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Startup management: 10 tools for launching a startup

This article aims to turn your attention to 10 management tools that every startup needs to work out on the way to attracting its investor. The sections below are the foundation for a successful project.

Rather than taking this article as a guide to action, consider it as a useful summary that will help your startup pass the hard test on the path to success.

Strategic management

To begin with, it is worth talking about strategic management. Strategic management comprises a series of actions by a company to achieve long-term goals that allow a business to overcome competitors and thrive in spite of any external obstacles. The company’s mission is at the core of defining strategic goals and a model of corporate strategy on the way to achieving them.

We recommend answering the following questions:

  1. What resources and capabilities does the project have?
  2. What is your intermediate and final destination?
  3. What tools do you possess to achieve your goals?

It is important to note that there is a significant difference between strategic management and strategic planning. The strategy of an early stage project should not limit its opportunities, and it is necessary to be flexible in adjusting the development vector if need be. Therefore, constant monitoring of the current state of affairs both within the startup and the market environment is an inherent part of strategic management.

Business model

Business model is an explanation of where and how a company plans to make money, a kind of business vision with the following key elements: resources-value proposition-competitive advantage; income-costs-profit.

The most difficult question for any startup is which business model will be most effective for me? To answer this key question in the development of a young project, there is an Osterwalder business model (Business model Canvas), which enables you to define the key elements of the business. With such “homework” done, you will get a visual representation of the essence of the business, as well as answers to the questions that require additional study.

The structure of the business model canvas is as follows:

  • key partners
  • main processes
  • resources
  • value proposition
  • technologies of customer relationships
  • distribution channel
  • target groups of consumers
  • income / costs flow

Marketing strategy

It does not matter how innovative your startup is, it will not help you make a dime without the right marketing. Creating the marketing plan is a vital part of developing a new project. A marketing strategy is a sequential plan for the implementation of marketing activities aimed at achieving goals of promoting the company’s goods / services to the market. There are five simple steps to follow to create an efficient marketing strategy:

  1. Setting strategic goals
  2. Conducting research on the target market
  3. Determining the competitive advantage
  4. Defining tasks and marketing tools
  5. Drawing up a marketing calendar and monitoring its implementation

Investment Ideas

Market launch

Entering new markets is an ambitious goal that requires full attention on the needs of the consumer and the ability of marketers to convert customer feedback towards improving the product in order to increase its value for the consumers. Thereby, it is necessary to use all possible tools to achieve your goals:

  1. Analyzing the target audience
  2. Branding
  3. Digital tools for effective promotion
  4. Personalization algorithms
  5. Predictive analytics
  6. Growth hacking

The proper use of a combination of these solutions will allow you to make the market launch as successful as possible.

Team building

No matter how good an idea is, it will remain just an idea without people who can implement it. Team building is the cornerstone of startup management. When selecting people for your project, you should understand the specifics of a startup as a place of work and take that it into account when recruiting. Motivation for team members is a key aspect, so here are six theses that you should follow when building your dream team:

  • Do not try to motivate with money. A startup is a long-term investment so make people believe in the project rather than lock them in a “golden cage”.
  • Keep a little less people than you need to. In a small but motivated team, this will improve working activity and stimulate cooperation.
  • Do not be afraid of routine – it will strengthen your team and help it on the way to creating a Dream Team.
  • Do not entrust others to find employees in the early stages of project development.
  • Recruit those who are stronger than you – this will upgrade both you and the whole team.
  • Recruit people for specific tasks. Specialists are the best employees for a startup, they are familiar with the nuances and motivated to facilitate development.

 

Business processes and organizational structure

Of course, the life of a startup comprises a variety of business processes. It is very important to create the right organizational structure to maximize the efficiency of your team. To that aim, here are some effective tips:

  1. Determine the company’s decision-making hierarchy, which will help to create effective corporate governance in the company.
  2. Create a staffing table that defines your strategic vision for expanding your team, a pool of talent and team budget.
  3. Automate. Delegate. Control. It will be difficult to increase speed at the initial stage without these.
  4. Develop the team’s terms of reference as well as job descriptions. Bureaucracy, you may say. But it increases the efficiency and focus of employees.
  5. Write down the terms of interaction among departments.

Startup economics

We will not talk about accounting in this section. Rather, the focus will be on the metrics that startups should pay great attention to when planning activities. Unlike traditional businesses, startups are primarily evaluated with the Retention & Engagement and Unit Economics metrics. This is due to the fact that in startups the perspective is much more important than current profitability.

In the Retention & Engagement group, user activity indicators are primarily measured, for example, DAU / WAU / MAU – the number of unique users of a product by day, week and month. Unit economics is a simulation of profitability per unit of the product. The main indicators of this group are LTV and CAC. The first means the amount of funds that the company plans to receive from one active client for the entire time of working with him, and the second the cost of attracting a client.

Sources of financing

Startup requires sufficient investment until it begins to generate a profit for the owner. A founder’s own finances are mainly not enough to fully realize their ambitions. Therefore, we suggest you possible sources of funding for a startup.

  1. Crowdfunding is the process of receiving funds from a wide range of people (donors or backers). The advantage of this method: in addition to funds, it also attracts the attention of potential customers to the project.
  2. Venture capital. Raising capital from special venture funds is a classic tool for a startup. In addition to funds, you get high-quality expertise and monitoring from the investors.
  3. Business incubators and accelerators are also a good source of fundraising and expertise at an early stage.
  4. Government grants are a good way to attract a large sum, if you just observe all the bureaucratic subtleties.
  5. A bank loan requires the historical indicators of the company’s financial performance, and also often requires collateral. Such terms often do not fit early-stage projects.
  6. Startups do not have to exist apart from the corporate market. A partnership with a large company is a chance to receive funding and support for years to come.
  7. “Business angels” work almost like venture funds, only the amount of funding from them is less while the interest in the project is much higher.

 

Investor relations

To obtain the required capital for the development of a startup, it is necessary to build the correct communication with investors. Thereby, we have highlighted the main points that should be completed to build the right relationship with investors and to attract funding.

  1. Be honest with the investor. You should not try to deceive the investor with inflated project indicators or hide information. Intimate relationship are indispensable with fruitful cooperation.
  2. Prepare a clear business plan and informative presentation of the project to attract the investor’s attention.
  3. Show that your startup is up-to-date and has a growth potential. If your business is based on outdated technology and does not provide for high sales volumes and, as a result, profits, the investor is not interested in you.
  4. When investing in a startup, the investor looks thoroughly at the project team, so do your best to present it in the best light.

 

Deal structuring

When the investor is found, it is time to select the correct transaction structure. This is a key point for young companies, so it is worth seeking legal advice.

There are many instruments for attracting financing for early-stage startups in the world, and in Russia the main instruments are the sale of a block of shares or a convertible loan. The sale of a block of shares involves the sale of a share of the company to an investor for a certain amount. The size of this share depends on the estimated value of the company, which is agreed with the investor.

A convertible loan is used when the participants intend to postpone negotiations on the value of the business at a later date. The company will be evaluated after a certain period of time, and during this period, there will be an interest charged on the funds invested by the investor. By the end of the period, the investor can either withdraw his money or convert it into shares based on the current valuation of the company.

When due diligence on the part of the investor and negotiations on the price / value of money are done, the parties to the contract can conclude an agreement and prepare the legal framework in accordance with the chosen instrument.

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