questions for entrepeneurs/business owners - how to "start" your business?

[purbeast0]

i'm a software engineer for 10+ years now and i've been doing some very niche mobile development on the side in my spare time for some small spare cash, but also because i enjoy development. my buddy (who is in sales/marketing) and i are always thinking of something we can come up with to start a company.

well this past week i came up with what i believe is a very real idea that could be industry changing if executed properly. i'm going to sit down with my buddy and i'm going to explain the idea in more detail to him and see what he thinks about it.

being a developer myself, i could easily (would take time, but it's completely doable) code up a prototype of basic functionality of what i'm talking about software wise. however, the "real" application is something that would require full time development and definitely something i couldn't simply do in my spare time (well i could but it would take a very long time, especially considering i have a 6 month old).

so my question is, as someone who has 0 business skills for the most part, what would be the next step to try and start an actual business out of an idea/prototype that i have?

i've heard of things before like going out and getting seed funding to get some kind of backing for initial developments, but i have no clue on how i would even start looking into something like that. or i could be completely wrong and that doesn't happen.

the thing is, i couldn't do this full time "for free" right now just due to family circumstances. my wife works, but she doesn't pull in enough to support us by herself.

or am i delusional thinking that even if i had funding from somewhere early on, that they would allow me to use it to "pay myself" a little bit to get the initial work done?

so basically, i guess i'm just wondering from entrepeneurs and business owners, what would be the next step to take. even if there are books or something that you recommend to help guide, i'm definitely open to hearing those as well.

 

[ultimatebob]

What's your product? Can you explain the basics of it to me in a page or less?

If not, you better learn how. Otherwise, you're going to have problems selling this product or getting funding for the company.

My advice is to listen to the Gimlet Media Startup podcast if you haven't already. It has some great hints on how to start a new business, while still being entertaining to listen to:

https://gimletmedia.com/show/startup/

Season 1 is better than Season 2. Season 2 talks a lot about Y Combinator, which is something you might want to look into once you have a business plan and working prototype and need cash to roll it out.

 

[purbeast0]

What's your product? Can you explain the basics of it to me in a page or less?

If not, you better learn how. Otherwise, you're going to have problems selling this product or getting funding for the company.

My advice is to listen to the Gimlet Media Startup podcast if you haven't already. It has some great hints on how to start a new business, while still being entertaining to listen to:

https://gimletmedia.com/show/startup/

Season 1 is better than Season 2. Season 2 talks a lot about Y Combinator, which is something you might want to look into once you have a business plan and working prototype and need cash to roll it out.

cool thanks for the link. i actually have heard about Y Combinator before too. i'm not sure if you have seen the show Silicon Valley or not, but i had no clue that "incubators" were a real thing until after i had seen that show.

as for explaining the product in a page or less, yes, i definitely can do that. i could probably do it in a paragraph. i need to do more research for sure but to my knowledge there is nothing of this nature out there and it definitely solves a problem. it's one of those ideas that it seems so obvious yet there is nothing out there for it now.

i'll check that link out shortly and see what i can get out of it, thanks.

 

[OverVolt]

READ SOME BOOKS.

Seriously, I'm in the same boat. I know some family friends who could point me in the right direction. But I also think some books would be the BEST knowledge from one person to another on how to actually start a business instead of a web forum.

 

[purbeast0]

READ SOME BOOKS.

Seriously, I'm in the same boat. I know some family friends who could point me in the right direction. But I also think some books would be the BEST knowledge from one person to another on how to actually start a business instead of a web forum.

if you actually read my OP, you would see i asked for recommendations on books to read cause i have 0 clue where to start with that too.

 

[uclabachelor]

Don't worry about the business aspect of it yet... focus on building a product first then use it between the two of you to see if others would pay for the product. Don't expect to get paid during this time.

Once you have a working product then you basically have two routes.

Go big. Find investors (angels, family, friends, personal) and use that investment money to fund the startup, get the legal business structure filed, get customers, hire employees, etc.

Or start small.

If your product is as good as you think it is, investors will come to you.

 

[Crusty]

The biggest question any incubator or seed investor is going to ask you is if you are completely committed to working on your idea full-time if you get funding.

