How to Launch a Startup and Become Successful in Silicon Valley? A Step-by-Step Action Plan.

The problem of all startups is the same. How to turn your idea into a financially successful company? Entrepreneurs want to create a successful startup, and investors want to invest in a promising project. So, the interests here completely align.

But all people are different. Some particularly creative individuals generate five ideas a day, while others can only come up with a single idea in their entire lifetime. Therefore, ideas must be taken very seriously, and before implementing them, one must honestly answer three questions:

• Why is this needed? Do you have a market?
• What is new about your idea, and why will customers want your product?
• Who will pay for this?

If you don’t have a clear, reasonable answer to at least one of these questions, the idea is clearly bad.

Examples from Our Practice

A client comes in: "I want to create an app for people in offices to meet each other, socialize, have tea after work, and connect..."

When asked, "Why is this needed? How is it different from Facebook or messengers?" — there is no answer. The niche is occupied, and nobody will pay for it... The idea is initially doomed to fail.

Another client comes in: "I want to create a robot friend that will talk to you, joke, find the information you need, suggest answers, and provide recommendations."

Here, the idea is not bad. There are millions of lonely people in the world who simply don’t know how to communicate. There is definitely a consumer base; the market exists. But how is this different from voice assistants? For example, Amazon Alexa, or Apple Siri, or Google Assistant? Or just from a dating site? There’s no answer. Will anyone pay for this? No, they won’t.

The next client has a rather interesting idea. There are millions of intimate and other photos on personal phones, which carries a certain risk of storage. It’s not necessarily something bad, but these could be photos of your exes, prototypes of inventions or their descriptions, lawsuits from clients or partners, password lists, etc. Things that clearly shouldn’t become public knowledge. The idea is to create an app where all these photos, videos, and documents will be stored in a separate secret vault and won’t be accessible if the phone is lost. They won’t be accessible to hackers who hack the phone or personal storage services like Apple or Google.

This is clearly interesting. There are already 4 billion phones. At least 50% of their owners have something on their phones that they wouldn’t want to lose, but even more so, they wouldn’t want it to become public knowledge or be seen by their loved ones. For example, if your fiancée wants to go through your phone… or you want to go through hers. The idea is brilliant; the market is huge. Moving on. Do such companies exist today? Yes, there are about 10 companies. But they all have various shortcomings. In any case, their capitalization at that moment was less than a quarter of a percent of the market (the study was conducted in 2016). Will people pay for this? No, they won’t. All known companies at that time offered all their services for free, and only a very small percentage of customers were willing to pay, but only very small amounts. From 99 cents to $2.99 a month. So, the answer to the third question is negative — there’s no monetization.

Monetization — while it’s the third question, it’s the most important one. Any investor is interested in a clear and understandable answer to the question of how they will get their money back. If there is no answer, then there is no money...

Childish notions like: "I'll gather clients, and advertisers will pay me for advertising" do not work. A tech startup is not an Instagram blogger. It doesn’t work that way...

And finally, you found that very idea where the answer to all three key questions is YES. Now you can start working on the project.

And here’s a step-by-step guide on what you need to do.

How to Know if the Timing is Right?

For a startup to be successful, it needs to be implemented at the peak of demand. This is how services like Uber, HeadHunter, and other convenient services came to life. Among them were those that successfully launched during the global economic crisis because they were necessary. Today, their owners are millionaires and possibly billionaires. All that is needed for a startup that is sure to "hit" is to find a problem and immediately provide potential customers with a solution.

A good example is Eventbrite.com. This is a service of online tools necessary for planning and conducting events. At the same time, tickets are sold on the website. Today, the company’s office is located near San Francisco.

This company provides aggregator services for selling tickets to concerts, conferences, sports matches, and other interesting events. Additionally, you’ll find useful tools on its website for conducting commercial and non-commercial events.

The business model of this company is called "Freemium" in Silicon Valley (a combination of "free" and "premium"). A minimal number of services are available for free, while extended functionality is offered for a small fee. The company earns through ticket sales commissions and paid services.

Despite the fact that Eventbrite.com has competitors in this business niche, the company’s revenues have been growing exponentially almost since its inception. According to management, the key to success is a qualified team working with clients and 24/7 user support. This requires significant investment, so only large competitors can afford a high level of service. But even they have not yet caught up with it in terms of development and profitability.

This leads us to the second point.

How to Assemble an Effective Team of Specialists?

A team with experience and the right knowledge is no less important than a well-developed business plan. The realization of your idea depends on their actions. Investors often pay more attention not to the idea itself but to the team. Show that you have one. The team should generally consist of: the idea author, developer, marketer, PR manager, finance specialist, accountant, and lawyer.

Never search for a team through recruitment agencies. Their task is often just to "sell" you employees. It’s better to rely on recommendations from acquaintances. If no one can help you with this, look for people yourself and contact them directly, offering your terms.

Show that the Idea Works

Here, all hope rests on the prototype that you will show to investors. If you plan to promote an app, you will need to develop its algorithm. Most likely, you won’t find investors at this stage. Therefore, you will have to pay for this work out of your own pocket. However, it’s worth it.

Attract Financing

Now it's time to find someone who will finance your project. If you are a budding entrepreneur, you may have four options for obtaining funds: friends who can lend you money; business angels; investments from venture capital firms; and online platforms where you can raise the necessary amount from many small private investors. The last option is great if you need a relatively small amount. In any case, at this stage, you won't be able to secure multi-million dollar funding. You will achieve that after you attract user attention to your application or online resource. They should receive the following data from you: the number of users (both total and new daily), the number of daily registrations, the number of clients or orders, news subscribers, and more. At this stage, you can move your company to the United States.

