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How to Make the Leap and Build Your First Startup

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[] Who Are The Serial Entrepreneurs?

The Serial Entrepreneurs are 35 of Europe’s leading entrepreneurs who have founded companies such as Amazon UK, Graze, Kelkoo, LoveFilm. They’ve never had the time to write books or articles in order to share their stories and experiences from idea to multi-million exits; until now!

 

You want to make the leap but don’t know where to start, perhaps you’re in a full-time role now, a freelancer, or just started out on your own. You’ve always dreamed about setting up your own business but worried about failing, how to do it with limited money in the bank, or how to balance your current commitments and responsibilities by doing so. You’re not alone.

 

For the first-time ever, The Serial Entrepreneurs are sharing their secret playbook.

 

For more information on how to start your business, visit:

http://www.TheSerialEntrepreneurs.co

 

Table of Contents

Who Are The Serial Entrepreneurs?

Chapter 1: The Entrepreneur Mindset

Motivation

Entrepreneurship is not innate – everyone has to learn it

Don’t do it on your own

Preparing for the rollercoaster of emotions

Summary Points

Worksheet

Chapter 2: Vision and Idea

Turning the Switch On and Off

Conscious vs. Unconscious Thought

What’s Your Edge?

Inspired or Generated

Inspired – where the idea comes to you

Generated – you have a specific framework to use

The Serial Entrepreneurs Idea Framework

New Experiences

Talk to people

Read

Build on what you know and love

Exercise new thinking

Filters

Summary Points

Worksheet

Chapter 3: Validating your Business Idea

Idea = Solution

Customers

What to validate?

Ways to validate your idea

1: Talking to customers

2: Building a small prototype

3: Building an online landing page (online product test)

Things to avoid

Summary Points

Worksheet

Recommended Resources

Chapter 4. Building the Team

The Founding Team

Creating a Shareholders’ Agreement

Building a larger team

Summary Points

Worksheet

Chapter 5: Structuring your Venture

Create Milestones

Time, Space, and Tools

Legal and Admin bits and bobs

Don’t be afraid to ask for help

Have a Plan

Summary Points

Worksheet

Enjoyed the eBook? Share it!

Acknowledgements

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[][][] Chapter 1: The Entrepreneur Mindset

Starting a business is tough but can be one of the most rewarding, and fulfilling, things you ever do; being in control of your own destiny and striving to build something you are passionate about.

Many people rush in like lemmings gleefully jumping off a cliff, but the smarter practitioners develop a real advantage by taking a little more time to mentally prepare themselves. None of our serial entrepreneurs regretted starting a business but, without exception, all of them would have spent more time preparing themselves beforehand.

[][] Motivation

Firstly, ask yourself why you want to build a business. Is it because you want to make enough money to be able to do things you want to do, and have the freedom to control your destiny? Or is it because you want to establish a good work/life balance? Perhaps you just want to break free from the day-to-day production line mindset of an existing job, and do something different?

Whatever your reason, it will affect the decisions you make. You need to be honest with yourself and clear about what your motivation really is. Wanting to make a real impact in the world involves building something that affects a large number of people, and that’s very different to running a small local business that won’t change the world but gives you the work/life balance you strive for.

In fact, all our entrepreneurs will tell you that it’s far more laborious and stressful to build your own business than it is to work for someone else. It can take many years of hard work. What gets them through is their passion for what they do and the clear, unadulterated vision of the end goal they want to reach: the paradise land! You can satisfy all those motivations, but it will take time, effort and true grit.

Ashley Friedlein
Founder Econsultancy

One of our serial entrepreneurs, Ashley Friedlein, admitted that having a clear vision and end goal was something he didn’t possess when he started out. This led him to chase too many opportunities, but also taught a valuable lesson: doing too much does not scale well and risks dissipating the limited resources available. This made him realise that having a clear vision and end goal was necessary. From that point on, he changed the way he ran his business.

According to Ashley, having passion was the thing he did have and that all budding entrepreneurs need when starting their own business. Passion leads to commitment, self-belief, relentless pushing, ambition, and not taking ‘no’ for an answer.

William Reeve
Founder LOVEFiLM and Co-CEO Hubbub

Investor and entrepreneur William Reeve has a similar perspective, but warns that your development of self-confidence and belief should not override the necessity of listening when people say that things “don’t work”, or raise other objections to what you’re up to. This has become easier over the years, says William, especially as many of his naysayers have seen him succeed. For William, overcoming significant self-doubt was part of this process.

True grit – the ability to persevere despite having many challenges and obstacles – is the one characteristic that all of the serial entrepreneurs have in common. Each of them has learned to develop this characteristic, over time, on their entrepreneurial journey.

In the coming chapters I’ll explain how to find a good business idea (chapter 2), how to validate this idea (chapter 3), how to find and select co-founders (chapter 4), and how to structure and scale your venture (chapter 5).

Understanding Risk-Reward

It is a misconception that entrepreneurs are wild gamblers who risk everything with the hope of getting big rewards. In fact, you’d be surprised how much thought and consideration goes into every major decision they make. It’s all about how they measure risk and reward; minimising the risks while maximising the upside.

Entrepreneurs minimise risks in regard to personal finances, career, perception, failing, and feeling bored and lonely. They maximise rewards in regard to having the right idea, big opportunity, team and funds, enjoyment and learning.

Looking at the diagram below, you can see how you might evaluate the pros and cons of starting a business.

Building a venture will come with ups and downs. The diagram below illustrates the path of starting a venture.

Entrepreneurs will attempt to minimise risks. A basic example of minimising risk is saving up money from your existing salary, before you start. This cash surplus can be very helpful, and means you can concentrate on the new venture without exhausting energy holding down what is, in effect, two jobs. Entrepreneurs will also look at ‘a year off’ as a good thing, rather than fretting about what others may think of them or how this might impact their career prospects. Calmly accepting that – yes – it could all fail, and that you might be miserable, is an essential part of minimising risks.

With risks in hand, entrepreneurs look at the potential upside. You might have hit on the right idea at the right time, can raise money to support your ambition, build a great team around you to help execute it, and ultimately make a lot of money and earn freedom.

