StartupPro: How to set up and grow a tech business: Practical guidance on how to turn your passion, idea, and technical skills into a successful business

By Martin Zwilling

Marty Zwilling knows exactly what it takes to create and grow a successful business from scratch. As the founder and CEO of Startup Professionals, Marty is passionate about helping small business owners and startup founders grow in confidence and profits.

The most important, if difficult thing for anyone in business is transforming the first small buds of success into a blossoming business. With a large community of followers online, popular blogs dispensing advice on a range of business issues and books such as “Do You Have What It Takes to Be an Entrepreneur?” Marty here looks at the growing, lucrative – essential, even - world of tech. In this new book he provides you with sharp insights and friendly guidance to help even the most inexperienced tech entrepreneur.

Demonstrating how to prepare yourself for and navigate the challenging but exciting world of business, this book is an invaluable companion on the journey towards success. Beginning with the attributes of a good entrepreneur, and then looking at how to build a business around your skills and passions, Marty’s indispensable advice also looks at how to formalize a business plan, find investors, and lead teams. Success is often hard-won in the business world, but here Marty attempts to make it that little bit easier for you.

Today, the fastest growing businesses are built around tech – whether you are building websites or analysing data, the world of business is dependent on tech experts to constantly be one step ahead of the game. Yet while your skills and knowledge may be in demand, creating and growing a successful business can be a huge challenge. With this insightful and inspirational guide, you will find out how to build the business you want, beginning with an effective and formalized business plan you – and other stakeholders – truly believe in, then how to articulate that confidence and belief as you find investors and stakeholders you can trust and build a team you know you can depend upon. You will also discover how to lead teams, driving forward both your business and yourself to the success you always dreamed of.

• Language: English
• Publisher: Packt Publishing
• Release date: Dec 1, 2014
• ISBN: 9781783001439

Book preview

Table of Contents

StartupPro: How to set up and grow a tech business

Credits

About the Author

About the Reviewers

Preface

What this book covers

Who this book is for

Conventions

Reader feedback

Piracy

1. Do You Have What It Takes to be an Entrepreneur?

Personality traits of great technical entrepreneurs

Are all technical entrepreneurs natural-born?

Every entrepreneur needs multiple intelligences

Technical entrepreneurs have to love learning more than money

Technical entrepreneurs learn best from business networking

A technical entrepreneur must build relationships

Attributes to work on for entrepreneurial success

All entrepreneurs are survivors, never victims

Test the startup lifestyle before jumping into it

Missteps to avoid for aspiring technical entrepreneurs

Customers and investors like ideas, but measure you on their execution

Succeeding as a technical entrepreneur is really about you

Summary

2. Does Your Dream Idea Have the Potential to be a Business?

How to perform a reality check of your opportunity

Recognize the entrepreneur passion trap

The difference between entrepreneurial requirements and engineering perceptions

Assess the opportunity and the risks with a startup incubator

The importance of frequent tuning and daily determination

Feature creep can turn your leading edge into the bleeding edge

Early adopters don't make your market

Check your alignment with today's customer buying habits

Winning customers from big business brands

Women technical entrepreneurs have some unique challenges

Summary

3. When, Where, and How Do You Formalize a Technical Business?

Startup location – a critical success factor

Picking the right company name

Paying for a domain name

The official start date of your business is an important milestone

Protecting your startup founder's stock shares

Minimizing the red tape and taxes of a startup

Every technical startup needs a website

Business blog – an alternative to a business website

Kick-starting your startup with Twitter

Every business needs momentum

Summary

4. Does a Technical Entrepreneur Really Need a Business Plan?

When do you really need a business plan?

Valid reasons for not writing a business plan yet

The difference between product plans and business plans

Creating a good business plan

Make it a simple but effective business plan

Focusing on investors' questions

Define the problem

Solution and benefits

Industry and market sizing

Explain the business model

Competition and sustainable advantage

Marketing, sales, and partners

Executive team

Funding requirements

Financial forecast and metrics

Exit strategy

How to do market research on a startup budget

What is your business model?

