So you want to build a start-up? You’ve had a bright idea. And you’re convinced it’s the best thing since sliced bread. What comes next? How do you turn a killer concept into a market-beating product or service? We look at the seven focus areas that you need to tackle to set yourself, your idea and your fledgling enterprise on the road to success.
1. Research
After you’ve had a flash of inspiration, you need to conduct research. It’s the first step towards turning that spark of an idea into a viable new product or service customers want to buy. An intellectual property search and review of whether you have any competitors offering similar products and services is a priority. If your concept already exists in the marketplace, your research lets you assess the competitive landscape and the potential unique selling point of your proposed product or service. It will also give you the inside track on any intellectual property rights (IPR) your competitors may have. If your research confirms a market opening for your idea, it’s time to shift your research focus to the proof of concept stage (POC). The POC is a rudimentary investigation — a mini project to test whether your idea can work in practice. In addition to revealing whether your product or service idea is feasible, the POC gives you an indication of how valuable it will be to potential customers. The POC exercise also enables start-ups to garner valuable internal feedback about their innovation. Findings from the POC can then be used in an elevator pitch to potential investors and other key stakeholders.
2. Elevator pitch
An elevator pitch is a short, sharp and shiny summary of your business. Having a compelling elevator pitch is an invaluable tool for explaining or pitching your concept and business to a range of audiences, such as potential investors, business partners, employees and customers. A convincing elevator pitch for an innovative product or service should:
- Describe your innovation: include information about the problem it solves, how it works and how it helps, plus any high-level statistics or data that demonstrate the value your idea can deliver.
- Explain your unique selling point (USP): communicate what makes your idea and your business different.
- Add a question: round out your message with an engaging question. This is the part of your pitch that you should tailor to whichever audience you’re addressing, be it a potential investor or an employee.
- Keep it brief: an elevator pitch should serve as a circa 30-second introduction and be no longer than a minute.
3. Prototyping and beyond
If your POC has shown you that your innovation can be made, it’s time to work on how you will bring it to life. And building a prototype is the next step on your journey towards establishing the product/market fit for your invention. Prototyping helps founders and their stakeholders evaluate how the new product or service will operate under real-world conditions. It ticks these boxes by showing how it will be built, how it will look and how it will be used by potential customers. After that comes the minimum viable product (MPV) and product/market fit stages.
MVP
An MPV is a step up from your prototype. The MPV’s purpose is to answer a simple question. Will people buy the innovative product or service you’ve created? And is it viable commercially? When you build an MPV, in essence you’re making the minimum version of your product or service and sharing it with the maximum number of potential customers. That way, you can sense check the supply and demand equation for your innovation. And if you can deliver a product or service that enough people want to use and you can supply it to them on a commercially viable basis, then the chances are you’re onto a winner.
Product/market fit
The MPV, as the name suggests, is not your final product. Reaching your final go-to-market product and service is an iterative process. It requires continual testing and learning before you finally arrive at your product/market fit. You’ll know you’ve achieved a product/market fit when your target customer base is buying, using and recommending your inventive product or service in large enough numbers to support growth and profitability for your venture.
4. Funding
To build a start-up from the ground up requires capital. And this can be in short supply for innovation-based companies, especially at the early stage. Venture capital can be hard to land at the best of times. And it’s typically the reserve of later-stage start-ups and scale-ups. When a business is in the early stages and is still working towards a product/market fit, trying to raise money by approaching venture capitalists is usually not an option.
Bootstrapping and seed funding
Most founders bootstrap their start-ups with a combination of personal savings and government grants. Asking friends and family for seed funding is another avenue to explore. This capital can take the form of a convertible debt which is effectively a simple short-term loan. The seed funding can either convert into shares once the company reaches a pre-agreed milestone or be paid back as capital with interest. Crowdfunding is another potential source of seed capital. Platforms such as Kickstarter and Indiegogo connect early adopters of new products, initiatives and technologies with the innovators creating them. Through these platforms, start-ups can showcase their POC and receive crowdfunding from backers in exchange for a prototype or MPV of the product or service they are working on. It can be a smart way for entrepreneurs to bankroll the early stages of their new innovations.