This is exactly how I looked at things when I left my job at Perot Systems to begin my first venture (price comparison site ‘Shopgenie’ which later merged with Kelkoo.com). I’d saved up enough money to live for six months and pay my bills, and thought that, even if it didn’t work, at least I’d learn a lot about programming and business that would enable me to get another job at the end of it. The potential upsides were that, a) it might just work, b) I’d enjoy it, and c) I’d never have any regrets about passing up the opportunity to give it a go.

Of course there are grey areas in understanding risk and rewards, but by far the most common mistake people make is to not minimise the risks enough, and not have a big enough potential reward.

[][] Entrepreneurship is not innate – everyone has to learn it

As human beings, we naturally learn how to walk, talk, eat, and fight; it’s built into who we are. We don’t naturally learn how to build a business. Everyone starts at the same point and has to gain the same knowledge and experience to achieve it.

Some people might have more of a head start than others; perhaps a family member is an entrepreneur who mentors them, or they went to a university that taught some of the principles. Today the Internet provides a massive, level playing field for anyone to be able to learn the key skills and how to apply them, with a multitude of books like this one as well as online courses and communities helping each other.

The best entrepreneurs realise how little they still know and constantly seek out more knowledge and experience to get better. That’s partly the explicit knowledge that comes from traditional study, and partly the tacit knowledge arising through personal contact and regular interaction with others. Don’t stand still – you learn by reading, listening and doing.

[][] Don’t do it on your own

All successful entrepreneurs build a team of people around them who are smarter than they are, and much better at doing specific things. Why? Because you can’t do it all on your own. In fact, as a founder, a vast amount of your time will be used up making sure you don’t run out of money, attracting great people to come and work for you, and setting a vision for everyone to believe in.

Make the distinction between whether you are going to be a self-employed contractor (where you are an individual who makes money by selling your time), or your path is building a real business where other people do most of the work, and so one of your primary long-term objectives is to make the business work without you.

[] Preparing for the rollercoaster of emotions

You’re going to experience some massive swings in emotions where one day you might feel like everything is going wrong, and on other days you’ll be on top of the world. This is common amongst entrepreneurs and you need to steel yourself to handle things the right way during those dark times.

Matt Wheeler
Founder Driftrock, Omio, and Forward Partners

Matt Wheeler explained that his three startups all had some seriously dark times. These were exceptionally hard for him personally, but that each time he was eventually able to flip things around and build successful businesses.

One such experiences was when an innovative, new data-driven marketing strategy was showing disappointing results. After a couple of months losing money, he approached his mentor to tell him it didn’t work and that he wanted to shut things down. They were earning revenue, but were hemorrhaging money each day. They both felt the underlying concept was sound so they decided to double the spend and run twice as many tests. After just a few weeks of extra testing, they discovered that a small tweak in the model led to great results. The strategy started working! Matt grew this into a company generating tens of millions a year on the back of that

The takeaway here is that the rollercoaster of emotional ups and downs is part of being an entrepreneur. Having the right mindset to handle this rollercoaster is an important facet of being an entrepreneur.

[][] Summary Points

• Set yourself a bit of time to fully prepare yourself for starting a business – don’t blindly rush in.

• Question your motivation and be truthful to yourself with the answers you produce.

• Evaluate the risk-reward of what you’re doing.

• Understand that entrepreneurship is not innate. It has to be learned.

• Get used to the fact that building a real business will involve teaming up with others. It can’t be done alone.

• Prepare yourself for the emotional rollercoaster and learn to embrace failure and mistakes in order to get through the tough times.

[][][] Worksheet

Why do you want to build a business? Is it because you want to establish a good work life balance? Is it to break free from the day-to-day routine of your present job and do something different?

Your answer:

Consider your own situation. Select only one option.

☐ I’m going to be a self-employed contractor / consultant where I make money by selling my time

☐ I’m going to build a real business where other people will be doing most of the work and my eventual goal will be to make the business work without me

Think about risks and rewards. How can you mitigate the risks associated with starting your venture, while still getting all the rewards?

Your answer:

[] Chapter 2: Vision and Idea

You can read so many books on building businesses and ‘doing startups’, but all you’re really doing is learning a language. It’s only when you start practicing it, and immersing yourself in that environment, that things truly start to happen.

Ask yourself one simple question: why should your business exist?

This really goes back to having a solid vision that you remain faithful to as you experience the ups and downs of building something from nothing. This could be anywhere on a spectrum between, “I want to have a better lifestyle balance and make something of a size big enough just to facilitate that”, through to, “I want to build something that changes the world and makes a mark for people to look back on and remember.”

Whatever this vision, you must be passionate about it because it will consume your life, and could cost a great deal in opportunity, time and money.

What you really have to do is to create something people really, really love and then tell them about it. Typically this entails solving a problem they have or giving them a way to do something far better than ever before.

It’s easy to create a startup, but very difficult to make a product people really want.

[][] Turning the Switch On and Off

Our entrepreneurs often talk about “exploring new ideas” or “being in the ideation zone” where they’ve somehow flicked on the switch of generating new business concepts. The secret to their success comes from making their minds pliable and willing to be shaped, while avoiding getting too fixated on single things.

Steve Jobs once said, “Everything around you that you call ‘life’ was made up by people who were no smarter than you. And you can change it. You can influence it. You can build your own things that other people can use.

It takes practice but, once it’s working, you start to notice opportunity all around you, from how car hire could be a massively improved experience the next time you’re on holiday, to how you can make it simpler to buy kids shoes!

[][] Conscious vs. Unconscious Thought

Generating your business idea often starts out with the conscious decision that you want to build something and you’re keen to explore what that could be. You may have some topics or areas you want to start investigating, or you may not. The point is that you consciously move forward and realise that you can’t just lock yourself in a room and try and come up with something great with no other stimulus around you.

What’s most powerful here is balancing your conscious thought with unconscious thought, and recognising this is a key part in the process of idea generation. You mostly don’t realise it but your brain will go on crunching things you’ve absorbed long after you’d apparently stopped focussing your attention on it.

There’s a great talk about creativity by the comedian John Cleese that is definitely worth watching. He often found that he would write a sketch but couldn’t quite get the ending right. So he’d go to bed, wake up the next morning and the answer would be so clear to him that he couldn’t remember what the problem was in the first place. He also retells the experience of losing a script that he knew was very good, and dealing with the disappointment of having to rewrite it again from memory. Having later found the lost version of the script, and compared the two, he saw that the later draft was substantially better; his explanation being that his unconscious mind must have carried on working on it even after the first draft had been finished.

