Lots of people will tell you that building a successful startup is hard, and more importantly, that there is a lot of uncertainty. We at Distiman are a team of successful entrepreneurs. We devised a formula which will make you successful 100%. Sharing our know-how with a larger community so we can build millions of successful startups in India.
First of all, let’s define ‘success’ in startups. For me, success is more in revenue terms than in valuation. So my definition of a successful startup is a startup making at least $1 million in revenue with at least 50% gross margin with a TAM of more than $200 million. This makes the startup close to being profitable apart from being scaleable.
Now that we know what success is, Here are 3 simple rules you need to follow to be successful:
Rule 1: Inspire people better than you to join your team
This is a tough one but totally worthwhile. There is no point in building a startup if you can’t even sell your idea to your friends or acquaintances who are better than you at sales/coding/marketing/operations.
Go talk to everyone in your network and at all startup events. Find those kickass co-founders and core team members before you even bother doing anything else. My rule is don’t bother doing business till you have kickass 3-4 people founding team who are working only for ‘stock’ and no salary. (2 co-founders are too easy; 3 kinds of makes you do the ‘sale’). Read my post on finding co-founder(s).
Rule 2: It’s a business, not a startup
Lot of entrepreneurs forget that startups are real businesses. I know cause we did it ourselves for the first couple of years. If you want to build a startup, sell your cool idea to some people before you even build it. It is very easy to do if you are an enterprise startup. Some people suggest that it’s not possible if you are building a consumer startup. Ever heard of ‘pre-order’? Some guys will still maintain that it’s not possible if your business model is advertising. But well, if you are banking your dreams on advertising to Indian consumers, you should stop smoking whatever it is that you are smoking.
For those tech-minded entrepreneurs, I have an algorithm for this rule. Don’t build the product till you have Rs 5L (~$10000) worth of sales. This should help you fund a bit of product development too (kind of like seed money).
No exceptions to this rule, if you can’t even sell $10K worth of your product, don’t start. Don’t fool yourself by telling me that you are building the next Google or Facebook.
Rule 3: Don’t meet VCs for the first 2 years
I see so many entrepreneurs running to VCs, Angels and accelerators with ideas without any validation, it’s sickening. No matter what you read in the Times of India, resist the itch to talk to VCs for at least for first 2 years. By then, you have the product done and some validation in the bag. What’s more, you would be a far better entrepreneur to raise institutional capital.
Remember VCs are just one way to raise capital and you would have many other ways (like debt funding, and bank loans without collateral) of raising capital if you have a kickass product with proven market fit and a sustainable competitive advantage. We know that money cannot be a competitive advantage. When you are ready, you may meet some angels like the ones that worked for us.
There are exceptions to this rule though, especially for infrastructure/asset-heavy businesses like data centres, manufacturing plants or telecom. But tell me how many startups can claim to be building infrastructure? Unless you are building the next “Reliance Jio” Don’t go to VCs for the first 2 years.
Another exception is if you are an IIT/IIM pass-out riding on the current wave-like ‘hyperlocal’ or ex flipkart/redbus/myntra core team member. For you guys, getting seed money of $10 million is so easy, you would be a fool not to raise it…:-)
Bonus Rule 4: Prepare for 10 years but achieve in 3
This is a bonus rule. As an entrepreneur, always think of a startup as a 10-year roadmap. This will force you to think of it like a business. And if you are following the first 3 rules I promise you that you will be a successful profitable startup in the first 3 years!!
So go, sell your cool new idea to your friends first then customers and then to VCs with 10-year hardship planned. I promise you will be successful. After all, success is hard to achieve but assured.
P.s. Don’t forget to send some equity to me when you achieve your dreams by following my 3 simple rules 🙂