Two years ago I had an idea for a website. I decided to leave a well paying job, invest all of the money I made post college, and began to start the terrifying journey of building a company.
Today, I want to share the ten most powerful things I learned about turning that idea into a business at a time when the economy was at its worst, and capital was scarce. Many of the tips I'm sharing with you were passed down from others who were kind enough to share their experiences and insight with me.
My goal with this piece is to help those who are considering starting a venture of their own. Starting a company is really scary, so if you have some great advice, please pay it forward. Feel free to share your own thoughts on what works and what doesn't in the comments section below.
1. Get skin in the game. Foregoing income is one thing; investing your own money in your idea is another. It makes you (even more) focused. In December 2008, when most were hiding their cash under their mattress, I took a leap and invested all the money I made post-college into starting LearnVest. I don't recommend that everyone else be this crazy, but having your own dollars invested influences every decision you make.
2. Enlist support. Anyone who tells you that you can go it totally alone is wrong. Start out by creating an advisory board composed of successful people, and don't be afraid to give them equity. Chances are, they will know some helpful short cuts and be able to offer connections to other experienced people.
If at all possible, rely on friends and family for support, but not for funding the business. First, mixing friends and money is complicated, and you don't need the additional stress. Moreover, when the time comes to seek additional funding, outside investors will prefer to see that you've been forced to go beyond your immediate network and have been able to convince people about the validity of your idea. When starting LearnVest, I decided to only take money from people that were also able to provide the strategic advice that would bring my idea to the next level.
3. Be steadfast about the big idea, but willing to adjust the execution. A clearly articulated business proposal that supports an unmet need can find investors, but it might take longer than you expect. Be inviolate about the big idea, but be willing to adjust the details. You need to iterate quickly on ideas, and always make sure to get lots of feedback. If you start with a truly good idea and your product solves a real problem, doors will open.
4. Know your user. At the end of the day, your user is all that matters. (And it never hurts if you're in your target market!). How does your product make their life easier/better/more efficient? Once you know your user, keep them in mind at all times when making those critical decisions.
5. Provide the best customer service possible. My number one goal was to provide the best customer experience possible. This is a challenging goal and one that we struggle with every day. But when we do a good job, nothing gives me more joy than one of our users telling us that LearnVest changed her life for the better by helping her confront a financial issue. Plus, happy customers are the best way to find new users. If your product makes their life better, they will want to share it.
6. Spend $0 on marketing. The key is to embrace social media. Not only is it cheap and efficient, it's most likely where your audience is. And, get free PR by going after awards (for example, we were fortunate to be selected as a Tech Crunch 50 company). Try out marketing concepts like launching an invite-a-friend sweepstakes. Social media is always changing, so stay in the loop.
7. Clearly identify your metrics. In the case of our business, visitors to the website, page turns, open rates for our newsletter, and survey results provide tangible confirmation that we are moving in the right direction. Set specific weekly/monthly goals and clearly articulate those goals.
8. Create structure but balance with innovation. You need to create some sort of structure and processes by which to do business. This is important not only for building great product but will also allow you to scale. The hard part is balancing this structure with innovation. Use the fact that your company is small and flexible to your advantage.
9. Be cheap. (And, I say this not just because I started a personal finance company in a recession!)
- Cell phones can be cheaper than having an office phone
- Use Google Mail because why not? (Plus, we love the intra-office gchat capabilities)
- Never print in color
- Do your furniture shopping at places like Ikea
- Spend wisely on office space. There are great deals to be had in a recession, so take advantage. We share space (and rental costs!) with Easybib.com, an awesome bibliography company led by great entrepreneurs.
10. Never get demoralized. Take time to find the joy in each day of the journey. It seems obvious, but after working 16+ hours a day over and over again it's hard not to become a little ragged. I always find at least twenty minutes a day of quiet time to take a break and exercise. It never fails to provide greater clarity to problems I'm trying to solve. You owe that to yourself.
Two years after I had the idea to start LearnVest, I'm proud to say that I have been able to raise two rounds of funding (a seed round and a venture round), enroll an incredible group of people to be on the LearnVest team, and now provide financial guidance and advice to thousands of people every day.
Just last week, LearnVest closed $4.5 million in funding from Accel Ventures (the investors behind Facebook, Etsy, Kayak, Groupon, and more). The journey of making LearnVest the business I once envisioned is a continuing process. This process is a very long one, but at the minimum, we are one step closer to achieving our mission of educating millions of women.
Follow Alexa von Tobel on Twitter: www.twitter.com/alexavontobel
For your readers who want resources to read and guide them on their journey I recommend the book: Energize growth now, I just reviewed on my blog http://nosmokeandmirrors.wordpress.com/2010/04/11/how-can-marketing-make-your-company-wealthy/
Also free on my blog is my eBook: 50 ugly truths about starting your own business…and why you should do it anyway. I wrote it after working with so many people who started a business but had the wrong expectation as to what running your own business was like.
Thank you again for your 10 points and I plan to share them in my blog and social network.
Mark Allen Roberts
www.nosmokeandmirrors.com
Congrats on your funding and good luck!
Did you have a safety net ?
What were your plans if the venture failed after two years ?
How did you approach the investors ?
One thing that I believe you point out implicitly is that ... you really have to start by building your company FIRST, before any of the smart-money is going to step in. (Unlike certain banks that we may know, these people do not gamble with their cash.) But then, as the logical next step, you do have to ask for money: you do reach the point where liquidity is necessary to proceed. But by then, your way forward must be clear ... and whatever you're doing (as in your case) must be, well, "well worth doing."
It's easy to see why Accel was interested in your venture. Offhand, I think they chose wisely.
$0 for marketing is an extremely poor choice for almost any business whose owner is not an real-world experienced marketing pro herself.
By offering equity, i.e. paying for, advice, promotional efforts and networking activities from investors, the author did in fact pay for marketing in the instance cited.
To anyone thinking about starting up a business, Ms. von Tobel is offering sage wisdom!
Thanks so much for this addition to the list. Knowing your competitors is certainly key! If anyone else has anything to add please share!