As you’ll see in the rest of this chapter, there are many business advantages to letting your mind be a pliable sponge, actively seeking out new things to absorb/people to talk to, and giving your unconscious mind time to digest and make sense of it all.

The unconscious mind; pliant, working on interesting problems, listening to people you trust and respect – is a hallmark of our serial entrepreneurs.

[][] What’s Your Edge?

A great starting point is to think about what skills you have that could be applied to a specific problem, or what domain knowledge and insight you possess. Maybe you’ve been working in insurance for many years and have identified a whole range of things that could be done differently, or new, growing opportunities that aren’t being exploited yet.

Remember that there are really no ‘brand new’ ideas and that a lot of other people are probably working on the same thing right now. Why are you going to be able to execute this idea instead of them?

Also, ask yourself: why now? What’s happening that makes today the best time to be working on an idea? What are the new trends making something possible for the first time?

[][] Inspired or Generated

When each of the serial entrepreneurs were asked how they got their ideas, an interesting pattern emerged. All could be placed into one of the following three groups:

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p<>{color:#000;}. Entrepreneurs became inspired.

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p<>{color:#000;}. Ideas were generated.

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p<>{color:#000;}. Entrepreneurs converted from being contractors.

Generally speaking, most entrepreneurs fall under the ‘inspired’ category, some fall under the ‘generated’ category and only a few fall under the ‘converted’ category.

There are plenty of examples where chance and circumstance present the spark of a great idea.

[][] Inspired – where the idea comes to you

The entrepreneurs in this group shared their stories on how they gained insight into something and discovered a good idea that they then turned into successful businesses. In some cases they were actively looking for their next business, while in others they just came across something which seemed too good an opportunity to miss.

James Fellows
Founder Dict8

One such example is the story of James Fellowes (founder of Dict8). James harboured an ambition to branch out with an original business idea. He didn’t particularly mind what it was or what sector it would be in; just something he knew he could get his teeth into and be a real business opportunity. His inspiration came after many months in the ideation phase.

One night at a party, he got talking with another of the guests, Mike, who turned out to be a top NHS doctor (the NHS is the UK’s publicly funded health care system). James asked Mike what challenges he faced at work and what he thought could be improved. Mike told of his constant frustration with how long it took to get his medical notes digitally recorded by pools of expensive medical transcribers contracted by the NHS, and how he felt something should be done about it. James slept on that for a while, did some digging, and discovered there were hundreds of trained transcribers across the country who wanted more flexible working hours to fit around their home lives, and who would prefer doing the work outside of normal working hours, including late at night.

Dict8 was born as one of the first cloud-based service providers of its kind, providing a secure place where doctors upload their dictations onto a platform so that trained medical transcribers can remotely login and get the work done. Now Dict8 supplies its services to much of the UK healthcare industry and has over 3,500 UK based transcribers on its books. Since its launch, around 15% of the UK population have received a medical letter transcribed using Dict8.

To our other entrepreneurs, there was nothing unusual about James’s lack of prior experience in the medical sector. Having spent many months keeping his mind open and pliable – and exploring a wide variety of sectors and ideas beforehand – James was primed to recognise the otherwise throwaway insight offered by Mike, and turn it into a real business.

Kiyan Foroughi
Founder and CEO of Boticca.com

For Kiyan Foroughi his idea came during a Christmas break in Marrakech. While exploring a souk in the Medina quarter, a chance encounter with a local man made him realise how difficult access to distribution was for up-and-coming designers. This gave him a real itch to scratch and so, back home, he started his research. A couple of months later he knew exactly what to pursue, turning Boticca into an international online marketplace to solve the challenge of independent designers everywhere, and open up a world of new goods for buyers around the world.

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[] Generated – you have a specific framework to use

This approach is most often followed by entrepreneurs with a bit of experience under their belts; who are clear about how to identify a market opportunity and whether there could be a clear business around it. It takes a more formulaic approach to the ideation process and is almost always executed alongside another person or as part of a small team.

Dough Scott
Founder of Potential.co.uk

A good example of the ‘generated’ idea is illustrated by Doug Scott, founder of Potential.co.uk, a company that has launched and run multiple internet businesses over the last 20 years. He explained how he and his team arrived at their chosen ideas using a structured process:

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p<>{color:#000;}. A small team starts with 300 ideas that are a collection of gathered ideas plus things they’ve seen on the web.

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p<>{color:#000;}. Each idea is scored on different categories as part of a set methodology.

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p<>{color:#000;}. Based on these scores, the list is reduced to 40 ideas.

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p<>{color:#000;}. One week is spent arguing to reduce them to the best 10 ideas.

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p<>{color:#000;}. The 10 ideas are tried, and analytics used, to test if anything interesting happened.

#
p<>{color:#000;}. The best performing idea is the one they finally pursue as a business

[][] The Serial Entrepreneurs Idea Framework

Based on the insights of the serial entrepreneurs, here is a framework that you can use to help find the right business idea that works for you. It builds upon the ‘inspired’ category of ideas mentioned above, which is the most popular way that new businesses are formed.

[][] New Experiences

• Make an effort to have new experiences and explore old ones. It could be some travelling, learning a new skill or going to exhibitions in completely unrelated sectors to what you’re normally used to.

• A change of scenery gets your mind out of its comfort zone and stimulates creative thinking. This could be something as simple as a countryside walk or a day out in a new town.

[][] Talk to people

• Go to conferences and meetups on a wide variety of topics, and start talking to people you find there about what they’re involved in and the challenges they’re thinking about.

• Reach out to others working in a domain you’re exploring, or find experts in their fields. You’ll be surprised how keen they are to talk to you about what they’re doing and the interesting avenues for further research that this opens up.

• Find like-minded individuals who are also going through the ideation phase and are looking to start a business. They will bring unique perspectives on things you might not even have considered.

[][] Read

• Consume and read everything and anything; newspapers, magazines in different sectors, books, blogs etc.

• Read up on market research to identify the latest trends and insights.

