Author: Alara Guler, Graphics: Ella Suh
THE BRB BOTTOMLINE
Do you think you have the next million-dollar idea and are looking to start a business with it?
Even before starting college, I have always been interested in entrepreneurship. When I got accepted to Cal, I was over the moon to study in an institution right next to Silicon Valley, the entrepreneurship capital in the U.S. I spent my last two summers working with different Bay Area startups. My experience interning in successful startups taught me the many key takeaways I should learn before starting my own company in the future. I have also been taking courses related to entrepreneurship from the Haas School of Business and the Sutardja Center for Entrepreneurship that teach more about the theoretical and business aspects of entrepreneurship. Now, I would like to share my insights on how to become a successful entrepreneur.
Many want to start their own company believing they have the next million dollar idea. However, only a few of those entrepreneurs actually succeed while many others go bankrupt. Eleven out of twelve startups end up failing. In this article, I will discuss what I believe are the most important characteristics of a successful startup.
Find Your Perfect Idea
In order to start a business, you have to have an idea of a product or a service. Whether it’s about fashion, tech, or wellbeing, you need to find the right product. As one of my professors once told me: “Your idea has to solve a pain your customers are experiencing.” I stand by this idea because your product will not mean much to the consumer unless it is solving a problem they are experiencing. For example, I take notes on my iPad during class. Sometimes my iPad’s or my Apple Pencil’s battery dies in the middle of the class, and I don’t have enough time to charge myiPad’s battery while the class goes on. This is a pain (problem) I’m experiencing, and I would want to get a product that could relieve this pain immediately. You can think of many more examples like this from your daily life. Consequently, your perfect idea is lying in front you. You just need to look more closely.
Once you found your idea, now you need a way to fund it. It is great if you can fund your idea yourself or through your parents, but not every college student is lucky enough to have that option. Therefore, usually what entrepreneurs do is to go to a variety of venture capitals (VCs) that are willing to give them the money they are looking for. There are many different VCs that fund startups in different industries. For example, if you’re a tech startup, you should apply exclusively to VCs that fund tech startups. If you’re a food startup, then you should apply for VCs that are funding food startups. Once you find the right VCs for yourself and apply, you need to get ready to present your idea. VCs will usually look for exciting new ideas and a spectacular presentation. They want to make sure that you believe in your idea before they do. You might apply to many VCs and get rejected from many, but all you need is one VC that believes in you and your product as much as you do.
Startups also have different funding rounds. There is the “seed” round, where you just founded your company and don’t need much money. Then as you are expanding, you should focus more on Round A and B funding. Round A and B funding are rounds where you get money to continue to operate since you will not be making a lot of profit early on. Depending on how much money you need, you might also want to consider Round C funding. After Round C, your company hopefully expanded enough for an Initial Public Offering (IPO). An IPO is where you will be selling shares of your company in the stock market. After this step, your company is no longer a startup.
Get the Right Teammates
Another very important aspect while starting a new business is to form the right team with the right people. In my Entrepreneurship Speaker Series DeCal, one of the speakers emphasized the importance of creating the right team. I cannot agree more. If you and your team are not on the same page while developing your product, you will be in a lot of trouble. Your teammates also need to be just as passionate as you are about your million dollar idea. If your teammates don’t believe in your idea and are just doing this for money or as a pastime, they are not the right people for you.
When you are first developing your product, your team could consist of very few people, but as you are expanding you will need to hire more people and have a more organized company structure. When a person, usually one of the people who have been there since the beginning, tries to handle everything, your likeliness of failing as a startup increases. Hiring more people for specific positions will result in more efficient work.
Choose the Right Industry
Choosing the right industry is one of the most important aspects of creating a successful startup. In order to identify your target market, you will need to do some marketing research. After that marketing research, you might need to pivot and alter your product better to fit market expectations. Pivoting is a very common strategy used by many startups. No startup wants to enter a saturated market. For instance, if you are developing a new smartphone that looks and functions just like an iPhone or Samsung, chances are that you won’t be a very successful entrepreneur. In this case, you need to pivot and find the differentiating factor of your product.
Have a Bulletproof Business Plan
Before you start forming your startup, you need to have a bulletproof business plan. You need to know your expenses, how you will be making money from your products, and many more details like these. Having a business plan will allow you to know where your business will be going, and keep track of growth. When you are presenting your idea to VCs, it will also help you present better. VCs will want to know how they will be profiting from your product. Also, you will be able to answer their questions better. Consequently, having an elaborate business plan helps in many ways.
There is more than one right way of starting your own business. In this article, I share what I have observed,being closely in touch with the entrepreneurial world. To me, the most important aspects to a successful startup are finding the right idea, having a thorough business plan, getting funded, hiring the right people, and doing proper market research before launching a product. I hope everyone who is about to start a startup finds this useful.
Alara is a junior studying Mechanical Engineering and Business Administration. She is very passionate about financial literacy and joined BRB to discover more about this topic. She is also interested in brand management and marketing. This year, Alara is one of the senior columnists of the Financial Literacy column. She is an international student from Istanbul, Turkey and loves Turkish food. Alara also loves coffee, so when she doesn’t have a class you can probably find her in a coffee shop around campus with an iced americano!