:
Having said that, it is most definitely possible to be a single founder.
Just don’t turn into Smeagol. I once did.
3. A presentation.
A presentation is your first business plan. Instead of writing a very long document no one will ever read, you are going to make a kick-ass slide-deck. I like to build mine the way this Venturehacks article suggests it: http://venturehacks.com/articles/deck
In order for the presentation to make sense you need:
3.1. to solve some kind of problem
3.2. some kind of market research
3.3. have some sort of business model
3.1 Solve a problem.
If you are a startup, it’s generally good to solve a business problem here. The origin of this question is there where somebody has a problem and he is ready to pay someone else for solving it.
3.2.1 Market size
So the problem you are solving – how many people in total have this problem? That’s your market size.
Market size is not too important in such an early stage, but as a future tycoon you should pay close attention to the market you are penetrating.
3.2.2 Access to the market
On the other hand – the way you plan to get your users (the people who have the problem your startup is solving) should be the reason why you are raising money at all.
It is most uncommon these days that a product just “takes off”.
99% of the cases it takes a stupid amount of effort to get users.
Or money. That’s why you are raising money. Ow, I said that.
The good news is that you can still get customers with advertising, Google and Facebook ads being the main area you should look into.
All other plans for accessing the market ought to be what you tell your investors about.
Having these plans is a good sign you know what you are doing.
If you don’t have competition, that means:
a) you are the first in the market,
b) there’s a flaw in your plan,
c) you can’t google.
Most probably it’s b or c, usually b and c combined.
In general terms it’s rather bad if you don’t have any competition and good if you have some. If someone’s doing it, it proves that it’s a working model. Now all you gotta do is do your thang and be better than the competition in something.
3.3 Business model.
I do agree that a business model is the most important part of a business.
Nevertheless it’s usually a bit over communicated in most startup events. As a startup you get asked “where’s the money” till death.
Although I totally agree with the fact that startup is a business, I would also like to add that I’ve spent a tremendous part of the past years trying to figure out a business plan for products that didn’t have any traction. The obvious answer is that perhaps I should have been thinking why and how there’s no traction and how to get some.
So just out of that experience I would like to point out that you have to keep the business side in the back of your head (at all times), but if you still get 10 visitors a week, focus on getting more visitors instead of creating awesome Oesterwalder canvases or building excel utopias.
4. Twitter / Facebook / Domain / Hosting
You don’t really need to tweet anything yet.
The important thing is to save the handles and have them in your presentation.
We took the hosting from Heroku this time. They are cloud born, scalable, do good node+mongo and won’t ask money until the site gets some visitors. And give you a nice https for your Facebook application.
5. A video about your team presenting your product.
The first time creating this video I spent 2-3 weeks working on the script, rehearsing, filming etc.
This time I did it in 2-3 days.
Creating a video is a possible showstopper. Don’t get stucked here in this phase.
Plan 2-3 days for it, and during these days put everything you have into it. And then move on. If you’re not ashamed of it, you spent too much time in this phase. And most probably you will be ashamed even then. That’s the way videos work.
Notice the “team presenting product” part. The reason for that is that sometimes you get asked for videos that present your team and sometimes for videos that present your product. It’s sort of a 2-in-1 thing.
6. Angel list, Gust, F6S profile
If you’ve done all the things in this list then it’s actually pretty much the stuff you need for Angel list. Plus some questions you get on a monthly basis in a startup (what’s your greatest achievement etc).
Although looking good, Gust sometimes has a gusting user experience. Don’t let that stop you, just include the same data you added to Angel List. It ought to get you to at least pitching stage. As an early mover in the space, Gust is a weapon of choice for angel syndicates all over the world and therefore it is of utmost importance to you!
F6S features some of the accelerators others don’t (Techstars, Bethnal Green Ventures) so it pays to be there.
If you are not able to create a budget within 30 minutes then having a budget is also rather important.
After producting about 50 versions of something my advisory board member for Meie Tallinn Kristian Jansen reffered to as Excel Utopia, I’m pretty fluent for creating these things nowadays.
Edit: Here’s @davemcclure talking about the same topic
dear every startup who sends me 3-yr revenue projections: if u send me 12-mo EXPENSE projections, then i *might* fucking believe u. #lies
— Dave McClure (@davemcclure) January 14, 2014
My suggestion would be to take an agile approach and create the budget the first time somebody asks for it.
Up to that point know at every moment, sleeping or awake, how much your burn rate is or will be once you get your money.
(If you don’t know it, then) Burn rate is the amount of money you will waste in a month.
There’s no ultimate truth here, but let’s play around with this:
Most accelerator programs give you around € 15k for 3 months, if you are a 3 person team.
During the program you will most likely burn most of that money, which makes your average burn rate € 5k / month for a three person company or € 1666.-/ month a person.
Talk about it with your cofounders before you raise any money.
By the way – the direct material cost for creating Multiverse (with all the things listed in this article + yes, the overly attached girlfriend meme is from Multiverse + yes, the beginning of this article is about creating Multiverse) so far is $ 20.-
That’s what we paid for the domain price. Everything else is more or less free these days.
So what now?
Learn to answer all questions within 30 seconds.
Learn to listen a lot.
Learn to take a lot of insults in a row and only answer politely to the last question you were asked.
For this reason you should start approaching VCs, but your real league are the angels, angel syndicates and accelerators.
Therefore – push the bits out of Angel list, Gust and F6S!
And be a conference ho for some time, but not too long. Just enough to make a small roadshow at your local ecosystem.
And when it’s all done? Then take a moment to appreciate it. Make a small company party. You now have some information about what the company is doing. It’s not only important for investors, it’s important for the company as well to have it written down this way.
Congratulations, you’ve built a Minimum Viable Startup.