You need to be able to answer this question immediately and comfortably assuring the other party you are fully committed. If there is any doubt whether or not you will waffle after a few weeks or months of hard and often times non-rewarding work you will have a hard time convincing anyone to give you money.

Y Combinator in particular doesn't necessarily invest in ideas, they invest in the founders. You might have the greatest idea in the world, but if you are a shitbag(not implying anything about you here) they won't be giving you any money. If they do fund you though, they expect you to drop what you are doing and focus 100% on your startup for the next several months.

 

[purbeast0]

Don't worry about the business aspect of it yet... focus on building a product first then use it between the two of you to see if others would pay for the product. Don't expect to get paid during this time.

Once you have a working product then you basically have two routes.

Go big. Find investors (angels, family, friends, personal) and use that investment money to fund the startup, get the legal business structure filed, get customers, hire employees, etc.

Or start small.

If your product is as good as you think it is, investors will come to you.

well the thing is, my buddy isn't a coder at all. he was in sales for a software company i worked for, so the coding would be 100% done by me. and i could do it for sure, but it would take a lot of time.

i couldn't build the 100% full ready to sell product in my spare time (ie, the part i know i wouldn't get paid for) since i have a full time job and a new born to deal with right now, but i could get like a prototype up with certain aspects of it working, where it would be ready to be expanded upon. that would probably take me a couple months in spare time to get done.

but once it was at that point, proof of concept would be very easy to show and explain how it could be used with more features.

The biggest question any incubator or seed investor is going to ask you is if you are completely committed to working on your idea full-time if you get funding.

You need to be able to answer this question immediately and comfortably assuring the other party you are fully committed. If there is any doubt whether or not you will waffle after a few weeks or months of hard and often times non-rewarding work you will have a hard time convincing anyone to give you money.

Y Combinator in particular doesn't necessarily invest in ideas, they invest in the founders. You might have the greatest idea in the world, but if you are a shitbag(not implying anything about you here) they won't be giving you any money. If they do fund you though, they expect you to drop what you are doing and focus 100% on your startup for the next several months.

i am 200% ready to focus on something if it meant i'd be working on my own product for my own business. i could answer that with 100% confidence for sure. however, the only thing is, during that very early stage, would i expect to be getting any salary from these investors at all? i make a pretty good salary now and i'm wondering if i would even make anything close to it in a situation where investors were giving me money. or is that just something i'd have to negotiate/etc with them?

i actually got an offer with a startup company and would have been their #3 employee, however, they offered me less than 1/2 of what i currently make, for a senior software lead position. i simply could not take it because it was way way too low. however, if it was for my own company, i would have to have a serious sit down with my wife and see if we could swing it. i mean it would be a huge lifestyle change, but if only temporary, then it may be doable.

 

[Crusty]

well the thing is, my buddy isn't a coder at all. he was in sales for a software company i worked for, so the coding would be 100% done by me. and i could do it for sure, but it would take a lot of time.

i couldn't build the 100% full ready to sell product in my spare time (ie, the part i know i wouldn't get paid for) since i have a full time job and a new born to deal with right now, but i could get like a prototype up with certain aspects of it working, where it would be ready to be expanded upon. that would probably take me a couple months in spare time to get done.

but once it was at that point, proof of concept would be very easy to show and explain how it could be used with more features.



i am 200% ready to focus on something if it meant i'd be working on my own product for my own business. i could answer that with 100% confidence for sure. however, the only thing is, during that very early stage, would i expect to be getting any salary from these investors at all? i make a pretty good salary now and i'm wondering if i would even make anything close to it in a situation where investors were giving me money. or is that just something i'd have to negotiate/etc with them?

i actually got an offer with a startup company and would have been their #3 employee, however, they offered me less than 1/2 of what i currently make, for a senior software lead position. i simply could not take it because it was way way too low. however, if it was for my own company, i would have to have a serious sit down with my wife and see if we could swing it. i mean it would be a huge lifestyle change, but if only temporary, then it may be doable.

I will say that it is very common for companies to pay founders minimum wage until you start generating significant revenue or land a second round of investing. You'll have a hard time convincing investors that you deserve to get paid more at the very start.