Financial forecasts – a key element of every business plan

Benefits of using a financial model

Summary

5. When and How Do You Find Funding for a Technical Business?

Finding cash sources to start a technical business

Crowdfunding basics for technical entrepreneurs

Tips on how much money to ask for from investors

Honing your elevator pitch and executive summary

Structuring your investor presentation

Guidelines for pitching to professional investors

Rules of thumb for startup investment valuation

Every technical entrepreneur needs a startup exit strategy

Getting ready for the dreaded due diligence

Rejection, and how you learn from it

Investors fund solutions rather than technology

Differentiating startup viability from fundability

Summary

6. After the Funding, How Do You Survive the Execution Risks?

Risks to be avoided

Learn the laws of the jungle for technical startups

Every technical startup needs business accounting and records

Think carefully before taking legal risks and shortcuts

Register all your intellectual property

Know the value and risks of patents

When to use non-disclosure agreements

Risk factors that scare investors most

Other common startup risks to avoid

Taking smart risks

Entrepreneurship success is recognizing smart risks

Using imitation with innovation to limit risk

Follow strategies of other successful risk takers

Summary

7. Are You Ready for All the Leadership and Team Challenges?

How to be an entrepreneur role model to lead your technical startup

Traits of a great technical startup founder

Finding the right top executive for your technical startup

Importance of having a startup mentor

How to assure a productive mentor-mentee experience

Mentoring your team efficiently

Recognizing and hiring the smartest people for your startup team

How to turn your team members into an innovative startup team

Keys to motivation that every technical entrepreneur should know

Recognizing people who drain energy from your company

Summary

8. Do You Understand How Social Media is Changing the Business Landscape?

Making the right use of social media

How to begin using social media in your technical business

Differences between traditional and social media marketing

The big three social networks for business

Steps to social media success for technical entrepreneurs

Some old and broken social media marketing uses

Steps to measure technical entrepreneur social media results

How to balance social media costs versus value

How to make a real social media customer connection

Summary

9. If You Build It, Will They Find You, and Will They Use It?

Planning pivots – you may not get it right the first time

Joining the new breed with a new mantra – nail it then scale it

Validating the business model

Pricing your product correctly

Creating a memorable website for your startup

Optimizing your website for the search engines

Organic versus paid search results

Website ads are not a revenue stream for startups

Building your startup brand

Creating a brand experience for your technical product with digital marketing

Using viral marketing effectively

Above all, maintain a laser focus

Summary

10. Can You Build the Relationships Needed to Succeed in Business?

Don't work alone

Two heads are always better than one

Partner qualities to test before sharing equity

Why you need business relationships with many others

Don't look to a dating site for matchmaking business relationships

Should technical entrepreneur relationships ever be more than business?

Great relationships are the key to scaling your business

The importance of great customer relationships

Mergers and acquisitions for growth are special relationships

Make your relationship connect deeply

Summary

StartupPro: How to set up and grow a tech business

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StartupPro: How to set up and grow a tech business

Copyright © 2014 Impackt Publishing

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Credits

Author

Martin Zwilling

Reviewers

Fan Du

Jay LeBoeuf

Acquisition Editor

Nick Falkowski

Content Development Editor

Sweny M. Sukumaran

Copy Editors

Karuna Narayanan

Alfida Paiva

Faisal Siddiqui

Project Coordinator

Venitha Cutinho

Proofreaders

Simran Bhogal

Maria Gould

Ameesha Green

Paul Hindle

Production Coordinator

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Cover Work

Simon Cardew

About the Author

Marty Zwilling has a passion for nurturing the development of entrepreneurs by providing first-hand mentoring, funding assistance, and business plan development. He is the Founder and CEO of Startup Professionals, a company that provides products and services to startup founders and small business owners.

