Turning an Idea Into a Company
Solve Your Own Problem
Find out what annoys you and start thinking about a solution to fix it. It’s as simple as that.
If something drives you crazy, it’s likely to annoy a lot of people too. And companies will pay you money if you solve it. If there is no obvious solution for this problem, then you could have found a great business idea.
You will likely have been working for a while, perhaps even for many years. This means you know an industry particularly well. You know the pain points and what doesn’t work and have a network of colleagues and friends throughout that market.
You have probably thought many times how new or better technology could really boost an organization’s efficiency or reduce costs. Start thinking about what that technology would look like. Ask your peers what really bothers them. What their dream solution would contain. What would be needed to make it work globally.
Every one of us has a bunch of problems that they encounter every day that could be solved with the right technology. Solve your own problem and you might have the first step toward a successful business.
My Story
I worked in London for years. After the 2008 financial crisis, I set up a consultancy to advise fund companies on how to implement mountains of new regulation and compliance rules they were having to adopt. It was a headache. The fund managers hated it. It was really expensive and there was no obvious benefit (in their eyes). I was trying to manage massive global compliance projects taking place under rock-hard regulatory deadlines with huge fines and negative publicity if they weren’t completed on time.
We were trying to manage all of these fund compliance projects on spreadsheets. It was a complete and utter disaster.
I looked valiantly and with an open check book to try and buy specific software to bring some order to the chaos. I couldn’t find it anywhere. One major financial institution even offered to pay for it for their project. But it wasn’t possible. The software didn’t exist. The last really big project I managed was so stressful and so chaotic that I decided I would not run another global regulatory fund project without having suitable software.
I found lots of generic project management software available, but they were of no use to the investment management community. I needed a fund management specific compliance solution to manage the specificities of the industry and make sense of the regulatory madness.
So, I saved the money I had made from compliance consulting and moved back to Ireland, where I started to build it.
I knew I couldn’t manage any more projects without proper software and I knew from listening to half my industry complain about this issue that many were in the same boat and—crucially—would pay for a good solution to make their lives easier.
The Best Person for the Job
It makes it much easier to grow your business and raise money later if you are a Subject Matter Expert (“SME”) in your industry. That is, you know the space inside out. If you are a chemist who wants to automate a drug testing process, if you are a civil engineer who wants to manage a bridge construction or if you are a vet who wants to develop a new animal registration database—all the aspects of growing your software company will be made much easier by you being an expert in your field.
However, it is even better if, while also being an expert on your industry, that you are also a recognized leader in your field, that is, a “Thought Leader” in your niche and known for it. This is important because it means you can’t get caught out easily with questions from potential clients and investors. You are a known entity in this area. You have credibility and a great reputation. This means you have a strong chance of getting in the door of companies you know well and the solution you build will be taken seriously by them. This makes you a much more credible future investment opportunity when you start to look for funding.
Best of all worlds is that you are an expert in your field, recognized in your industry as a thought leader and you have a wide network. It is absolutely crucial for an expanding successful technology start-up to have a readymade professional network to market the product to. They can also provide feedback and research, help design the solution, and then finally, become the first business customers. How are you going to get your product in front of the right people in the right companies if you don’t know them and they don’t know you?
There are ways around this (and we will cover that in the marketing chapter), but it slows everything down. And for business to business sales, that means years to make a successful high figure sale—not months or weeks.
If you haven’t got a great social media following and do not speak at industry conferences and events, or even publish blog posts, then this is going to be a problem. Start changing this right now.
Non-technology Software Founders
You have probably never run a tech company before. That is fine. I had not either. I did not know a line of code from a jar of coffee. I still don’t know much about coding, and I don’t care to ever learn. You do not need to understand programming languages to build a tech business. You need to understand customer pain points, how software can take their pain away, and what benefits the user needs to attain from your solution.
Start-Up Essentials
In this initial setup chapter, we will cover the following kick off essentials:
Initial Funds
To kick this thing off, you are going to need at least $30,000. Ideally, you should have $130,000, but that’s probably not a realistic option for most people. $30,000 is an amount that is possible for many people to save or borrow and it’s more importantly also a reasonable amount to build a decent “Minimum Viable Product” (MVP) of your solution. It won’t deliver a completed enterprise (i.e., large company) ready software solution, but it should allow you to build a first version that covers the main pain points you are solving and excite the interest of your industry.