• Don’t get fixated on business guides or ‘how to make it rich’ books. While they may inspire you, they are unlikely you help you progress down the ideation route.

[][] Build on what you know and love

• Based on the sector you’re already in, find something that can be done better. You’ll often have colleagues in that space who you could convince to join you.

• Do something you are passionate about. Do something that you love.

• Just remember that something you love, and that may even be a hobby, might not necessarily represent a real business opportunity.

[][] Exercise new thinking

• Find ways to ‘come out of left-field’. Think unconventional thoughts.

• Do things that excite you and explore them! Something may just come out of it. Take a moment to create an oasis of time and space for consciously exploring things, then stop and let your unconscious mind do the work while you get on with other things for a while.

• Be instinctive. Sometimes you just seem to find the idea by trusting your instinct.

[]Filters

What happens next is that you start generating (or being inspired by) so many ideas, that you don’t know what to do with them all. Each of our entrepreneurs has a way of applying filters to narrow them down to one business idea.

In very basic terms, successful entrepreneurs go from the ‘ideation zone’, where they come up with ideas, to then deciding which idea to work on, before focusing single-mindedly on this idea in order to make it work. In the ensuing process they turn off a mental switch to stop being distracted by any continuation of the creative phase; at least until they’ve quickly proven whether the market really wants what they’re trying to build.

There are two main elements to the filters serial entrepreneurs use: the ‘personal filter’ and the ‘business filter’.

The personal filter answers the questions:

• Am I passionate enough about this?

• Am I (or my initial team) the best people to do this? Do we possess the necessary deep domain knowledge and/or skills for this?

• Am I prepared for it failing, and happy with the risk / reward balance?

The business filter answers the questions:

• Is there initial evidence that the market wants this, and that it’s a clear opportunity?

• Is the timing right? Is now the best time?

• Is it a growing sector; is there a trend here?

• Is this going to be feasible to build? (cash required, time to create etc.)

Full ‘YES’ on all questions in the filter

While you’re aiming for a yes answer on all questions in the filters, at the same time you have to accept that it isn’t quite as black and white as that. Dealing in different shades of yes and no is the reality of an entrepreneur. Our serial entrepreneurs handle this by mitigating risk, assessing risk and rewards (see chapter 1) and then taking a leap of faith. You don’t always know the answer. After taking a the leap of faith, our serial entrepreneurs always move forward by testing and iterating on their business idea (chapter 3).

[][] Summary Points

• Serial entrepreneurs use two types of filters to decide on their business idea: the personal filter and the business filter.

• The personal filter answers questions like: Am I passionate enough? Am I (or my initial team) the best people to do this? Am I prepared for it failing and am happy with the risk / reward balance?

• The business filter answers questions like: Will this idea make a good business in the market? Is the timing right?

• Serial entrepreneurs either became inspired, generated their idea, or converted from being a contractor into an entrepreneur.

• Do things that excite you, and explore these. This will help you get to your idea.

[][] Worksheet

Remember the area that you’re passionate about. What are some of the challenges people face in this area?

Your answer:

How can you create an oasis of time and space to consciously explore things for yourself? What can you do to set this up?

Your answer:

Think of an idea that you have for a venture and write it down below. Take this idea through the filters.

Your idea:

Am I passionate enough? [ YES / NO ]

Am I (or my initial team) the best people to do this? [ YES / NO ]

Am I prepared for it failing and am happy with the risk / reward balance? [ YES / NO ]

Will this idea make a good business in the market? [ YES / NO ]

Is the timing right? [ YES / NO ]

[][][] Chapter 3: Validating your Business Idea

Validating your business idea is the final key stage before you can start scaling your operations. It’s so key that Simon Murdoch (founder and managing partner at Episode 1 Ventures) asserts that, “Before you start talking to other people about what you are doing, you are not taking a market centric approach. In other words; once you have an idea, you need to immediately start talking with customers, test your product and start learning about the market.”

Why is validating your business idea so important? The reason is that not all ideas are good ones, and it’s a common trap people fall into time and time again; spending too much time and energy on the wrong thing or in the wrong direction. You don’t want to spent time and money on building a product that no one wants. Working with customers to validate your business idea is the right way forward.

It’s so easy to get emotional about something and discard any evidence or feedback you get, largely because part of you is saying, “They are all wrong – and I will prove it.” While this can sometimes be the case, it’s extremely rare.

Typically our entrepreneurs have a standardised approach to taking an idea, testing if it’s something the market wants, refining it based on feedback, and then either continuing or going back to the start to repeat the process with something new. This is displayed in the diagram below.

[][] Idea = Solution

Previously we’ve discussed how you can get or find your idea. After you’ve found it, you need to ask yourself: is my idea really a valid solution to a problem? You should see your idea as the solution to a problem that people experience.

If your idea is not a valid solution to a problem that people experience, it’s very unlikely that people will pay you money. Hence, it’s key to find out what a valid problem is. A valid problem is one that is happening for enough potentially paying customers, and that enough of them care about getting a solution for that problem.

It’s important to note that all successful businesses have validated their product in some way. They don’t just emerge from an act of randomness that entrepreneurs know how to repeat in order to create the next profitable company. However, the serial entrepreneurs do have a common set of actions that they undertake as part of their validation processes.

When validating your business idea it’s important to get clarity on the customers, their problem, and your solution. This is often referred to as defining a CPS, or Customer-Problem-Solution.

Let’s have a look at Dict8. Dict8 is an online service where doctors record their notes via dictaphones and then upload their audio onto an online platform for trained transcribers to transcribe at times convenient to them. Here the customers are hospitals and medical doctors. The hospitals and medical doctors are experiencing problems in finding staff to type up transcripts and deliver the written transcripts in time.

Another example is Kopi, an online coffee subscription service. For Kopi the customers are households and coffee lovers. The households and coffee lovers’ problem is that they find find it time consuming to get freshly roasted, great tasting coffee into their homes.

When starting a business it’s important to write down: Who are the customers? What problem are they experiencing?

[][] Customers

It’s important to test with real end users/would-be customers. You need to zoom in and create a customer profile to make sure you’re focusing on the right customer segment. Let’s look at an example customer profile for Kopi subscription coffee.

Customers:

• Coffee drinkers who buy a subscription online for getting coffee delivered to their door.