Extract Profit from the Project

For example, you can earn from online resources in the following ways:

• paid subscriptions to the application;
• advertising in the free version of the service;
• some paid features based on the free application;
• selling various goods and services through the application.

In the last case, you don't necessarily have to sell something yourself; you can simply act as an intermediary and take a small commission, about ten percent. Enter into a contract with the manufacturer of goods or an online store. If you sell a service, start a partnership with the provider. It's good if the buyer gets a discount or cashback when purchasing through your application. Most sellers are willing to offer discounts for a significant increase in customer audience.

If you produce a product, you can certainly take pre-orders or even require advance payment.

Find an Investor

When attracting an angel investor to your project, remember that investing in your ventures is their business. For their money, which is around $20,000 to $100,000, they will receive a share of your startup.

Angel investors are patrons who have several types of businesses, one of which is investing in startups. They never collaborate with people who know nothing about business and finance. A well-developed business plan is essential, detailing how the project will pay for itself, how monetization will occur, and what the stages of development will be. Understanding this from the outset is very important. Without a clearly developed strategy, it is unclear which direction to move in, what goals need to be achieved, and when. Such startups do not reach their logical conclusion, collapsing midway. This is why they are not invested in.

Approximately half of startups fail due to poor management. Therefore, the work on management and promotion must be described in the business plan.

Experienced angel investors are also willing to give hints on how to secure investments. If you have never developed business plans, just find a successful project online that someone else has implemented. Describe your idea in numbers to present a clear picture to the investor. Also, do not ask for large sums immediately. The thing is, most business angels prefer to invest money in several projects in small amounts. This is due to the statistics we provided earlier — only 10-20% of startups bring real income, while the rest fail. By dividing the investment budget, entrepreneurs mitigate their risk. This way, they have a better chance of making a profit in the future.

And of course, after several refusals, you must not give up. Prepare yourself mentally in advance for refusals and do not take them to heart. It’s possible that twenty investors may not be inspired by your idea, while the twenty-first will provide the necessary funds. According to statistics, out of one hundred angels, about ten will pay attention to you. This is not surprising, as they try to protect themselves from the risk of losing their money. Be sure to show them the growth of your project and its potential for high profits.

A venture investor differs from an angel in that they expect even greater returns. For example, a venture capital firm will give you money if your plan suggests that the amount will increase five to six times; for an angel, a threefold return is sufficient. At the same time, a venture investor can provide you with more than $1,000,000. So, if you need to secure a million dollars, your business plan should project profits of six million by the end of the project. It is important to know that venture capital firms often provide money in parts so that you work only with them, without bringing in anyone else.

They operate on simple logic. By receiving the sum in small portions, you cannot spend it all at once, especially on non-target expenses. This makes it easier to control you. Different contracts and agreements will prevent you from making incorrect moves, specifying not only the amounts but also the timeframes.

In any case, investors are crucial for you to realize your business idea in the U.S. They will provide not only money for business development but also contacts with useful people and companies, established schemes, etc. Essentially, these people will become your guides into the world of successful business, introducing you to press representatives, advertising agents, whom they likely already know. Although it may also be that an investor has never seen anything like your product but is still interested in it. In that case, you will only receive money, and all other questions will need to be resolved independently. If you also lack experience and connections, competitors may very well surpass you quickly.

Where, Specifically, to Find an Investor?

You might say it’s easy to say "find an investor," but how can this be done? There are several ways to search:

• through the internet;
• through MBA schools, less frequently through other educational institutions;
• at exhibitions and conferences;
• in specialized intermediary companies;
• through investors who have refused to help you.

If you did not understand the last point, let us clarify: you do not need to immediately cease communication with an investor who did not invest in your idea. Find out if they consider the project interesting but, for some reason, cannot provide funds. In such a situation, they may provide the coordinates of other people capable of valuing your plan appropriately.

Regarding the internet, it’s best to communicate with investors on specialized platforms. Entrepreneurs who are already ready to discuss various projects and make capital investments are registered there.

However, the most effective communication occurs offline in business schools. For this, venture investors come to meetings with students at the end of their training. This resembles an exam, where business plans are reviewed like test papers. The best authors are offered contracts with six-figure sums. Consider, perhaps, you should also undergo such training to find a business angel.

Of course, you need to conduct the presentation correctly. Since you are looking for an American investor, the meeting should take place in the U.S. An online presentation or sending a business plan via email is not appropriate. You will need to come to the States and meet the investor in person. Otherwise, you will have almost no chance of securing substantial investments.

Detailed Advice on How to Talk to an Investor

To make a good impression, follow two simple recommendations.

• Develop a brief presentation. Eight to ten slides with concise verbal accompaniment are sufficient. The speech should be convincing, with concrete facts and figures. Do not prolong your project presentation beyond three to four minutes. The presentation should conclude with a concise and informative business plan.
• Exclude unnecessary information from the business plan. Do not allow “psychological,” emotional texts in it. Only include figures — that’s what interests the investor. Pay particular attention to monetization.

What to Do When the Investor is Already Yours?

Regularly report to the investor about the work done. You should do this even if you did not discuss this aspect when concluding the agreement. Every two weeks, send them information about how the funds are being spent. The accounting must be as transparent as possible.

Conclusion

If you have already once failed with a startup, do not despair. Investors value those who have already made mistakes and recognized them. If you have learned through your own experience how not to do things, you will not make incorrect moves. So even having negative experience can give you a significant advantage over beginners.