Legal
Set up your company right now. It can be daunting and frightening taking this real and tangible first step—but it separates 90 percent of the great idea merchants from the actual “Doers.”
Remember, ideas are ten a penny—the gold is in implementing them and that is what you are going to do now.
That pain you experience in registering the company in your location and the setting up of online tax accounts are all parts of making this real. Investors will expect it and so will your first clients.
Remember—before you incorporate, you are an idea. After you incorporate, you are a real entity.
One that exists in the “Real World” and one that you can now grow and add value to, as you begin your journey to an eight-figure valuation.
Logistics
Where are you going to be located? That is a key question but not one you need to resolve right now. In the age of flexible start-up space, you can use your bedroom in one of the innumerable start-up hubs in every major global city.
If you opt to keep things from home initially as you get your MVP developed, at the very least, spend a couple of hundred dollars a month getting a business address from a respected business hub. That way, you can get business cards printed that are credible and you can update your business e-mail signature with your office location (see below). All of this makes you look like a real company.
If at all possible, set up the business in a location close to but cheaper than a major business center. That way, you can attract employees with good experience but a shorter commute and lower cost of living, while at the same time, allowing you to easily service business clients not that far away. In the post-pandemic world this may also make the company more attractive to future employees.
You will not be able to compete with the salaries large companies pay for many years. Don’t let that worry you too much. Large companies are boring. What you can compete with is flexible working conditions in an exciting start-up environment and a great quality of life.
I set up my technology company one hour from downtown Dublin in Ireland. This meant easy access to the main North/South motorway on the island and 40 minutes from one of Europe’s busiest airports, with a flight to London every fifteen minutes and direct nonstop services to Dubai, Hong Kong, and hundreds of weekly flights to the United States, New York, and San Francisco. It was also much, much cheaper than trying to locate in Dublin or London city center (our annual rental first year was less than $4,000).
Investigate if there are any government or local incentives to help you set up. In some countries, these can be substantial and the cash flow in the early days is invaluable. You are likely starting a business in advanced or emerging technology. Every country in the world would like these types of businesses in their backyard. They are the future of employment and one of the growth trends in the global economy.
Speak to the government start-up body and the local Chamber of Commerce. Grants may be available, as well as financial support for creating high quality jobs, tax breaks for new businesses, and even free assistance from local higher educational institutes. The support we had in the first couple of years was invaluable to staying afloat.
Now go into your local bank with your company registration documents and set up a business bank account. Deposit your start-up capital and ask for a debit card. You are now ready to begin trading. Pity it will probably be at least a year before there is any revenue coming in. But don’t worry. For “Business to Business” (B2B) start-ups, this is normal. You just need to stay alive long enough to get there.
Set up the company e-mail and website. E-mail set up is a simple step but an important one. Get your company e-mail set up so it’s clear you are not just a small operator with limited vision and plans. So, if your company is called “Colonize the Moon” your e-mail should be “[email protected]”. I recommend using a Google Gmail business account for this. It’s easy to set up and reasonably priced, both initially and as you expand and add more staff and users. Also, set up a second “info” e-mail account that is forwarded to your main company account. This will make your business look larger than it is.
These days, there are many lovely template websites that you can use to create a nice professional looking website in a weekend with no coding experience required. You only need a few pages initially. A section about the company, the product you are building, and you as founder.
Complete some secondary market research into the opportunity you are targeting. This will enhance your own primary experience of the industry and the problem you are trying to solve. Have a few cups of coffee or Zoom meetings with people from companies in the space (and hopefully, who you know), to get their thoughts and another viewpoint on your proposed solution. This can be very enlightening, and it expands your network.
Many start-up gurus suggest a very expansive and detailed round of market research, but the good news is, if you are solving your own problem and know the industry very well, this research is more for validation.
You now need to think about pulling together some sort of first version of your solution. You are going to need someone to do it. I am taking it for granted it’s not going to be you. An entrepreneur with the coding skills to build an enterprise product, is very rarely the same person as the CEO of the company who will design the product, find the team, procure the clients, and secure the funding you need to grow this business. It’s a completely different set of skills.