[_ Demographics:_]

• Language: English speaking.

• Location: Living in the UK.

• Age: 20-60 years.

Desired characteristics:

• Have money to spend on coffee.

• Have experience ordering goods/services via apps or online.

Some of these demographics could be overkill. So in your own case decide what level of detail you require.

After you’ve defined the problem and the customers, it’s time to validate whether the problem you’re trying to solve is really a problem, and find out if customers are willing and able to spend money on it. It is an unfeasible business idea to solve a problem that is not, in fact, a problem to real people, or to fix something and have no one willing to pay for it.

[][] What to validate?

After gaining more clarity on the problem and the customers, you can start validating a solution to the problem that the customers have. The sole purpose of validation is to test the demand; to see if there is an appetite for your product. No appetite means you can’t earn money with this idea in this space.

Serial entrepreneurs validate by creating a very small test. They find out what is the smallest most minimal way of creating something of value to customers.

Andrew J Scott
Founder of Rummble Labs and Playtxt

A go-to-market strategy is all about breaking up the journey to the ultimate vision of your product or service, into baby steps. What is the smallest chunk of value you can deliver to users/customers to solve a problem, which someone will find useful on an ongoing basis? Creating a test or tests which singularly or together prove that case, will enable you to get to the next stage. The next stage is either the decision to invest the time and resources to keep developing that product or service, or a critical mass of proof in order to raise your first round of funding.

The key is that this Minimum Viable Product (MVP), or first version of your product or service, must be both sufficiently comprehensive to generate enough value for your customer to find it worth using (and preferably paying for, if not directly then indirectly), but also be the first phase of a journey that will result in the ultimate delivery of your vision. Your vision must be big, bold and have the potential to dominate a market.”

So when does the validation process end? For the serial entrepreneurs, validation ends when customers pay for your solution. As Will Critchlow (founder and CEO of Distilled) puts it, “It does not count until they [customers] give you money.”

[][] Ways to validate your idea

There are a number of ways to validate your product. The serial entrepreneurs all use at least one of the following three methods for their validation. Most of them use a combination.

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p<>{color:#000;}. Talking to customers.

#
p<>{color:#000;}. Building a small prototype.

#
p<>{color:#000;}. Building an online landing page (online product test).

[][] 1: Talking to customers

One of the easiest ways is to find a group of potential customers and call them up, invite them, or interview them with a set of questions. For my Kopi venture, I invited a lot of people in my house who I served coffee to. I found it out what characteristics people were looking for in coffee and how they were currently buying it. I was able to identify the specific obstacles to experiencing good coffee at home.

Here are some of the questions that you could ask:

• How are you solving your problem right now?

• How much would you be willing to pay for someone to do this for you i.e. an imaginary ‘helper’?

• (Propose your solution) What do you like about this? How would you use it?

• What do you dislike?

• What needs to be improved?

By using these questions, you’ll get great feedback. But be mindful as well; don’t just do what potential customers say, or take comments too literally. Use their feedback as a benchmark to improve something and then test again. One or our entrepreneurs told us that after building something a potential customer requested, he demonstrated the improvement to them. The potential customer said, “Ehhh nah, no thanks.” Make sure you keep testing what potential customers say before doing exactly what they want!

[][] 2: Building a small prototype

The smallest way to create a prototype would be to draw something on paper and then show it to people to gain their feedback. This low-tech approach is what one of our serial entrepreneurs does habitually, even when the concepts are inherently high-tech, such as a new smartphone app. He often sketches out his small prototypes in pen and then heads off to Starbucks to do product validation. There, he asks people from the appropriately matching demographics to give him their honest opinion (obviously he has to pay for their coffee!) which he listens to intently. This method works well and it’s recommended to keep things friendly and informal. A really good way to run such sessions is by offering potential customers two different sketches or potential products, and learning which one they prefer and why.

Sketching a prototype isn’t always the ideal way to validate your idea. The natural evolution from this approach is to create a small prototype website and test how customers react to it. Creating live prototypes takes more work than doing it on paper. However, if it’s small enough, you can likely do it by yourself. In Kopi’s case I started to take some orders, monitor demand and study what customers did. These insights led me to adapt my business, and I kept doing this until it became profitable.

[][] 3: Building an online landing page (online product test)

The two previous methods are relatively straightforward, but there’s an even quicker way to validate products: building online landing pages.

The most basic setting would be the scenario where you create a test website that sells a product. It either involves you really selling a product or making it ‘look’ like you’re selling a product. Making a website that looks like you’re selling a product allows you to monitor how customers are interacting with it. This method involves the use of monitoring/analytical tools to observe the demand.

Kiyan Foroughi
Founder and CEO Boticca

I launched a very low-cost alpha version of my idea and drove some minimal usage to it to start seeing whether there was appetite for the product, and whether my initial assumptions about the business would hold.”

The illustration below explains how this would work. There are three steps:

• Step 1: Create an online advertisement that sends traffic to your website.

• Step 2: Create a test website that ‘sells’ your product.

• Step 3: Monitor people who click the buy button (or any other interaction).

 

Step 1. It’s simple to send traffic to your website via Facebook, LinkedIn, Twitter or Google AdWords ads. You only have to spend tiny amounts to see how customers behave.

It’s really important to make sure that you match the messaging of your ads with the target group. If you send people who look for “tennis shoes” to a website that sells “football shoes” they are unlikely to purchase anything. Making sure the ads match with what you are offering is key.

Step 2. Creating a website that sells a product can be done by using any online website creator such SquareSpace.com, Wix.com, Pikock.com or other online tools.

Step 3. There are various ways of measuring the amount of people that click the buy button or do any form of interaction on the website. This can be done with Conversion Tracking from the online advertisements. Examples include, Google Analytics, AdWords Conversion Tracking, Twitter Conversion Tracking etc.

The website could be augmented with an online survey. There are many good ones out there. Some examples are Typeform, Wufoo, Google Forms etc.

It’s recommended to ask for an email address as a minimum, just in case your online test does not (yet) sell your product. This is so you can email these customers later on or inform them about your launch when ready. A more sophisticated test could include a survey that asks questions revealing more about your customers and what they look for. Make sure you comply with data protection laws when dealing with personal data, even though they aren’t customers yet!

Creating online product tests is a powerful method, but does require continual tweaking and learning.