 

[purbeast0]

I will say that it is very common for companies to pay founders minimum wage until you start generating significant revenue or land a second round of investing. You'll have a hard time convincing investors that you deserve to get paid more at the very start.

and i'm assuming "minimum wage" isn't the real minimum wage, but more of a minimum salary that is agreed upon?

 

[Crusty]

and i'm assuming "minimum wage" isn't the real minimum wage, but more of a minimum salary that is agreed upon?

No, I mean the minimum that is legally required. You as a founder are taking on a huge risk in starting a company, your huge reward arrives when you exit, not in your initial salary.

 

[Jeeebus]

Before you go around disclosing your idea, I highly suggest you have a solid nondisclosure agreement in place with whoever you plan to talk to. If your idea is truly revolutionary, then you'll want to protect it (especially from those you are explaining it to in detail).

 

[Crusty]

Before you go around disclosing your idea, I highly suggest you have a solid nondisclosure agreement in place with whoever you plan to talk to. If your idea is truly revolutionary, then you'll want to protect it (especially from those you are explaining it to in detail).

This will only work for potential co-founders/partners and hires, no investor will sign an NDA before meeting with you unless you're a serial entrepreneur with a successful reputation already.

 

[Ns1]

and i'm assuming "minimum wage" isn't the real minimum wage, but more of a minimum salary that is agreed upon?

No, I mean the minimum that is legally required. You as a founder are taking on a huge risk in starting a company, your huge reward arrives when you exit, not in your initial salary.

oh that sweet sweet -95% pay reduction in exchange for equity.

 

[purbeast0]

No, I mean the minimum that is legally required. You as a founder are taking on a huge risk in starting a company, your huge reward arrives when you exit, not in your initial salary.

damn so making like $10/hr lol. that would be ROUGH! but yeah i hear ya.

Before you go around disclosing your idea, I highly suggest you have a solid nondisclosure agreement in place with whoever you plan to talk to. If your idea is truly revolutionary, then you'll want to protect it (especially from those you are explaining it to in detail).

yeah i mean i don't plan on really talking about it to anyone until i had a prototype ready or had someone who was seriously interested from the get go in helping out with funding. although, money early on i wouldn't need for much other than myself to kind of live off of. it mainly requires my own time. although, i'd definitely need some kind of server or possibly utilize something like AWS.

 

[purbeast0]

listening to this gimlet guy now from s1e1. didn't realize this was a ton of podcasts, gonna take a while to get through all of this. so far though i like how it is presented.

 

[Crusty]

damn so making like $10/hr lol. that would be ROUGH! but yeah i hear ya.



yeah i mean i don't plan on really talking about it to anyone until i had a prototype ready or had someone who was seriously interested from the get go in helping out with funding. although, money early on i wouldn't need for much other than myself to kind of live off of. it mainly requires my own time. although, i'd definitely need some kind of server or possibly utilize something like AWS.

Almost every single cloud provider will offer some sort of free tier or free credits for a startup, especially if you join an incubator or participate in a 'startup weekend' somewhere.

I know Microsoft offers up to $500k in platform credits on Azure for certain startups.

 

[purbeast0]

Almost every single cloud provider will offer some sort of free tier or free credits for a startup, especially if you join an incubator or participate in a 'startup weekend' somewhere.

I know Microsoft offers up to $500k in platform credits on Azure for certain startups.

oh that is cool to know.

the thing is, i don't really even know how to even get from an idea/prototype, to an actual company and what not. that is a big jump that i really have no clue about. but hopefully listening to podcasts or reading stuff can help out with that.

 

[Platypus]

Unrelated to your business questions, but worth saying, don't wait until you have a product to think about the security of it. Build it with security in mind the entire time... this includes using free cloud hosting for your data, etc. Be careful putting your trust in another provider and expecting them to do things the right way.

You get one chance in most cases to do things right, user trust is almost impossible to regain in a lot of cases. If you think your idea and your ability are good enough to be 'industry changing' you should be prepared for people to start looking behind the curtain for ways to undermine/exploit it.

 

[Crusty]

Honestly don't worry about incorporating for now. If it is just you and a buddy doing this on the side until you feel its ready to shop around to investors/incubators for a seed round there is no point in paying the filing fees until you've got something actually built.

