12 Extremely Useful Tips for Building a Startup

Has the thought of building your own startup ever crossed your mind?

You should consider that 9 out of 10 startups fail.

I'm one of the co-founders of Endtest.

Below are 12 extremely useful tips for building a startup.

1. Educate yourself

If you're a technical person like me, the first thing that you would do after you get your idea is to start writing code.

This would be a mistake and you would most likely waste a lot of precious time.

Most first-time founders make a lot of expensive mistakes,that you can avoid if you dedicate your first 2-3 days to reading about how startups work.

1.1. Read The Lean Startup.

A book written by Eric Ries that provides a scientific approach to creating and managing startups and get a desired product to customers' hands faster.

I noticed that investors tend to ask if you read this book.

1.2. Read Paul Graham's blog.

Paul Graham is the co-founder of Y Combinator, the influential startup accelerator behind Dropbox, GitLab, Airbnb, Stripe and many more.

His blog is basically a collection of essays.

Some of my personal favorites:
Startup = Growth
The Anatomy of Determination
Ramen Profitable
Do Things That Don't Scale
How to Start a Startup in a Bad Economy

You need to be knowledgeable, watching Silicon Valley on Netflix simply isn't enough.

2. Test your startup idea

Take the time to answer the following questions:

What problems do you want to solve?
How does your product solve those problems?
Who is your customer?
How will it generate revenue?

Most of what you write down are simply assumptions.

You need to get out and test those assumptions by interviewing potential users/customers. Start with your own network.

Because those people are your family and friends, they might just be nice and tell you that it's a great idea.

There is an interesting book about this situation called The Mom Test.

When someone tells you “it sounds great”, your first reaction should be to follow-up with “why?” It’s important to understand that someone liking your idea is not the same as buying or using your product.

3. Make sure there are no Legal issues

A Legal issue can literally kill your startup and get you in trouble.

Some things are obvious, like the fact that you shouldn't start a marketplace for selling illegal drugs.

Remember Silk Road?

But some things are not so obvious, like Intellectual Property.

If you're currently working as an employee, you probably have a section in your Employment Agreement regarding Intellectual Property (IP).

For example:

The Employee acknowledges that all Intellectual Property Rights in respect of all Intellectual Property made, originated or developed by her/him at any time in the course of her/his employment with the Employer shall belong to and vest in the Employer absolutely to the fullest extent permitted by law.

Roughly, that means that if you start working on an idea while you are employed, your employer might automatically own that idea.

This depends in which state or country you live in.

If you're in California, the IP belongs to the employer only if you use their resources (company-provided laptop, servers, office space, bandwidth, time, etc).

There are also some states in the US where the law is not on your side in this case.

If you're living in the European Union, you're mostly protected by that "to the fullest extent permitted by law" portion, but the law isn't the same for all EU members.

This doesn't mean that you should quit your job in order to start working on your startup idea.

There are a few solutions.

If you haven't started working on your idea, you can ask your employer to remove or modify that IP section from your contract.

If you already started working on your idea, you can ask your employer to sign an Intellectual Property Waiver, which says that the employer is not interested and does not want any part of your startup idea.

The biggest risk for you isn't that your employer will go after your idea, because it's highly unlikely that they will.

But if you ever plan to raise money for your startup or sell it, you will go through a Due Diligence process which will uncover that IP clause and no one will risk jumping in the boat with you, unless you have a written agreement from your employer or former-employer.

This almost happened to Viaweb, the startup co-founded by Paul Graham.

You can read that story here.

Do not make the assumption that your employer will agree to sign anything, especially if you're working in a huge enterprise.

Talk to a Lawyer who works with Intellectual Property Law in your state/country.

Similar to medical symptoms, you might not find the right answers online.

4. Launch early and talk to your users

The worst mistake that you can make is to work on something that no one wants.

The only way to validate that someone actually wants to use your product is to launch it.

Launch a basic MVP and get feedback from the users.

Improve your product by using that feedback.

Repeat. Repeat. Repeat.

You need to give users a quick way to reach you.

A great way to do that is to implement an online chat on your website.

We use Drift.

5. Understand the business model

Knowing if you're going to be a B2B (business to business) or B2C (business to customer) can help you understand what your users might need and how you're going to grow.

For example, maybe your idea is to use AI to detect people who are wearing hats.

A business is more likely to need that solution instead of a person.

Knowing if you're going to be B2B or B2C will also help you understand what functionalities to implement.

For example, a B2B product doesn't need to have a "Sign up with Facebook" option.

And a B2C product won't need an integration with Jira.

There are also cases where you can be both B2B and B2C, like Facebook. Their users are individuals, but they get their revenue from businesses.

6. Take Marketing seriously

The biggest lie I've heard about startups is this one:

If you build it, they will come.

If you ask startup founders how their product became so popular, some of them might answer:

Our product was so fantastic that users just jumped in. It grew organically.

That is probably BS.