Matt Wheeler practised this method when he created Driftrock.com. Starting out, they were struggling to make their model profitable. However, by changing the online strategy, and the money spent on advertisements, they were able to find way to become profitable. The rest is history.

[][] Things to avoid

Here’s a set of common pitfalls to avoid, based on the experiences of the serial entrepreneurs:

• Avoid a lack of clarity on the problem and solution you offer.

• Avoid a lack of clarity on your ideal customer profile (demographics and desired characteristics).

• Avoid skipping important validation steps.

• Avoid building a product without validation, or validating with an audience that only partially matches the customer profile.

[][] Summary Points

• Validating your business idea means that you have to get out and start talking to people. Before this happens, no real learning takes place.

• All serial entrepreneurs perform product validation. They don’t skip this. Ever. Skipping this leads to problems.

• The business idea is only validated when customers give you money.

• The serial entrepreneurs use one of three methods for validation, and often a combination of these: (1) Talking with customers, (2) Doing a prototype and (3) Online validation.

[]

[] Worksheet

Write down a Customer-Problem-Solution (CPS) for your idea.

Customer (include some specifics / demographics):

Problem:

Solution:

What’s the simplest way to start interacting with your potential customers to learn more about your Customer-Problem-Solution (CPS)?

Your answer:

What’s holding you back on setting up chats/meetings/calls/a website to validate your Idea with your potential customers? How will you tackle this?

Your answer:

[][] Recommended Resources

Websites:

• Create products that people love by validating your idea first, Hiten Shah

https://hitenism.com/business-ideas/

• The A to Z Guide to Getting User Feedback Before Launching Your Product, Joe Garza:

https://www.fi.co/posts/17991

• Books:

Talking to Humans, Giff Constable

The Lean Startup, Eric Ries

The Mom Test, Rob Fitzpatrick

Note: The Serial Entrepreneurs have no connection to these authors or resources.

 

[][] Chapter 4. Building the Team

Amazing businesses are rarely build by just one person. Starting a company today requires a lot of work to be done in a very short space of time, because a competitor is only a few months behind you and opportunities don’t last long. This means that when you’re starting out you need to have a team around you to build your business with.

This can be split into two stages:

#
p<>{color:#000;}. Having a founding team to get things off the ground.

#
p<>{color:#000;}. Growing a larger team and scaling up.

[][] The Founding Team

Creating your venture starts with finding your co-founders to create your ‘founding team’. This is often tricky for first-time entrepreneurs because they don’t know what a good team looks like so have nothing to compare it to.

The founding team should share the same core values as you, and believe in the same mission. This gives you a common foundation to build on. They should be prepared to put the same level of time, commitment, and money into the venture as you, which means being honest and upfront with each other about your personal circumstances and feelings.

The ideal number for a founding team is two or three. Any less than that and you’re just on your own, while any more creates too many different opinions early on. With two or three you can share the big workload tasks such as writing the business plan, building the product, doing market research, finding an office, managing cash flow, and a bunch of other things you’ll find yourself needing to focus on.

It’s great to discuss and bounce ideas off each other too, and the support that you will get from ‘not being in this alone’ is often underrated. Entrepreneurship can be a lonely endeavour with lots of knockbacks, so truly having someone you trust and respect helps you get through those periods together.

This naturally leads to how you actually find your co-founders and determine whether they’re the right fit. Start with the people around you now who are perhaps in the same company as you, are one of your suppliers, or a fellow student.

When asked about how to get the ideal founding team together, our serial entrepreneurs focus on the following three things:

#
p<>{color:#000;}. Work with great people who you’ve worked well with before.

#
p<>{color:#000;}. Ensure founding team members balance your skillset, but also share similar values.

#
p<>{color:#000;}. Don’t start your business with friends.

1: Work with people who you’ve worked with before

In an ideal world, you’ll have a series of people around you who work great together and who move around in a team. Unfortunately, like the movie industry which constantly pulls together different teams on new projects, this is rarely practical. Great people are always in great demand, which often means someone you want to work with might be working on another project or have personal circumstances preventing them from joining at the present time.

This is especially true if you want someone you know from a previous job. You may have worked really well together in the past, but perhaps they don’t share the same level of risk tolerance as you and want to stay in the corporate workspace.

This means you’ll likely end up spending your time amongst other people who are also looking to build businesses and actively pursue co-founders, some of whom might even be taking your former colleagues out to drinks to convince them they should make the leap with them.

Before diving into a venture with another person, you should find out what it’s like to actually work with them. The best way serial entrepreneurs do this is to get going on some mini projects together right away. This could be something as simple as, “Why don’t we spend 2-3 weeks building this component of our product, or formulating a marketing strategy together?” If it goes productively, and it’s clear that you complement each other’s skills, then you may have something.

Don’t be afraid to end things if they’re not going well, you’re not being productive or you generally dislike the experience. It’s easier to break up amicably early on than try to force it and end up with a stickier end. If you all go in at the beginning with this same perspective then there will be no surprises and no pressure to do otherwise.

2: Ensure founding team members are not identical to you but do share similar values

Serial entrepreneurs stress the importance of finding people who balance your skillset and share similar values.

Ashley Friedlein
Founder of Econsultancy

You should ideally look for people who have complementary expertise that will allow you to balance your own skillset, but at the same time these people should share the same values as yourself as this is of the utmost importance in business. Starting a business with someone that does not have the same values will not work in the long run.”

Guy Westlake
Founder of Lavanda

The initial team you make will set the tone of the company culture for all that is to follow, and will be crucial to helping you recruit and retain talent.”

3: Don’t start your business with friends

This principle is pretty clear. Serial entrepreneurs strongly emphasise the importance of never starting a business with friends. There are no exceptions to this rule. Not only does it change the very nature of your friendship, but just because you like someone in a social setting does not mean you will get on well at a business level. It’s not uncommon for one friend to withhold their true opinion for fear of upsetting the other one, and that’s never good when you need brutally honest feedback early on. Don’t confuse great friendship with the enjoyment of working with another person, because they are two different things. You can get on well and enjoy each other’s company but, first and foremost, you are building a business together.

You might hear of counterexamples to this, but dig deeper and you’ll invariably find there are special circumstances underlying it.