So, you will need to find the right person or company to build the first MVP. That process is covered in detail in the next chapter. Jot your initial ideas into a document and you can use this to populate the product page of your first company presentation (see below). This will be expanded later to provide a clear and illustrated walkthrough of your new product and the key features it should contain.
This first MVP will be a long way from the product you deploy with business client number one, but it’s another key first step along the way. Forget about advanced bells and whistles for the moment and concentrate on trying to build a 3 wheeled car. You can add the 4th wheel in later iterations.
First Company Deck
Don’t worry about a business plan for the moment. You can get to that later in the first year, when you start actively looking for funding. Let this book be your business plan for the first few months.
The key thing—and you should spend some time on this—is pulling together an initial company presentation (called a “deck”), which you can send far and wide and share with everyone who takes an interest in your new venture (and even those who don’t).
This deck will become your initial core piece of company collateral in those first months, while you work on building an MVP of your product. You will need to learn it backwards and be able to pitch it till you are blue in the face.
The deck will contain:
• The problem you have identified
• The solution you will provide
• The team you will assemble
• The size of the potential market
• The key steps you have already taken
• The future steps you will take this year
• The funding you will need next to make it happen
This deck will take many iterations and as you present it more and more, it will be refined to address questions you are asked from interested parties, potential team members, clients, and particularly investors.
The front page should have an initial logo for your business (large size) and a tagline for who you are going to be, for example, “Colonize the Moon Inc.—Bringing Lunar travel to the masses.”
Whatever. It’s just a starting point and can be updated as you hone your message and company identity. Similarly, almost any symbol at all for a logo will work at this stage.
The format should be approximately 10 slides in total (excluding the front page). Any more than that and people’s eyes glaze over and they will lose interest.
Remember the old Silicon Valley Rule of Thumb here—10/20/30.
Your deck should consist of 10 slides that take no more than 20 minutes to present (ideally, a lot less) and with type written in 30 size fonts.
That’s a good rule of thumb to live by. Very few investors will ask you to make your deck or your presentation longer. Most want 10 minutes max—or even five minutes. In the United States, two-minute pitches are common. The aim is a brief summary of what you are about.
One Irish “Venture Capital” (VC) investor I know sits through approximately seven hundred pitches like this every year. They normally invest in about twelve. So, your deck needs to be in the format they are used to seeing and containing the information they expect.
You can also use this deck to prepare shortened summaries of who you are and what you want. Opportunities like this occur all the time at business events, industry presentations, and at the sidebar of a conference. Get to know it off by heart. You will be pitching it endlessly over the next few months.
While this first deck will contain the same core detail, you will find yourself chopping and changing it to suit your audience and occasion. It will be revised and updated constantly, as the company sharpens its strategic focus and you find product/market fit.
At my company, we went through at least six branding changes, multiple name changes, and strategic pivots over the first two years while we got established and put our angel funding in place.
Think of this presentation like your CV or resume. You probably have a core resume that contains every great thing you have ever done. It’s likely that when you apply for a job you want, you review it and cut and chop bits out, and then put it together to suit the position you want. It is the exact same mindset with your initial company deck. Chop and change it to suit the investors, prospects, or partners that will see it.
PowerPoint is fine to use (if a bit chunky on memory) and Google Slides is a good option too.
The structure of your initial company deck should be as follows:
1. Problem—Succinctly summarize the core issue that is driving everyone crazy—for example, “Why can’t we holiday on the Moon safely?”
2. Solution—In bright large letters, make it clear what the industry needs to fix this problem—for example, what the space industry needs is a new technology solution to make lunar travel safe and inexpensive.
3. Product—Explain how your amazing new product will fix this problem. For example, “We are building the first healthy and safe software solution for lunar travel.” Also include a picture of your solution here. Of course, it’s not built yet right? So, grab something off the Internet (preferably royalty free) that looks like what you are planning to build and add in a few changes to cover the specific great functionality you will deploy.
At this stage, the product slide can be quick and dirty. You can add more to this in the future. This is for a talking point at this stage only. Everyone knows you are only out of the starting gate and your product is evolving. The important thing—the really important thing—is to have the vision and the implementation skills to be able to deliver it. That’s the difference between a million failed start-up’s and one that becomes the Series A success.