He writes a daily blog for entrepreneurs, and dispenses advice on the subject of startups to a large online audience of 750,000 Twitter followers. He is also a regular contributor to Forbes, Entrepreneur Inc, Business Insider, and the Huffington Post. He also has published two other books, Do You Have What It Takes To Be An Entrepreneur? and Attracting an Angel.

He has a 30 year track record of demonstrated results as an executive in general management, computer software development, product management, and marketing, as well as in leading technical business transformations, conducting due diligence for investors, mentoring new technical executives, and overseeing business development, customer service, and outsourcing both onshore and offshore.

Marty began his career with IBM, holding an array of positions including executive roles in software development and professional services. Prior to beginning his career, Marty obtained a Bachelor of Science degree in Accounting and a Minor in Computer Science from the University of Illinois in Champaign-Urbana.

A resident of Fountain Hills, Arizona, Marty is also an active member of the local Angel investment group (Arizona Technology Investor Forum), an advisor to the Arizona State University Venture Catalyst program, Executive in Residence at the Thunderbird School of Global Management, and member of the Advisory Boards for several startups in the area.

About the Reviewers

Fan Du is a Ph.D. student in the computer science department of University of Maryland. He received his bachelor's degree at Zhejiang University with honors. He has worked as a software engineer intern in top companies including Alibaba, Tencent, and IBM Watson. He was the founder and CTO of WaiMai Online, a startup company that provides an online ordering system for more than 40 restaurants.

Jay LeBoeuf is a technology executive and entrepreneur in the media creation and production industry. Jay is the President/Executive Director of Real Industry—a nonprofit organization transforming how students learn about the real world and how products go from an idea through to the process of commercialization.

Jay led R&D, IP, and technology strategy as Strategic Technology Director at iZotope. He founded and was CEO of an intelligent audio technology company Imagine Research, which was acquired by iZotope in March 2012. While creating Google for Sound, Jay was recognized as a Bloomberg Businessweek Innovator, and was awarded $1.1M in Small Business Innovation Research grants by the U.S. National Science Foundation, and interviewed on BBC World, Science 360, and other major media outlets. Prior to founding Imagine Research, Jay was a researcher in the Advanced Technology Group at Digidesign (Avid Technology) in charge of innovations for the industry-standard Pro Tools platform. He lectures on Real Industry and music information retrieval at Stanford University's Center for Computer Research in Music and Acoustics (CCRMA), and is on the Board of Advisors for music startups Chromatik and Humtap.

Preface

The purpose of this book is to address the needs of every technical entrepreneur who dreams of turning their passion and application ideas into a successful business. They need to know where to start in taking the idea from a concept to a product, incorporating the business as an LLC or C-corporation, finding the funding required to complete development and roll out the product, and how to build the team they need for all the marketing and delivery tasks, and all the details in between.

Equally important, the book will provide tips on how to network for partners and investors, communicate effectively with customers and employees, organize your business infrastructure, and have fun at the same time.

The entry cost for technical entrepreneurs to develop new applications is at an all-time low, with inexpensive yet powerful new software toolkits and hardware platforms. With the advent of smartphones and new web technologies, the application opportunities are huge.

At the same time, crowd-funding is adding a whole new dimension to the funding challenge. Old and new funding sources are discussed in detail, including the new alternatives with crowd-funding, as well as the implications of Angel funding, Super-Angels, and VCs.

The guidance is intended to be pragmatic and practical, rather than theoretical, based on my own many years of experience working as a developer, small software company executive, large company executive, mentor for startups, and Angel investor.

What this book covers

Chapter 1, Do You Have What It Takes to be an Entrepreneur?, sets the context for the book by providing you with a profile of entrepreneurs, who are markedly different from technical geeks that can write code in their needs and expectations and how they network and communicate. Through the more detailed discussion, readers have an opportunity to reflect on their own interests and passions, their strengths and weaknesses, and their ultimate success and happiness with the entrepreneur lifestyle.

