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Q: I have a business/app idea that would require capital to get it off the ground - what are the first steps go about funding and what would be needed on my end to ensure a positive outcome?
A: Hi Nicola,
Congratulations! It's very exciting to start a new idea and turn it into a company.
I do understand that you've formalised your idea and are looking at raising capital for it. I just want to point out a couple of things I feel you should do before raising any external capital.
Here we go:
1. Buy the book Running Lean by Ash Maurya and read it back to back (Here's a link: https://www.bookdepository.com/Running-Lean-Ash-Maurya/9781449305178)
2. Build your own Lean Canvas - this a business model on one canvas. With all due respect to other comments on this question, preparing a detailed business plan for a startup is an absolute waste of time.
What's a definition of a startup? A startup is a human institution operating under extreme uncertainty (this is paraphrased from Eric Ries - check out his book Lean Startup if you have time). It is this uncertainty that makes the 60-page business plans irrelevant. You spend a lot of time writing them and then when you dive into business, within a month everything is different and the cycle repeats itself. Should you embark on writing another 60-page then? Definitely not.
So look into preparing your lean canvas. The two most important areas you should look at when it comes to your lean canvas (in the early days of your startup) are Problem and Customer Segment. Clearly and succinctly define the problem that you're trying to solve and then indicate who has this particular problem (please don't say everyone has this problem - the more niche your customer segment the better).
3. Figure out who could be potentially your first 100 customers then go out there and interview your customer segment about the problem that they have. Design a set of questions, find your potential customers and talk to them. Look them up on LinkedIn, rock up to their stores, anywhere you can find them. Just do it.
4. Based on all your interviews, you either find that you need to modify your problem/customer segment or if that's not the case, great, define your value proposition.
5. Build your minimum viable product (MVP). Now that you know exactly what the problem is and who's your customer, look into a way that you can solve their problem. The method that you're going to pick shouldn't be scalable. It could be as simple as setting up a landing page for $60 (look how AirBnB or Dropbox did it) or it might be completely manual (like Food on the Table (FotT) - check this out: https://www.youtube.com/watch?v=ABKlXFR3lts).
I should mention, there are some industries that this might be difficult to implement this like financial or health industry due to licensing fees. But if you're not operating in those spaces, you probably can build a really cheap MVP.
Once you realise that you can't grow anymore with your current solution, that's the time to look into automation and maybe building an app. At this stage, you can approach external investors with the goal to raise some capital. You should look into angel investors and venture capital scenes and be open to give up 15% to 25% of your company (forget about banks - the interest rates are too high for a company that might have a hard time making much money in the early stages of its development and can cripple your business).
My main advice is to make sure you don't look at raising capital as a goal and not to do it too early. There's nothing worse than having investors looking over your shoulder when you're trying to figure out your business model.
Hope this helps.
Shahin