4. Team—Add three or four photos with names and occupation beneath. By all means, stick in another short line of experience (e.g., 15 years at Google, etc.). But keep this concise. Of course, your team may just be you. It will nearly certainly be missing a few of the key people you need to hire to get the company off the ground. That’s ok. People expect this. It’s important you have identified the positions you will need to hire. Where there are gaps, put a question mark in each missing photo and explain who they are going to be. For example, below one empty picture you could put “Head of Engineering - shortlist identified. Offer to be made when funding confirmed.”
5. Size of the market—Include a ballpark estimation on the current market size for your product and the potential future growth over the next few years. Don’t put silly numbers like $40 trillion and so on. That is not realistic and makes you look like an amateur. The key thing is to look at the potential addressable market—particularly over the next 24 to 36 months. What good is it to you if your most likely target clients are copper miners in Chile and you are located a dozen time zones away in Dubai. For my company, we knew there were 3,000 fund managers globally and that each of them was spending an average of $2 million a year on compliance and that number was growing all the time. The large ones were spending many multiples of this. They had both the pain and the budget to spend money on a solution software to take their compliance headache away.
Note that all this market data and information was easily available online. If you can’t find it for your industry, then you are not trying hard enough. If it’s a genuinely new space, make an informed and reasonable guesstimate. You will be ripped to shreds by professional investors if you put down ridiculous numbers.
6. How you will make money?—This is obviously key. Many end user applications like the kind of consumer apps Silicon Valley specializes in (Facebook, LinkedIn, Twitter, etc.) had the revenue come after user growth. That is, they spent a fortune to build a user base first. Amazon spent a few billion dollars even before making any profit. You are not Amazon and you are (likely) not in Silicon Valley. You don’t have the same connections in Palo Alto or on Sand Mill road. You live back here in the “Real World.”
That method of scaling is not going to work because you will be out of money long before your customer acquisition gets anywhere near the revenue or retention rate you need to be profitable (or investable).
Give up on that idea, and instead, put down three sources of revenue from your software clients. In this example, I am presuming it’s a B2B business.
1. Core User License Fee—The fee that each client will pay to use the solution. There are a million ways to slice and dice this number (see the chapter on Pricing).
2. Support—Once the business is established, you may be able to charge customers for extended business hour coverage outside their core time zone.
3. Consulting and customization—Clients will often ask for some specific development work and there may be an opportunity to use your Subject Matter Expertise to provide some consulting to customers. Most professional investors would not like to see consulting revenue to be more than 20 percent of your expected total revenue. They want to see repeatable fee income, not one-off consulting work.
VC investors want to see long term contracts in place of recurring monthly license fees (with a minimum pricing floor) and upward only pricing reviews, as your solution expands out to different teams across a global business.
That’s the goal. But it will take time to get there. Consulting is good for cashflow the first couple of years but the difference to your valuation can be stark. A recurring license fee contract typically adds triple the value to your “Pre-Money Valuation” (i.e., pre-investment company value), compared to a one off or likely but non contractually recurring piece of work.
7. Initial traction—This is another important slide. What have you done to date? Who have you spoken to (even over coffees)? What feedback have you received? What funding have you applied for? What demonstrable steps have you taken to turn this idea into a reality?
For example, you could state that your MVP was in its second iteration, you have applied for government research funding, you have had multiple initial meetings with potential future prospects, and that you have “established relationships” (always a good vague term) with a number of potentially interesting future partners. You are going to be asked a lot of questions about what you have written here, so make sure everything has that core kernel of truth and a potentially extremely exciting upside. This is CV inflation for start-ups.
8. Plans from here—What are you going to do next? Put down three bullet points for the next quarter, the rest of the year and the strategy for next year. Make these difficult but achievable. This quarter could be to finish and test the MVP. Rest of the year could be used to launch a paid pilot with a first interested client. Next year, it could be to secure seed funding, expand the team and target the first overseas customer. All these plans should reflect your real strategy, but from the perspective of an investor, that is, how will your plans rapidly increase the valuation of the company.
Remember, an investor is putting their money behind you and your team every bit as much as behind your product and idea. At this stage, it is the quality, experience, and motivation of the founder and initial hires that can mean the difference between an investor writing a check and sitting on the fence.