Let's take Slack for example.

They had 8000 people sign up on the first day.

Their fantastic growth started mostly because one of their founders is Stewart Butterfield, who was already famous for creating Flickr.

TechCrunch was already writing about them when their product wasn't even launched.

If you launch your product and you're waiting for that viral growth to happen, it's not going to happen.

You need to get the word out there and it's not easy.

There are lots of free resources online where you can learn about marketing strategies for your target audience.

For example, Ross Simmonds has a lot of useful videos for B2B Marketing.

You will also need to find your specific niche and learn how to target them.

For example, a startup that builds a Developer Tool will target Software Developers and the best way to do that is through Content Marketing.

7. Track everything and adapt

Some of the most successful startups out there have always been data-driven.

A few examples of what you should track:

What percentage of new visitors have signed up?
What are the channels through which you're getting the most visitors?
What percentage of active users tried the new feature?

You should compare the data for each week and measure your growth rate and figure out how to improve it.

If you're not using any analytics, you're basically shooting in the dark.

You can use tools like Google Analytics and Segment.

I would also recommend using session recorders like FullStory, they allow you to see every move your users make.

8. Be efficient and resourceful

We grossly underestimated the time it would take us to build Endtest.

We had no idea how complex the product was going to be.

But we didn't give up.

And now Endtest is the leading cloud solution for no-code test automation.

You should build a backlog with realistic estimates and double that time.

Remember, your goal is to launch early.

Even if your product idea sounds simple, you're still probably going to need the following sections:

Homepage
Sign Up
Sign In
Forgot Password
Settings
Contact Us
Terms of Service
Privacy Policy

You need to find ways to be efficient.

For example, you can use Divjoy to create a homepage.

Your first users won't care how you built your site and what languages you used, as long as it's working for them and it's solving their problem.

9. You don't have to use your own money

You should take advantage of the countless opportunities out there.

For example, if you sign up on Startup School, you will get access to $5000 in AWS credits and many other benefits.

Raising a small amount of funding from investors is relatively easy nowadays.

There are plenty of global and local accelerators that you can find on sites like F6S.

That small amount should be enough to get you through the first months.

We were lucky that Endtest was actually a success from the start and we managed to grow without raising money from investors. This is actually called bootstrapping.

We have been profitable for a while now and our monthly recurring revenue is currently 10 times bigger than it was one year ago, even with this COVID-19 situation.

10. Choose your tech stack carefully

Even if this should be the least of your concerns, it might turn out to be a deal-breaker on the long run.

Make sure that you are aware of the limitations of the technologies that you're using.

For example, you'll never be able to build a Chrome Extension that scans the files on the computer.

An interesting example is Cypress, who made a huge mistake which is still affecting them today.

Their decision to rely on JavaScript instead of webdrivers is responsible for some deal-breaking flaws:

It does not work with multiple browser tabs.
It does not work on Safari.
It does not work on Internet Explorer.
It's very difficult to deal with iframes.

And now they're suggesting over-complicated workarounds for each of those limitations.

In our case, we knew from the start that we wanted Endtest to work on all browsers, including Internet Explorer and Safari, that's why our engine is using webdrivers.

We definitely made the right call.

11. Don't be afraid to pivot

The most essential part of a startup is the team, not the product.

A team that has the ability to understand the users and adapt will eventually build the winning product.

In 1993, a student from Stanford University decided to create an online form where you could order pizza.

Restaurants didn't have computers and internet back then, so that online system would send the order by fax to the restaurant.

After completing his project, he fired up the web server, filled in the order which then got sent through the internet to the pizza restaurant.

And then he waited.

After a few hours he broke down and phoned the pizza place and said: “You know I faxed you an order four hours ago!” And the guy said: “OH, really? Let me go check the fax machine.”

It was then that the student realised this internet-fax thing just wouldn’t work because the restaurants that did have faxes were not even looking at them.

The idea that had seemed brilliant, failed.

The name of that student? Sergey Brin, who then moved on to his next idea and co-founded Google in 1998 together with Larry Page.

The moral of that story is that the team is more important than the idea.

That means that you can always pivot.

A startup pivot occurs when a company shifts its business strategy to accommodate changes in its industry, customer preferences, or any other factor that impacts its bottom line.

A pivot doesn't necessarily mean that you have to completely change the idea, sometimes you might just need to steer a little bit in a different direction.

12. Learn how to deal with investors

If you're reading articles on TechCrunch, you might get the impression that it's easy to raise money for your startup.

You might think that you just have to write some code and build a product and the investors will come running to throw bags of money at you.

Raising a small amount from investors is relatively easy, raising a larger amount is difficult.

You should learn how to pitch your startup.

Try to remember that they're mostly interested in how investing in your startup can bring them solid returns.

You should be familiar with terms such as LTV, CAC, Churn, Marketing Funnels, Growth Engine, etc.

If you read The Lean Startup, you're already familiar with them.