Starting a company, especially a tech company, is a very difficult, time-consuming, and risky undertaking. If you’ve never done it before, it can be challenging to even know where to begin. We have received a lot of requests from prospective founders wanting a general overview of the steps involved in starting a new company.
While all startups are unique, below is a breakdown of the high-level steps we recommend prospective founders consider when thinking about launching a new company. This is very high-level and not meant to be an exhaustive list of everything that goes into starting a company. Instead, it provides a brief overview of what you can expect as major milestones and the proper sequencing of those events.
You’ll notice our first several steps are all about educating yourself before you ever launch your company. We feel very strongly that these first several steps are the most important.
Step 1: Educate Yourself
The first thing a prospective founder should do is learn as much as possible about the right way to approach new product development. As a founder, you must embrace a lifestyle of continuous learning. As you grow, your challenges will change, and you need to be able to quickly learn how to be the type of leader your company requires. Check out our blog post Essential Resources for Founders for some recommendations on books and articles to help you get started.
Step 2: Objectively Evaluate Your Idea
We say this often at MKII: don’t fall in love with your initial idea. Instead, focus on evaluating an idea objectively and finding all the reasons not to pursue it. Check out our blog post Evaluating a Business or Product Idea for more information on how to do this well.
Step 3: Explore the Problem Space
All great businesses are built around a simple focus on solving problems for customers. Don’t become obsessed with your initial product idea or solution. Become obsessed with solving a painful problem for your customers in the best possible way. Check out our blog post Exploring the Problem Space for a list of guiding questions to help you.
Step 4: Develop an MVP Hypothesis / Business Plan
Once you’re confident you have identified a real problem area that needs solving, the next step is to build out your MVP Hypothesis and business plan. These can take many different forms but essentially you want to layout your hypothesis on how you believe (based on your research so far) you can best solve the identified problem. You also will need to develop financial models, customer acquisition strategies, and more.
Step 5: Identify Your Founding Team / Alpha Customers
You’ll probably need some people to help you build your MVP and get your company off the ground. Try to keep the initial team as small as possible (based on your needs). It’s also best to have already lined up “Alpha Customers” or customers who will work with you to develop the product by providing feedback throughout the MVP development process.
Step 6: Incorporate and Setup Your Company
After you’ve done all of the work above, you’re now ready to actually incorporate your company and set up the administrative infrastructure such as a bank account, an accounting system, basic contracts such as NDAs and employment agreements, etc.
Step 7: Raise Initial Funding
In many cases, you’ll need some initial funding to get started and build your MVP. Depending on the size and scope of your project, this could take many forms ranging from just a few thousands dollars to millions of dollars in venture capital.
Step 8: Build and Launch MVP
Now you can begin building your MVP. At MKII, we follow a strict lean product development methodology that includes 10 different stages of MVP development. We spend a lot of time upfront refining our hypotheses and working with Alpha Customers to eliminate as many product assumptions as possible before we ever write the first line of code or turn the first wrench. We then build prototypes and further validate with customer feedback. Finally, we build an actual product and deliver it to real customers.
Step 9: Achieve Product-Market Fit
Before you spend too much time thinking about sales, revenue, or acquiring customers, you have to focus on getting the initial product right. Until this is achieved, nothing else really matters all that much. So continue to iterate and refine your product based on real customer feedback until you’re confident that you’ve built something your small group of initial customers truly love. For more information on how to define PMF, please refer to the resources referenced in Step 1.
Step 10: Raise Additional Funding As Needed
Once you’ve achieved PMF, you may want to raise additional funding from investors to help you continue to build on your success. Achieving PMF is a major milestone in a startup (probably the most significant one) and it represents a major elimination of risk from an investor’s perspective. As a result, this is often the moment when you start to switch gears and focus more on investing in customer acquisition to grow as quickly as possible.
Step 11: Refine Distribution Strategy and Scale Customer Acquisition
Armed with a product your target customers love and probably a little more capital, you can now refine your distribution or “go-to-market” strategy and begin investing heavily in customer acquisition. You’ll want to focus on being able to develop a scalable approach to acquiring new customers for less than those customers are worth to the company.
Step 12: Continuing Improving Product and Growing Revenue
Good product development never ends. It is a continuous improvement process that focuses on constantly removing friction from your customers’ processes and adding in functionality that improves their satisfaction with your product. You’ll also want to grow your revenues, both by increasing your number of customers as well as the value of those customers.