9. Funding requirements—How much money are you going to need this year and the next to turn this project into a thriving business? State that you are looking for $50,000 to $100,000 angel funding immediately to fund the business for the next twelve months and get the first client signed up and onboarded.
I can tell you right now that you will need a lot more than that. Likely in excess of half and probably closer to a million dollars seed round in due course. Don’t worry about that right now. A promise of adding a lot of value to the company for a relatively small amount of angel capital is enticing for potential investors.
10. Wrap up slide—This is a simple wrap up slide with four bullet points covering the name of the company, the problem you are addressing, how you will solve it and most importantly—your “Ask.” Always include an “Ask” at the end of every presentation. Some companies ask for nonfinancial favors (e.g., introductions to potential clients or employees). I don’t expect that to be you. Instead, you will likely be running out of funding as we speak. Ask for investment. At this stage, that’s the $50,000 angel we discussed earlier. Have a good answer ready for what you plan to do with that kind of money—and of course, the answer is to finalize building the product and start to hire some staff. Early stage angel investors don’t like to see the founder taking much salary at the early stage.
Later formats of this core deck can be refined to expand on the product, for initial customer prospects, and potential investors. It can expand on what funds you plan to raise and how you will spend it (for potential investors). Other interested third parties will want to know more about the company itself (think regulators, service providers including lawyers, and accountants) and potential company advisors.
You are going to be presenting this deck repeatedly in this first year. Get to know it inside out. Anticipate answers to the questions you will learn to expect. Update it constantly with ideas that come to you in the night and with feedback you receive from the listeners.
Pitching the Business
You will be pitching the company to investors, potential clients, prospective employees, and hopefully at industry events. Lots of them. Get used to it. If you hate public speaking, you will have to overcome this, or you won’t make it far with the business.
If you haven’t pitched much before, watch as many great business presentations as you can online. How do the speakers talk? How do they walk? Where do they leave gaps and pauses? How do they move their hands and arms? Great pitching is an art, but the good news is that it can be easily learnt with practice.
When you pitch, remember that you are the presentation. Your deck should not be the focus of your presentation. You are an entrepreneur not a college lecturer.
Your deck is the “wallpaper” to your presentation. This advice is so essential to fundraising, I am going to state it again—your deck is the wallpaper—you are the presentation.
You must take this advice on board if you ever hope to raise any money from professional investors.
If you read off your deck or if it’s covered in tons of writing, then no one listens to you anyway. They just read the deck while you are talking. Your whole pitch, all the work you spent putting into the presentation, all the research, all your practicing is wasted and the first impression you will make on anyone is boredom or even worse.
You would not believe the number of entrepreneurs that get this wrong.
Consider your deck to be the essential “talking points” of your presentation—not your presentation.
Do a good pitch and you are in the top 20 percent of entrepreneurs looking for funding that an average VC is seeing.
VCs are like film critics having to watch fifty versions of “Attack of the Killer Tomatoes” to find that one “Reservoir Dogs.”
You can be Mr. White. Practice your pitch. Do it in front of your team. Take feedback and do it again. Then make them drill you (with likely and hard questions), and finally, allow thirty seconds longer than the time you think it will take. For some unknown reason, pitching live always takes a little longer than you expect from rehearsals. You don’t want to be the idiot who gets the bell rung before their great finale and gets booted off the stage. It happened to me once in San Francisco many years ago. It was such a mortifying experience, it hasn’t happened to me since.
Conclusion
Great. Now your company exists. You have business cards printed, a decent website, and e-mail set up, as well as a first deck to extol the virtues of your new enterprise to all and sundry. You have even started working on your first MVP and will have something to demo soon.
Congratulations. You have now done more than 90 percent of what every aspiring entrepreneur talks about doing.
You are now in the top 10 percent.
Chapter Summary
• Establish yourself as a respected Thought Leader in your industry.
• Incorporate the company.
• Open a bank account for the business.
• Complete some primary and secondary market research on the opportunity.
• Start formulating what the first version of your MVP will look like.
• Decide where to locate.
• Investigate local and government start-up incentives.
• Set up company e-mail and website.
• Build a good first company deck and refine it constantly.
• Practice pitching the deck repeatedly and update it with feedback and answers to the questions you are asked.