A bad deed is always simple but it is necessary to take much effort to bring something good and new to the world and to earn money on this. FHM closely examines all pitfalls of a startup that you will not encounter when you start your innovative business now.
Now get ready, it will be really dull because business is jolly only when it is porno business and failures happen even there. Speaking about a startup, we decided not only to enlighten ourselves about theoretical issues although this would be first of all but also invited those who felt everything in practice and even those who would explain how you should survive through the crisis with your startup. And, as a special treat, we have five commandments of kosher startuper. Read and follow.
THEORETICALLY THIS IS POSSIBLE
(visiting lecturer of Stockholm School of Economics Russia, docent of the department of strategic and international management of the Graduate School of Management of St. Petersburg University)
Policy of startups is aimed at implementation of these or those ideas and for this purpose, of course, people need resources. I am afraid that financial resources are not the central problem although many people have got used to considering only this to be significant. The central problem is rather in obtaining of a notion about the market needs. Literate specialists are necessary for this first of all.
Of course, without a bright presentation you will not persuade an investor to provide resources for fulfillment of a project.
But people often make good presentations showing that they have an idea, finally receive money and everything ends at this point. For a history to have continuation it is necessary to have clear understanding of which values a startup offers to the market and to build a business model, that is a logic of implementation of these values, on their basis. Work on defense and implementation of a project takes a huge quantity of time. That is why the startupers who finally win "marry" their idea.
After reception of resources a young company that strives for development should get overgrown by relevant processes. There are people who keep generating ideas instead of focusing of implementation of the plan. Many people are not ready to go out of the "creative" process and to submerge into condition of the most stringent discipline for implementation of the idea.
PEOPLE OFTEN MAKE GOOD PRESENTATIONS SHOWING THAT THEY HAVE AN IDEA, FINALLY RECEIVE MONEY AND EVERYTHING ENDS AT THIS POINT
Any business may encounter unforeseen risks. That is why it is better to foresee what may go wrong not only in financial aspect but also in technical or organizational one and to think about the ways of solving of hypothetical problems from the start. This is one of the elements of correct management of startups. Risk management is aerobatics that will be needed when the company starts breathing and comes alive.
In choice of a project into which it is worth while investing I would be oriented not as much at an idea as at people who are going to implement this idea. Only those who are deeply submerged into business and are aware of all possible risks can achieve success and this clause should be outlined in a business plan in detail. It is worth giving money to a team that can transform "resources" into "values," of course, with other equal conditions.
PRACTICE OF MANY YEARS
(founder and general director of Dr.Tariff)
Before starting up you own business it is important to grope what you know the best of all and for what the future clients are ready to pay you. This is extremely important because one of the main mistakes of many startupers that I have encountered is a wish to start business not in a field where they have real theoretical and practical knowledge but in the segments that either will bring more money potentially or in opinion of a startup entrepreneur are more promising from the standpoint of competition, growth etc. Pitfalls will appear fairly soon and enthusiasm for their surmounting should be sufficient for a long time without revenue and in conditions of uncertainty before you find your business model or another area of activity.
With regard to the current economic situation assessment of the value of startups on the part of investors decreases, it is more difficult to receive money from Russian investors and foreigners will hardly risk. Correspondingly, entrance into capital-intensive segments is much more difficult now. Investors expect quick return on investments and do not wish to invest much money. The latter statement is applicable to non-crisis time too and in case of economic recession investors wish to be on the safe side and in majority of cases they prefer other instruments to venture business.
Investments go mostly to the projects that have got cheaper because of the crisis or to the startups that demonstrate impressive results against the background of the crisis. In case of already developed businesses everything is understandable: if you invest money in them a chance to receive profit is bigger. An investor buys a business that is getting cheaper if he sees potential in it.
When a product has already passed the stage of seed investments and is looking for the ways of development and money is growing "more expensive" a startuper may temporarily change the focus in search for investors and start working with a strategic partner. It is possible that such partner does not allocate "cash" but helps with its resources and expertise. For example, when I went to Svyaznoy with already working service Dr.Tariff I had understanding that the retailer could be interested in the service of analysis of expenses of subscribers and selection of tariff. Why? Contracts of all operators are sold in stores of the company and appearance of a service that allows comparison of expenses in use of services of operators will help both me and the retailer. It will help me during promotion of the project and it will help Svyaznoy for strengthening of image of a company with a broad set of services "around" cellular communication and the network where it is possible to choose from several proposals of operators. We finally signed a contract with Svyaznoy and the company helped promotion of the project using its own resources. These are online services with more than 2 million unique visitors per day and retail chain to which more than 1.5 million people come daily for products and various services.