Chapter 2, Does Your Dream Idea Have the Potential to be a Business?, helps you bridge the gap between a great idea and a great startup. I'm sure you all realize that there could be quite a distance between a great idea and a great startup. However, many people don't have a clue on how to bridge the gap. Some entrepreneurs are so caught up in their dream that they jump immediately into implementation with no focus on strategy and tactics first. The result is that when they hit the first obstacle (and there will be many), it seems like the end of the road. They don't have any idea which way to turn.

Even when your startup is a one-man show and lots of fun, a business needs some discipline and controls to keep it from being defined as a hobby by investors, and to assure some financial return.

Chapter 3, When, Where, and How Do You Formalize a Technical Business?, introduces you to the practical requirements you need to understand and execute to start a business. These include naming your company and product, the formalities of incorporation as an LLC or C-corporation, tax and liability considerations, and creating a website. In today's environment, this also includes how to use social media, writing a blog, creating an account on LinkedIn and Twitter, and an introduction to marketing.

Chapter 4, Does a Technical Entrepreneur Really Need a Business Plan?, discusses all the pros and cons of a business plan, and then tells you how to build one with all the basics, including surrounding elements such as a financial model and elevator pitch, without a huge cost or investment in time. The thought of preparing a business plan for the first time can be very intimidating. There are many moving parts, and it's easy to get lost in the details. In reality, if you are not looking for investors, no business plan is expected by anyone. Yet I would suggest that creating one is still a valuable exercise since you need the plan as the blueprint for your company, team communication, and progress metrics, unless your management style makes this a waste of time.

Chapter 5, When and How Do You Find Funding for a Technical Business?, explores the most common and most productive approaches to get your startup moving forward. Of course, every approach has pros and cons. For example, with any outside investment, you give up some ownership and control, and with bootstrapping, your growth curve will likely be longer and more organic.

Money to build the business is the number one challenge for most startups. Don't believe the urban myth that you can sketch your idea on a napkin and professional investors will throw money at you. In reality, only 3 out of 100 companies who apply are successful with Angels, and the success rate with VCs is even lower. A large percentage of startups never apply to either.

If you are new to the entrepreneurial world of startups, you are likely confused by the terminology of seed-stage, lean startups, micro-VCs, and Super Angels. Don't be embarrassed since even professional investors are often confused these days by the new terms as well as old terms used with new meanings. In any case, this chapter looks at the options you really have and how to make them happen.

Chapter 6, After the Funding, How Do You Survive the Execution Risks?, covers details about patents and other intellectual property. A large portion of every startup's competitive advantage and potential value to investors is the size of your intellectual property portfolio. When someone says Intellectual Property (IP), most entrepreneurs think only of patents. In reality, patents are only one of many items that should be in your IP portfolio. This chapter explores the range of these items, helps readers understand the pros and cons of each, discusses cost issues, as well as value to investors, founders, and customers.

Chapter 7, Are You Ready for All the Leadership and Team Challenges?, explores the fact that creating and building a business is not a one-man show, even though it usually springs from the mind and determination of one person—committees don't start successful businesses. But turning an idea to a business success requires many people to work together effectively, and that requires entrepreneurial leadership.

Leadership is not a skill one is born with, but it can be learned and honed from experience and failures. Startups also require many different leadership skills, from technical to financial, so an entrepreneur needs to understand how to build the right team, work will all kinds of people, and provide communication and motivation to all.

Chapter 8, Do You Understand How Social Media is Changing the Business Landscape?, tells a new entrepreneur where and how to start using social media, as well as how to measure the impact, and make the required trade-offs between cost and value received.

Everyone is talking about how social media can help you jumpstart your business at no cost, and experts are springing up on all sides to help you do it at a high cost. So who do you believe, and what are the keys to success for any startup?

