Guest Post: How and Where to Begin Your First Startup Via Jun Loayza
Note: Jun has been a longtime blogging friend (we’ve even met in real life at BlogWorld before). While we were recently chatting, I asked him to contribute his thoughts on how to start a company and become an entrepreneur. He already has created multiple startups and been through the ringer in learning what works and doesn’t. Enjoy!
I started my first startup 3 months after I graduated from college. At the tender age of 22, I quit my corporate job, moved into a 1-bedroom apartment with my co-founders, and set off to create a virtual world called FD World.
The company failed in less than a year.
I built my 3rd startup in 2009 – a digital technology agency focused on building social apps for US brands. In less than a year, I sold the company to the largest SEO company in Southern California.
In less than 2 years, I went from failing two startups to finally having a successful exit. Below I’ll teach you what I learned during those 2 years and how I’ve applied these techniques for my latest startup that has raised over $1M in funding.
Idea Phase: give yourself a head start
FD World failed for many reasons, but one of the biggest contributing factors was that no member of the team had relevant virtual world experience. Looking back, it just didn’t make sense: why did we strive to build a virtual world when we had no experience with virtual worlds?
When creating your idea, think of your hobbies, interests, and explore your network. For example, my graduating class had many investment bankers. I’m not a banker, but because I have a large network of investment bankers, it makes sense to build a product or solution for them.
This is what I call “giving yourself a head start.” Build a product for an audience that you have connections to; build a product that you would use yourself.
Team-building Phase: too many cooks in the kitchen
I met a group of 3 Stanford MBA students with a startup. Their idea was in the mobile app space. When I asked how many of them were developers, they replied, “None of us.” This startup was doomed to fail.
And it did. Just 7 months after I met them, their startup had failed.
It’s not enough to build a team of smart, capable people – your team must compliment each other. If you’re building an Internet startup, the ideal team is a developer, designer, and the all-purpose business guy.
Do not outsource the development of your product. Your product will go through tons of iterations before launch, causing you massive headaches if your development team is outsourced. You NEED a technical co-founder – do not skip out on this.
Where to find your team: subscribe to the Startup Digest and attend as many events as possible. Network your butt off and you’ll eventually find your team.
Note: basic principles come from Steve Blank’s 4 Steps to the Epiphany
This next step is very important – as the team is building the product, go out into the field and interview your target customers. Make sure to bring your co-founders to the meetings as well because it’s important for them to hear the feedback first-hand from target customers.
Questions to ask:
- Do you have a problem with X right now?
- How much does problem X cost you?
- What are you doing right now to solve the problem?
- How much do you pay for this solution?
- What is missing from your current solution?
Interview as many people as needed until you begin to see a predictable pattern in answers. Use the answers in the creation of your product so that you build the right product for the right target audience.
Product launch Phase
You will have learned the following throughout the customer development process:
- Who is my target customer
- What features my target customer will pay for
- How much my target customer will pay for my product
Now that the product is complete, return to the target customers you interviewed and sell them the product that they want. You roughly know how much to charge because you know how much their pain costs them and how much they pay for their current solution.
Follow up questions to ask:
- Can you recommend me to 5 people who you feel will also benefit from my product
- What online magazines/blogs do you consistently read
- What conferences or tradeshows do you consistently attend
- What groups or organizations are you a part of and regularly attend
Fundraising is hell.
Our current CEO’s full-time job is to fundraise. If there’s anything I’ve learned, you need a dedicated person to build the product, another person to sell the product, giving you time and availability to fundraise for the venture.
Where to begin: Introductions will get you funding. Your goal is to get an introduction to an Angel Investor or Venture Capitalist from a trusted source. This trusted source would most likely be a founder that was funded by the investor. Take these steps:
- Join Angel List
- Explore The Funded to find investor information
- Find investors that invest in your industry
- For example, if you’re in the mobile app space, then find investors that have previously invested in other mobile apps
- Research the portfolio companies of your target investors
- Build a relationship with the founders of the portfolio companies
Your goal is to build a solid relationship, make the case for why your startup will succeed, and respectfully ask for an introduction to the investor. This is the quickest way to get in front of an investor and have a chance at funding.
About the author: Jun Loayza is the Co-founder of RewardMe – a digital rewards program for restaurants and brick-and-mortar retailers. Prior to RewardMe, Jun founded SocialMediaMarketing.com (sold to SEOP), where he led social technology projects for LG, Levi’s, and Activision.