How to Create a Software Startup, Part I

There is a glut of overly optimistic literature giving advice and encouragement on entrepreneurship, innovation, and fearlessness in the face of risk. The advice can be quite misleading due to its authors’ success bias, because they represent the tiny percentage of people who have succeeded and are given a voice among the infinitely many more people who have failed. Since chances are against most of us who try, the goal of this article is to offer suggestions on how to build a company and give it a chance to stand on its feet, while spending nothing more than the legal fee to register as a company and a domain name. Hopefully it will afford you more time to try to build your company well.

Bootstrapping: What You Can Expect to Achieve

During the bootstrapping stage, as many as possible of the below milestones have to be accomplished in order to ensure the company is able to survive moving forward:

    * A small but solid team has to be gelled and chugging along
    * An early version of the product has to be put on the market
    * Figure out a way to earn a little bit of revenue in the early stages
    * The product has to be gaining some traction

The more of the above a company can accomplish, the better. If none of these are established, there is little chance that the business will become a viable one and the entrepreneur has to take a look at what he or she has accomplished. If, on the other hand, everything falls nicely into place and you are able to accomplish all four of the goals, you may have an incredible new business on your hands that might one day be very successful. If the business is somewhere in the middle, it may be a good candidate for an investment and still have great chances to be successful in the future.

Now we’ll go through all the necessary steps, pitfalls and considerations to get on the road to accomplishing the above milestones.

The Beginning: The Value of the Original Idea

You probably had a little laugh at the title of this section. Many first-time entrepreneurs and dreamers live in the hopes of a “million-dollar idea.” In reality, it is very rare for an idea to be even remotely close to being that valuable. Only years of top-notch execution, continuous innovation, and very hard work will create value.

No matter your previous background, there are some common pitfalls. Engineers tend to overdo and business people tend to over-plan; not because they are incompetent, but rather because they are hard workers who are excited about the prospects of their ideas and do what they can before the other parts of the business come along. This is often crippling to the company. One of the first tasks is to build a well-rounded partner team and validate your idea. I won’t get into specifics of idea-validation here, as Steve Blank does an amazing job of it in his book “Four Steps to Epiphany” which is a must-read for every entrepreneur, but I will discuss how to build a superstar founding team, starting with the differences in approaches in case your background is technical or in business.

What I often hear business people say is, “I am not very technical …” If this sounds familiar, don’t worry, that is understood. Just find a partner who is technical, communicates well, and in whose professionalism you can trust. They will get you up to speed to a level where you need to be.

Engineers tend to jump in and do-do-do. But without a clear vision and direction, they often run themselves in circles, over-building unnecessary or overly-complicated features. For their part, engineers might say something similar to “I don’t understand business.” I myself have been guilty of such a quote. If I could go back in time, I’d advise myself to listen and learn as much and as fast as I can because after a short while, the business environment becomes second nature, fun and fascinating.

Why You Need Partners

Sometimes engineers who have become confident in the business world can pull of a start-up by themselves, but most people need partners. Business people always need engineers for the obvious reason that someone has to actually build the product. Engineers need business people and additional engineers because it is just too difficult for one person to write code, go to business meetings, network, deal with legal issues, do marketing, branding, social media, a slew of other tasks, while keeping a clear mind to maintain focus on their entrepreneurial vision.

The Perfect Skill Set of the Founding Team

Traditionally it has been thought that a perfect founding team consists of 2-4 people. The ideal mix should consist of one person who covers all things having to do with the business side, and the rest of the team members who have strong backgrounds in creating technology.

The engineers should ideally have different backgrounds within tech. One may be more of a back-end server engineer who would be in charge of architecture, while another could write business logic and focus more on the user-facing part of the application. As for the business person, she has to stand on her head doing all the non-tech tasks (legal issues, business docs, business networking, lead generation, light accounting, etc.) possible to allow the engineers to focus on building the core product.

Hunt for the Right Partners

If the world was perfect, I’d suggest finding motivated A-players who buy into your idea and are willing to work crazy hours, side by side with you to grow the idea into a company. And each entrepreneur should really have that as their goal. But how does one know whether the people who join their team will deliver? People often say they will do certain things, or that they can do various things, but cannot or just do not. They may have the best intentions in mind, but few people can work in a highly-demanding and unstructured environment for a long time; especially without a regular salary. So the entrepreneur’s job becomes to quickly weed out people who don’t deliver and keep ones who do.

My view is that everyone should be given a chance, and be put into a position to succeed, even if it is a long shot. People should also be given creative freedom and empowered to use as much of their talents as possible. At the same time, to ensure you do not waste your time, let them prove themselves by assigning immediate tasks and see for yourself how they will perform. This will help you weed out bad partners and keep the right ones.

Here are some specific traits to look for in a partner:

    * Responsiveness
    * Professionalism
    * Honesty
    * Accountability
    * Sharing of vision
    * Can-do attitude
    * You respect them as people and professionals

If any of these qualities are not there, see it as a big red flag.

Appreciating Your Partners

Once you do find good partners, recognize that working for equity is much more difficult than for a regular salary, and appreciate their work. At the same time make sure they always have momentum-building, challenging but not overwhelming tasks. For your part, I will add a few more items to the list above:

    * Help them whenever possible
    * Don’t overwhelm them with large and/or multiple tasks
    * Don’t make them do low-priority tasks
    * Appreciate them (I know I am repeating myself, but this is important)

Other than cash, some underrated currencies you can give to the people you work with are:

    * Credit and Recognition
    * Excitement and feeling of momentum
    * Feel-good and knowing they are appreciated
    * Equity
    * Make sure they learn new skills
    * Building rewarding relationships
    * Engage them in doing something interesting

Granted, none of the “currencies” mentioned above trade one to one with the U.S Dollar. My view is that good leaders ensure that their partners and employees get plenty of above items before actual cash starts coming in. It will also help you strengthen the team.

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