If your startup can't be bothered with social media or has no plan to take advantage of it, then you are definitely at risk these days with the new generation of customers. But simply jumping in is not enough. Before you start spending money and time being a user, you need to understand how it can help you and your business.

Chapter 9, If You Build It, Will They Find You, and Will They Use It?, focuses on the requirement for marketing in general, as well as the new rules required by social media and the overload of information bombarding potential customers via the Internet and traditional marketing sources.

Marketing is everything these days. You can have the best technology, but if customers don't know you exist or they don't know how your technology solves a real problem for them, your startup will fail. Yet I see many entrepreneurs that focus on the basics of marketing too little and too late.

Chapter 10, Can You Build the Relationships Needed to Succeed in Business?, explores the fine line between competitors and partners, and provides guidance on where, when, and how to find the right partners for growth and strength, without unduly risking your position with competitors.

New entrepreneurs are usually so focused on selling more of their branded product or service to their own customer base (organic growth) that they don't consider the more indirect methods (non-organic growth) of increasing revenue and market share. Non-organic growth would include OEM relationships, finding strategic partners, coopetition, as well as acquisitions.

In all cases, the challenge is the same, of finding people that you can work with and enjoy in the business relationship. The relationship has to have trust, communication, and respect in order to work. Otherwise, like a marriage, it will be doomed to constant conflict, second guessing, and unhappiness.

Who this book is for

This book is targeted to young and first-time entrepreneurs who have a technical background and training, a great idea for an enterprise software product, but don't have experience or training in setting up a business, marketing a product, and managing the finances required.

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Chapter 1. Do You Have What It Takes to be an Entrepreneur?

We already know that you are a technical superstar, with a passion for creating an innovative product that will be a paradigm shift in the technology you love. This is a necessary capability, but not a sufficient one, to be an entrepreneur. According to Wikipedia, entrepreneurs are people who create new and innovative businesses. Innovative products do not necessarily lead to innovative businesses. However, obviously, people who can do both are the most likely to be successful and happy.

Most experts agree that creating an innovative business is at least equal in difficulty to creating an innovative product or service. It requires a unique set of skills, personal attributes, and a mindset that many people don't have or don't choose to learn. In fact, just like many don't choose to build and nurture their technical skills, you might not want to develop the business and personal attributes associated with entrepreneurs.

Technical entrepreneurs often believe that great products will ultimately lead to a successful company, and good business skills only accelerate this process. In fact, there are tradeoffs involved between a focus on the technical aspects and a focus on the business aspects. The best entrepreneurs are able to find the right balance—technical perfectionism will kill you, just like minimal focus on building the business will kill you, even with a strong product.

Let's take a look at the personal attributes that differentiate non-entrepreneurs from the great ones, and help you achieve that balance!

Personality traits of great technical entrepreneurs

A while back, when a technical startup founder mentioned to me that he wasn't sure he had the personality to be an entrepreneur, I realized how important this insight was. My first thought is that if you are more annoyed than energized by expert advice, team suggestions, and customer input, then you should probably avoid this line of work.

Actually, it's more complicated than that, but that's a good start. After working with entrepreneurs for more than a decade, I have developed a good radar to quickly recognize the mentalities that will likely pass the test of investors, employees, and customers.

However, it's easier for me to look in from the outside than it is for you to look out. So, here is a list of mentality characteristics, which I believe are absolutely necessary for you to see in yourself as an entrepreneur. On the other hand, if any of these characteristics cause you stress and discomfort, you probably won't be happy in the role of an entrepreneur:

You enjoy being the visionary leader: Being able to envision what the business and industry will be like in years to come is a skill that can guarantee that you will be around for the long haul. What makes most success stories in business is not totally reinventing the wheel, but leading the charge to make the current wheel better or applying the existing wheel to a new market opportunity.

Sometimes you are creative, sometimes logical: A successful entrepreneur has to come up with innovative ideas but also turn them into a value-creating profitable business. This requires a good amount of both left-brain and right-brain activities, with enough common sense to find the balance.