When the time comes you will just incorporate as a C-Corp in the state of Delaware, it's not a painful process by any means.

Most incubator programs will also help you get the correct paperwork filed and make sure you are setting up your finances correctly(issuing shares, filing IRS/SEC forms etc.).

Most investors and incubators don't expect first time founders to know or understand all the intricacies of setting up your first corporation.

 

[purbeast0]

Unrelated to your business questions, but worth saying, don't wait until you have a product to think about the security of it. Build it with security in mind the entire time... this includes using free cloud hosting for your data, etc. Be careful putting your trust in another provider and expecting them to do things the right way.

You get one chance in most cases to do things right, user trust is almost impossible to regain in a lot of cases. If you think your idea and your ability are good enough to be 'industry changing' you should be prepared for people to start looking behind the curtain for ways to undermine/exploit it.

do you mean the security of my idea, or the users data being secure?

if the latter, that is definitely going to be a MAJOR part of this and something that i've definitely already thought about as well.

 

[Platypus]

do you mean the security of my idea, or the users data being secure?

if the latter, that is definitely going to be a MAJOR part of this and something that i've definitely already thought about as well.

The latter. I hope you are reaching out to people who specialize in this kind of thing instead of trying to do it yourself.

 

[Jeeebus]

Ok I read the OP another time and now my head really wants to explode. I'm going to assume you and your buddy don't have any sort of partnership agreement, LLC operating agreement, etc. in place. I'm also going to assume by the reaction above that you don't have any nondisclosure agreement with him or really anything setting out the relationship.

Given that I've litigated my fair share of cases that start out with everyone as best friends/family and end up with someone stealing/misappropriating ideas, money, designs, etc., my suggestion would be to do this smart in terms of protecting yourself and your idea.

I think you'll also find that lining up financing will be easier when you can demonstrate actual agreements in place which lay out the roles of those involved vs. just telling someone "it's me and my best bud and we're like totally excited to get this started."

I deal with this stuff fairly regularly. If all you really care about is getting someone to make the design, market it, put you in touch with the right contacts, then there are plenty of companies that do just that. If they are legitimate, they will have you sign a nondisclosure before ever talking to you about the idea. If they don't, run.

 

[purbeast0]

Ok I read the OP another time and now my head really wants to explode. I'm going to assume you and your buddy don't have any sort of partnership agreement, LLC operating agreement, etc. in place. I'm also going to assume by the reaction above that you don't have any nondisclosure agreement with him or really anything setting out the relationship.

Given that I've litigated my fair share of cases that start out with everyone as best friends/family and end up with someone stealing/misappropriating ideas, money, designs, etc., my suggestion would be to do this smart in terms of protecting yourself and your idea.

I think you'll also find that lining up financing will be easier when you can demonstrate actual agreements in place which lay out the roles of those involved vs. just telling someone "it's me and my best bud and we're like totally excited to get this started."

I deal with this stuff fairly regularly. If all you really care about is getting someone to make the design, market it, put you in touch with the right contacts, then there are plenty of companies that do just that. If they are legitimate, they will have you sign a nondisclosure before ever talking to you about the idea. If they don't, run.

yeah i mean my buddy and i are in the same boat and we both want to start up some kind of company and have been thinking about ideas for a year + but this one i think really can be that one. i trust him completely in general, and he's not even a tech guy so we complement eachother good. i mean he gets tech but has no real clue how to code or put something together from nothing.

before anything would actually come to fruition i think we would do what you are saying and lay out more formal ground work of who has what role and all that, especially before trying to find investors or pitch it.

and no i don't just care about getting people to do the design, market, etc. that's what we want to do. i want to design and develop it from the ground up and make it my baby. and then as mentioned, my buddy is in the sales/marketing side so he can handle that aspect of it.

since you seem to know this stuff, what is the actual process to get an NDA and is there a standard fee or does it vary?

The latter. I hope you are reaching out to people who specialize in this kind of thing instead of trying to do it yourself.

yeah i personally don't know much about cyber security so that would probably be the first person i would bring on board if we actually got funding. however, it would be very simple to prototype and show the conceptual idea without having security in place since it would just be for prototype purposes.

 

[ultimatebob]

Let me know when you have a prototype working. I'll do some QA testing for ya.