Founding a startup can be hard. From financing your endeavour to having a skeleton staff and navigating the legalities that come with starting a new venture, it’s no wonder that UK business only have a 54% chance of surviving beyond the first three years.
However, not every startup gets confined to the scrapheap. Despite some challenging political and economic circumstances, the UK startup scene is booming, boasting more unicorns than any other country besides the United States and China.
So, how do you turn your innovative business idea into a billion-pound company? We’ve pulled together some top tips for startup founders and although we can’t promise to make you the next Monzo, they’ll definitely provide you with some food for thought along your journey to startup success.
Have a good idea and communicate it well
Having a good idea is one thing, but having a good idea that can be turned into a viable business, appeal to (at least a portion of) the general public and offers an obvious way of making money is a whole different ball game.
"I think it makes a lot of sense for companies to think about it as a business first because in the market overall what I see is that people are building a solution that's looking for a problem, rather than coming up with a solution for an actual problem," says Reijo Pold, managing director at Innovation Heads.
"It needs to be a business and not just a tagline like 'AI machine learning' or some of these soundbites that are thrown around."
Unfortunately, the hurdles don’t stop there. The amount of traction your initial idea gets is down to how well you can communicate it to potential investors and members of the public alike. You might have stumbled upon the greatest business idea of the last twenty years but if no one knows about it, it’s never going to get off the ground.
"While pitching for advancement it's really important that companies have a clear concise pitch and documentations to back it up," says Pold. "There's a huge difference between companies who have trained and have a polished-up process and companies which, while they may have a very good product or a company behind them, can't communicate it in a concise way."
Head of strategic development at startup accelerator Founders Factory, David Hickson, agrees. He says that while funding is important, there's other things you need to pay attention to if you want to be taken seriously by investors. For Hickson, a well put together slide deck remains the most important tool in your arsenal.
Understand your market
Rule 1 of business: do your research. Before you burn through your life-savings funding a startup, you first need to find out if there’s a market for your idea and what its chances are of being successful. According to the experts, one of the biggest mistakes new founders can make is misunderstanding the size of, or other details about, the market for their idea.
"People might find a really good idea for a great product that some people will like, but once they actually get it out there they realise those people in the world are 1,000 not 10 million, and you need a much bigger number to build a business," says Rob O'Donovan, co-founder and CEO of CharlieHR, an HR platform for small businesses.
Try to do extensive market research in the area you'd like to launch in, as well as studying your future competitors and how you can differentiate your business from theirs. Conducting consumer research such as feedback sessions can also be useful when refining your business idea.
Some of the most successful founders have worked in the areas they wish to build a business in and this has helped them to gain a greater understanding of these industries and what would work. Of course, this doesn't always have to be the case, especially with consumer-facing products or services. But, if you don't have much direct experience of the industry you want to launch in, it may be beneficial to reach out to advisors who do.
Surround yourself with the right people
Working with your closest friends might seem like a great idea at first, until tricky decisions have to be made and you end up falling out over the colour of your logo. Unfortunately, the reality is, the people who you get on best with in real life aren’t always the best people to go into business with.
While getting on well with people at the startup stage is obviously important, their business skills and what they can contribute to the venture is more so.
"It's important to really define the behaviours in the people that you're looking for," O’Donovan says, pointing out that although most people stress the importance of a great team, it's hard to know what this actually looks like. "Some people think 'great' is about particular skills, or particular experiences, or sometimes characteristics. We've really honed in on this idea of behaviours - so what does it look like when people are really awesome in an organisation? How do they behave?
"It's understanding what those are and explaining them really clearly. You can then look to hire people that exhibit those behaviours."
Those behaviours could be anything from their enthusiasm to their public speaking ability or their ability to inspire other members of your team. It’s also important to try and make your team diverse. By ensuring that as many points of view and perspectives are given a seat at the decision-making table, it will lower the risk of your product or marketing being in anyway biased or insensitive.
"It's not so much statistics but thinking about what kind of a culture you want to build, and then really thinking on top of that, about what do people look like when that culture exists." says O'Donovan. The people you hire at the early stages can define how your company evolves so you need to be careful about who you bring on board.
Understand how to get funding
There are several ways a fledgling business can help raise some much-needed capital. Some startups with an idea for a popular consumer product may seek out funding through crowdsourcing, whilst others may seek angel investing. Some, more mature startups, may instead seek funding from venture capitalists. It is important to keep in mind however that funding from the latter is usually tied to stringent expectations about high rates of growth and returns.
In the early stages, it can be beneficial to access investment from a source that you are aligned with in terms of business aims.
"Strategic investment is someone who is vertical focused - whatever vertical or industry that you come from," says Pold. "Now that vertical focus investor, they may have one corporation who they're really well in touch with and who they're on a very friendly basis, say or who they kind of sweet deal with.
"What that means is they can then not only invest but also give the startup founder a commercial contract, which means that the technology will be provided to that big corporation, which means that instantly, not only do they have capital but they also have massive sales channels, which is very useful to help them along their way," says Pold.
Learn from your mistakes
It's rare - perhaps even impossible - that a startup will run smoothly from inception to fruition. In fact, it’s almost inevitable that you will hit stumbling blocks along the way. However, just because something doesn’t go right the first time, doesn’t mean it’s the end of the line. O'Donovan makes the point that
There’s no shame in making a mistake, we’re all human – even startup founders. However, as O’Donovan explains how a startup handles problems along the way can be the difference between success and failure. We all know the saying; insanity is doing the same thing, over and over again, but expecting different results. As a startup founder, you need to be able to set your ego to one side and be brave enough to admit when you’re wrong.
To avoid problems like this, it's again helpful to be surrounded by the right people.
"Anywhere that you see a company die, it tends to be in my view, from a culture issue," says O'Donovan. "If you have a really strong, really adaptable, high performance culture and business, you just tend to find a solution. For example, for the original idea that they launched with, maybe it turns out that the market's too small, or they can't develop the technology that they believed they could. But if you've got the right people, you tend to find that they can find another opportunity somewhere else."