[][] Creating a Shareholders’ Agreement

When you’re starting your business with other people, you’re all making a big investment in time and effort, and possibly money. In exchange for this everyone will take shares in the company so, when doing so, you must agree to a fundamental set of principles governing how that will work. This is done in the form of a Shareholders Agreement that documents who owns shares and what the rules are around owning them.

Let’s take the example of a founder who leaves the business after a few months. What should happen to their shares? You would have a clause in the Shareholders Agreement around this which discusses something known as a Vesting Period. This Vesting Period is typically three years. In practical terms this means that if one of the founding team members left after year one, they would only get one third of their original allocation, with the remainder being put back into the company for redistribution.

It’s tempting to think that you don’t need a Shareholders’ Agreement right away because you’re all getting on really well and it seems offensive to ask everyone to start signing documents. This is a mistake. Things can go wrong in business at any time, and often do. Without exception, every single serial entrepreneur has experienced this and is mightily relieved they catered for the eventuality right at the beginning.

Ensure everyone has an equal shareholding unless they joined a lot later in the lifecycle of the business. If you don’t do this, there may always be some resentment from a member of the team who thinks they’re doing more work and doesn’t understand why they don’t have the same as everyone else.

Take the long view; even if one of your co-founders joined three months after lots of initial product building or planning, think about how valuable they might be over the next 10 years. Is the three months they missed going to be significant enough to squabble over a few percentage points of equity?

[][] Building a larger team

You’re probably wondering why you should bother thinking about this when you’re just getting to grips with putting a founding team together in the first place. Once you know you’re creating something people want, it’s amazing how quickly you’ll need to bring in extra people and start building that team. Serial entrepreneurs believe it’s never too early to at least start thinking about this process, and stress the importance of always looking for great colleagues and new talent.

Andy McLoughlin
Founder Huddle and venture partner at SoftTech

The longer you wait to start hiring people, the more restricted your business will become as you start to run out of resources. Hiring should be done as soon as possible when it makes sense for the business.”

It’s important to make sure you don’t let yourself (as a founder) be the bottleneck to growth. If you’re missing a required skill when the business starts to grow, don’t muddle through it yourself; recruit it immediately. Make sure you are working around your own weaknesses. For example, if you’re not a developer, and you need development resources, you need to hire those first. But only hire those skills which are essential. It’s important to manage cash burn and motivate with equity/options where possible.

The next step in building your venture is getting to repeatable growth in terms of revenue. When repeatable growth is there, start hiring. This is how serial entrepreneurs grow their companies.

Matt Wheeler

Founder Driftrock and founder of Omio

Matt Wheeler mentioned that one of his big regrets with Omio was not hiring commercial talent quick enough. He had just hit on a great product/market fit, so a strong business development hire would have really helped his business to scale. But Matt opted to hire a freelancer rather than hiring a full-time ‘commercial rockstar’. According to Matt, as soon you have anything resembling a scalable, repeatable growth engine – this is the time to double down on hires to scale fast.

[][] Summary Points

• When starting your business, work with people who you’ve worked with before and got on well with.

• Find people with skills that complement your skills, and make sure that they share your values. If these values are not shared this will create problems later on.

• Don’t start your business with friends.

• Always have a shareholder agreement in place!

• Always be on the lookout for good people to join the team.

[][] Worksheet

Think about potential people to start a venture with. Write down a list of 10 people who are as good as yourself or better, and share the same values as you:

Your answer:

With this list of people, think about how they will balance your skill set:

Your answer:

Write down three mini-projects or tasks you could carry out with potential co-founders to evaluate how well you work together:

Your answer:

 

[][] Chapter 5: Structuring your Venture

If you think about this in the right way, and do some initial preparation, you’ll already be ahead of the game. These are things which are common to every business.

[][] Create Milestones

What you’re essentially doing is going from an idea and vision, to a successful future outcome. You can’t do that right away, so you have to divide it into a series of milestones that you can knock off one by one.

Think of each milestone as writing a chapter of a book, and stay focused on getting to the end of it having achieved or proven something in particular. Each time you’re trying to learn something new about your product and customers, and remove a layer of risk.

Imagine the idea you’re passionate about is to build a craft brewery, and that your vision is to be the number one selling beer in London within five years. You might set your first milestone as, “Show we can make one beer that people like, remember, and want to buy again”. Your next milestone might then be, “Prove we can do this at scale, and that the economics make sense.”

All our serial entrepreneurs achieve this level of focus and remove any distractions from completing their current milestone.

[][] Time, Space, and Tools

You may be doing the first stages of your business while working elsewhere, or you may have quit your job to focus all your efforts on it. Whichever path you’ve chosen, have a clear time when you work on your project on a regular basis. Know when you’re most productive to optimise your day. Some of our entrepreneurs said they worked best on product and creative challenges in the mornings and then left the afternoons for communicating and selling. As with anything, if it’s a regular time slot you always commit to then it’s easier to make progress.

Space is very important as where you work can massively increase or decrease your productivity. Some people can work well at home, while others like the buzz of coffee shops or other people around them. Remember that you’ll need reliable access to electrical power and the Internet, as well as a quiet place to make phone calls. Ultimately you’ll need to find space to think and actually do things.

A big trend has been the rise of coworking spaces where you can rent hot desks as you need them, or fixed desks and smaller offices if you’re willing to pay a bit more. All of these have flexible one month contracts which are perfect for when you’re just getting started and don’t know how the next few months will pan out.

Whatever you chose, allocate a regular time and space and stick to it.

There are some amazing tools to enable you to work from anywhere. You can collaborate with others via online software like Google Docs and Slack, access your files from anywhere with Dropbox and Google Drive, and communicate remotely with Skype and Google Hangouts. You can access all of these from your phone or tablet, and never be out of the loop.

We’re no longer in a world of ‘9 to 5’ where you sit in a cubicle on a lumbering desktop computer. Today’s entrepreneurs are just as likely to be on a beach with their iPads, checking in with the team on Slack.

[][] Legal and Admin bits and bobs

You’re always going to need a company bank account and certain legal documents. They’re vitally important and you need to understand them all, but at the same time you shouldn’t fixate on them. After all, your main role is to build the business and hit your next milestone, focusing on your products and customers.