Another advice is not to expect "quick" money from the project. Of course, there may be a business model with negative turnover when a client pays in advance. A good example is Amazon. But most often a startup brings insignificant profit in the first three years since the moment of its existence. It is necessary to get ready for a situation when sale of a big part of shares of a startup, its merger with a bigger company or, for example, IPO will happen only in five to eight years in case of success of the project.
Team is an important component. Not only the founder but also those with whom he starts should have long-term vision of the project. If a programmer or designer comes to work for a salary it is necessary to be ready for a situation when such persons may quit sooner or later and at the most unsuitable moment. It is necessary to motivate employees not by a high salary but, for example, by an option for a stake in the company but not earlier than after a year of fruitful cooperation. In this case you will have certain guarantee that the person does his best because his future dividends depend on his work directly.
ONE OF THE MAIN MISTAKES OF STARTUPERS IS A WISH TO START BUSINESS NOT IN A FIELD WHERE THEY HAVE REAL KNOWLEDGE BUT IN THE SEGMENTS THAT WILL BRING MORE MONEY
GENRE OF CRISIS
(director of Digital business of retailer Svyaznoy, previously she had posts of marketing director in anywayanyday.com and travel startup in Fast Lane)
With regard to complicated economic conditions development of entire Russian business will slow down. Startups at various stages will not be exceptions. In a crisis period this will be more difficult and those who offer ideas and business projects with relatively quick return on investments and ideas that are aimed at making of everyday life of people easier will win. For example, these are services for saving of something etc.
Why it will be difficult for startups during the crisis? Any project is started from seed investments. Sometimes these are savings of the startupers but more often they try to find money in funds or at business angels. Investments of such kind are spent very quickly, in four to six month and especially thrifty young entrepreneurs manage to "draw out" investments for a year. Access to seed investments became more limited now and money grew "more expensive." In this case it is possible to advise startupers regardless of age of their business to optimize all articles of expenses in the maximal way not to stop operations of the startup in any case. In other words, they need to strive for reduction of Burn Rate.
Business should develop despite the crisis. Correspondingly, an entrepreneur needs to use the maximal efficient marketing instruments that do not require big expenses more often. For example, it is possible to mention PR and increase of loyalty of existing clients.
Even in difficult economic conditions it is possible to launch and to develop a startup. The main thing is to see the goals and the tasks clearly and to plan your activity even clearer and to look for additional opportunities in promotion of a business or a service.
In a period of more comfortable economic situation funds and business angels could invest in a project even if it looked raw but also promising and attractive in the future. Now a startuper will hardly receive seed investments or money for development if a potential investor does not see a clear business plan with several variants of development of a startup and relatively short period of return on investments.
It is important for the startupers who have already passed the stage of seed investments to switch to search for the partners that may help not with "cash" but with other resources for a whole. For example, this may be a big marketing partner that will undertake advertising and marketing, the biggest article of expenses of a startup in majority of cases.
PROJECTS WITH QUICK RETURN ON INVESTMENTS WILL WIN DURING A CRISIS
Now when you have listened to a brief course of startup you need only to pass through check of your psychological compatibility with it. Our expert Elena Vasilyevna Sidorenko (candidate of psychological sciences, docent of the chair of psychology of the department of psychology of St. Petersburg University, visiting lecturer of Stockholm School of Economics Russia, business coach) will help you to find five main qualities of startuper in you.
A starting entrepreneur should have good intuition and should be able to feel a correct direction of further actions according to the slightest external signal.
Of course, optimism and believe that circumstances will be favorable for him are mandatory for a starting entrepreneur.
Third, he should have network intelligence. This is ability of a person to establish new relations instantaneously but not to lose the old ones along with this. It is necessary to use your entire social capital to obtain financial, information, intellectual and energy support.
A starting entrepreneur should also work surrounded by people who think in the same way. Of course, sooner or later all alliances break up. As a rule, enterprising people strive for beginning of their own business. But at the start a team of supporters of an idea is a mandatory condition.
A starting entrepreneur should have an insurance. It is better to calculate all risks in advance and to outline a scenario or retreat. Then in case of a failure he will not need to panic: he has foreseen everything and knows that to do further now.
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