Risk energizes you: To really enjoy the ride in the world of entrepreneurship, you need to be able to sustain yourself outside of your comfort zone and have a sense of adventure. Startups never go as you anticipated. This is why you need to be ready to go off the script and improvise, and enjoy the thrill of victory when it works.

Actively seek others' input: The quicker you learn not to take it personally (and it's hard when it's your business and your creation), the more successful you will be. You will always come across people who will criticize you, no matter how great or valuable your product or service may be.

Motivated yet patient: When you start a business, you need to have the frame of mind that this is what you want to do for the foreseeable future or at least until your current goals are achieved. Most people want financial freedom, but they want results immediately, and this is not the case 99 percent of the time. Most successful entrepreneurs understand that success does not come overnight; it takes years.

Jack of all trades: When running a business, you'll be doing a little bit of everything. You have to be good but not an expert at everything you do, and you have to know when to be flexible and when to ask for help. If you want to specialize in just one thing, then running a business might not be for you.

If you don't fit into everyone's personal view of an entrepreneur's mentality, don't be totally discouraged, and don't worry about someone else's view. Winning businesses have been started by people of every type. Yet, overall, the facts are that about two-thirds of startups fail as a business (which means they are not sustainable financially), so think hard before you ignore warning signs.

I'm convinced that if entrepreneurs spent half as much time evaluating themselves and what makes them happy, as they do writing business plans and visiting attorneys and accountants, they would be winners far more often.

Finally, don't forget that the most important thing is to always do something that you enjoy. Life is too short to be going to work every day unhappy. Beyond that, I believe success is a state of mind derived from confidence, self-esteem, and what you really want in life. How strongly do you really want to manage a startup versus continuing to build great products for someone else to manage and sell?

Are all technical entrepreneurs natural-born?

Some people assert that technical entrepreneurs with the personal attributes discussed earlier have to be natural-born, and you either are one or you aren't. I concede that good, natural-born entrepreneurs do exist, but more often, I tend to agree with Peter Drucker, who said It's not magic, it's not mysterious, and it has nothing to do with genes. It's a discipline, and like any discipline, it can be learned.

On the natural-born side, some entrepreneurs seem to have a strong vision and the ability to inspirationally lead others based on their background, upbringing, and early experiences. It is this vision that is the beacon to drive the right people behavior, leading to the success of the business. If you don't have a vision in your heart or if you don't have the strength to inspire people, entrepreneurship is probably the wrong road for you.

If you feel you do have the right characteristics, you can still benefit from learning some skills and disciplines that improve the success and the impact of every technical entrepreneur. Here are some of the key ones, assembled from an old interview with Herb Kelleher (http://searchcio.techtarget.com/news/924412/Entrepreneurs-Born-or-made-A-conversation-with-Herb-Kelleher-of-Southwest-Airlines) of Southwest Airlines and other executives:

Ability to set priorities and focus on goals: Many people allow themselves to be driven by the crisis of the moment. Personal discipline is the key word here. Set yourself some priorities and goals, and live by them.

Ability to identify important issues: Some people call this common sense; others call it 'street smarts.' In the normal startup environment, there are multiple forces that compete for your attention every day, and you need to learn to delegate or ignore many. It relates back to experience and knowledge, more than genes.

Conviction to be a passionate advocate: When you believe in something enough to turn your passion into action, you have become an advocate. This power and voice is then used to persuade others to make the correct decision. An effective advocate requires conviction, usually acquired during related first-hand experience or training.

Broad knowledge and experience: Experience allows one to tackle challenges with confidence, in a given area. Broad knowledge facilitates the same success in other business areas. Entrepreneurs need this, because their challenges are across the spectrum, from technical to legal, operational, financial, and organizational.

Active listening skills: Above all, the ability to listen and understand the real meaning of what people