Serial entrepreneurs will very quickly surround themselves with trusted advisors to take most of this work off their hands. A good accountant will set up your company (registering at Companies House), apply for VAT (if you need it), issue your first company shares, and do the bookkeeping for a modest monthly fee. Getting friendly with your local bank manager is never a bad thing as you want to eliminate as much red tape as you can, and eventually spend as little time with the bank as possible. Finally, a good lawyer is a must if you’re going to raise any external investment or bring on other shareholders in some capacity. All will work on a fixed and capped rate if you ask them.

As you grow, one of the top hires to get is an Office Manager who’ll take a lot of administration off your hands. They can handle everything from making sure people have chairs to sit on, to optimising your electricity bill, ensuring new hires have signed their employment contracts, and ultimately being your right hand for all the minutiae of day-to-day activity that building a business entails.

Remember to focus your time, energy, and money only on the things which are going to make the biggest difference to your business succeeding or not. You could dedicate two hours of your time entering expenses into your financial software, or you could instead spend it getting more customers and finding ways to delight them. The ability to prioritise effort is a common trait of every single serial entrepreneur.

Matt Wheeler
CEO of Driftrock

Matt Wheeler believes it’s important to hire people to manage administrative, accountancy and law work as quickly as possible, and at all stages. Work with virtual PAs, accountants and accounts lawyers that are willing to work on thin budgets.

Once the admin starts piling up, hire an office manager/finance manager you trust. These hires are crucial for removing tasks that don’t necessarily add value to the growth of the business, but just need doing.

[][] Don’t be afraid to ask for help

You don’t know everything and you can’t do it all by yourself. People are often more approachable than you think, especially if you ask them in the right way. There’s always someone with more knowledge or experience than you in the space you’re entering, so why not ask them for their advice?

LinkedIn is a great tool for finding people who could help you, as are referrals from your existing network. If, for example, you’re thinking about a business that will involve packaging and posting items, then look for someone who understands fulfilment houses and is in this kind of business already.

Sending an informal and personal message works best. Offer to call them for 15 minutes or to take them out for a coffee. Be prepared and very focused – you need to be conscious of their time. Follow up afterwards summarising what you learnt and thanking them for their help.

One example is when I was exploring a new industry. I didn’t have any knowledge of this particular sector and was keen to explore some specific industry reports. These reports were expensive; hundreds of pounds. I posted a message on LinkedIn to see if anyone had access to these reports, or if there were any people in my network with deep experience in this industry. I promised a coffee in return. Sure enough, someone got in touch to help.

As you build your team you’ll find more people like this, with the skills and experience to help you, and quite probably a team of investors and advisors too. Still, never forget to keep reaching out further and asking for more advice and help with specific things you’re trying to do. The worst they can do is say no!

[][] Have a Plan

The reason why you’re often told to create a business plan is to help that person (e.g. a potential investor) establish whether you’ve thought everything through and done enough planning to get going. It’s often the case that these are too detailed in the beginning and you’re making a lot of assumptions which will change constantly. In fact, most plans are out of date as soon as you’ve written them.

Start with trying to put everything into 10 (yep… 10) slides, that addresses the following seven key points:

#
p<>{color:#000;}. What is it you’re doing? Why do you exist?

#
p<>{color:#000;}. What does the market look like currently and what’s the opportunity you’ve identified?

#
p<>{color:#000;}. What’s the product you believe will enable you to take advantage of this opportunity?

#
p<>{color:#000;}. Why are YOU the best people to make this succeed?

#
p<>{color:#000;}. How does the business model work in terms of the economics? What are the key levers?

#
p<>{color:#000;}. How will you let people know about it and get market traction?

#
p<>{color:#000;}. How will you execute it and what will you need to hit each milestone (money, time, people…)?

Whether you’re going to raise money or not, you should build this plan for yourself and any team you have. Constantly review and revise it to keep you on track.

[][] Summary Points

• Serial entrepreneurs set milestones and so should you.

• Serial entrepreneurs use time, space, and tools to their advantage.

• Don’t do the busy work; get the legal and admin bits and bobs done by someone else.

• Asking for help is more than just OK. Make sure you ask for help.

• Always have a plan, so create one (even though it will change).

[][] Worksheet

Identify key milestones for your venture.

Your answer:

Identify one thing that you need help with and identify a person who can help here. Can you schedule a coffee?

I need help with:

I will schedule a 15 min coffee with:

Make a plan based on the 7 questions listed in this chapter.

What is it you’re doing? Why do you exist?

What’s the market look like currently and what’s the opportunity you’ve identified?

What’s the product you believe will enable you to take advantage of this opportunity?

Why are YOU the best people to make this succeed?

How does the business model work in terms of the economics? What are the key levers?

How will you let people know about it and get market traction?

How will you execute it (milestones) and what you need to hit each one (money, time, people…)?

 

[][] Enjoyed the eBook? Share it!

Check out our website www.TheSerialEntrepreneurs.co with more information on how to build startups.

On our website you’ll find our free course ‘5 Huge Mistakes First-Time Entrepreneurs Make Whilst Fundraising’. This course will help you to get closer to your startup investment.

Thank you for reading!

Philip

[email protected]

@PJWilkinson

[] Acknowledgements

A big thank you to all of the serial entrepreneurs who participated, and to David Evans from Content Dev (www.thecontentspage.com) for his help editing.


How to Make the Leap and Build Your First Startup

60 pages of secrets and guides from the best Serial Entrepreneur in the world. For the first-time ever, The Serial Entrepreneurs are sharing their secret playbook. The Serial Entrepreneurs are 35 of Europe’s leading entrepreneurs who have founded companies such as Amazon UK, Graze, Kelkoo, LoveFilm. They’ve never had the time to write books or articles in order to share their stories and experiences from idea to multi-million exits; until now! You want to make the leap but don’t know where to start, perhaps you’re in a full-time role now, a freelancer, or just started out on your own. You’ve always dreamed about setting up your own business but worried about failing, how to do it with limited money in the bank, or how to balance your current commitments and responsibilities by doing so. You’re not alone.

  • Author: Philip Wilkinson
  • Published: 2016-10-28 17:50:12
  • Words: 10773
How to Make the Leap and Build Your First Startup How to Make the Leap and Build Your First Startup