Angel Investors
It may be possible for your early-stage business to secure funding from Angel Investors. Business Angels are high-net-worth individuals. They provide funding of between $10,000 and $500,000 for early-stage start-ups in their field of interest or expertise, in exchange for a non-controlling equity stake in your business. Some, but not all Angels, offer in-kind support, including mentoring or access to their business networks. To find out more about Angel Investors, check out Radium Capital’s blog, Angel Investor vs Venture Capitalist: Which is better?
Incubators
Joining an incubator can also be an option for early-stage start-ups. Although incubators generally don’t provide funding, they provide in-kind support, mentoring and networking to help start-ups get off the ground. If you’d like to learn about business incubators and how they can help early-stage ventures, have a look at Radium Capital’s blog, Incubators vs accelerators: Which one is best for start-ups?
R&D tax incentive and R&D financing
If your business invests in R&D to develop an innovative product or service, you could claim the Federal Government R&D Tax Incentive (R&DTI), and receive a tax refund of up to 43.5 cents on each R&D dollar. The downside is your business could wait up to 18 months to receive this money. That’s why R&D financing is worth considering. R&D financing is a loan that gives you early access to your upcoming tax refund. The Radium Advance from Radium Capital is a unique form of R&D financing because it’s mass-market finance that’s entirely scalable and flexible. Any business — big or small — can apply for whatever loan amount they require and access this financing as often as they like, throughout the year. Another plus point of Radium Advances is their certainty. In a nutshell, if your business is eligible for the R&DTI refund, you can apply for a Radium Advance. And Radium’s seamless platform solution and application process means that your loan application will be approved in two business days, with the funds landing in your bank account a few days after you sign your loan documents.
5. Build a team
Sooner or later you’re going to have to hire and build a team to get your start-up off the ground. But it’s easier said than done. Most start-ups grapple with the same conundrum. They need a great team to be a success, but their venture doesn’t have the funds to hire a dream team from day one. So what are the options? Working out who you need in your founding team, the gaps in expertise, and how and when you’ll assemble the human capital you need is your first step. Following this three-pronged approach recommended by start-up experts is a good starting point¹:
- Hire and fill the senior roles initially, then expand your team when you have the resources to do so.
- Keep your company culture top of mind when you’re hiring for your start-up.
- Focus on strengthening both the internal and external relationships of your venture as you move through the recruitment process.
Once you’ve assembled your founding team, focus on communicating your company’s vision. It’s vital to ensure everyone is on the same page. Having clearly defined roles and responsibilities and being clear about how feedback is given and how the team will work together will help set you up for success.
6. Protect your venture
With your market opportunity and USP identified and your market/product fit at an advanced stage, it’s vital to protect your fledgling product or service and your venture more broadly. Take steps to protect both your tangible and intangible property. For most innovation-based start-ups, their intangible assets, namely IPR, is the top priority. IPR covers and protects any knowledge or creation. Depending on what your intangible assets are, you can protect them with IPR such as patents, copyrights and trademarks. Tangible assets include your business premises and equipment. It’s a good idea to get these valued and adequately insured. Make sure you have the licences and registrations you need in place and that you’ve lined up suitable contracts with clients, suppliers and employees.
7. Start marketing
Once you have defined your market, your target audience and settled on a distribution model and pricing structure, you can start to define your product messaging. Then it’s time to execute your go-to-market strategy by creating awareness of your product or service and generating leads to convert into sales and drive revenue. Ultimately, your goal is to maximise your market share and stay one step ahead of any competitors or new market entrants. Your product is centred on innovation, so continuing to invest in R&D is essential. Radium Capital connects innovators with the capital they need. So if you want extra capital to accelerate your R&D and ensure your products or services keep their leading-edge, why not contact one of our R&D finance specialists today?
¹https://www.businessnewsdaily.com. 2022. How to Hire for Your Business: The First 8 People You Should Hire. [ONLINE] Available at: https://www.businessnewsdaily.com/15186-first-startup-hires.html. [Accessed 11 March 2022].