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Advices10 tools for launching a startup - GETVISION

In this article, we bring to your attention ten management tools that each startup needs to work out to attract its investor. The sections presented below are the foundation that will allow you to create a successful project.

 

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 outperform 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 opportunities does the project have?
  2. What are your preliminary and final goals?
  3. What tools do you have to achieve your goals?

It is important to note significant differences 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 its components when necessary.  Therefore, constant monitoring of the current state of affairs within the startup and in regards to the market environment is an integral part of strategic management.

 

Business model

A business model is an explanation of how a company plans to make money. It involves the following key elements: resources-value proposition-competitive advantage; income-costs-profit.

The most difficult challenge for any startup is to find an efficient business model. The Osterwalder business model (Business model Canvas) defines the key components of a successful business model for early-stage startups. Once you define each component for your own startup, you will get a visual representation of the essence of the business model, as well as areas that need additional development.

The structure of the business model canvas is as follows:

  •     key partners
  •     core processes
  •     resources
  •     value proposition
  •     customer relationships
  •     distribution channels
  •     target groups of consumers
  •     revenue streams / costs structure

 

Marketing strategy

No matter how innovative your startup is, it will not help you earn a penny without proper marketing. Therefore, creating a high-quality marketing plan is a vital part of developing a new project. A marketing strategy is a step-by-step plan for implementing marketing activities aimed to promote the company’s goods/services to the market. To create a high-quality marketing strategy, you should follow five simple steps:

  1.     Setting strategic goals;
  2.     Researching the target market;
  3.     Determination of competitive advantage;
  4.     Defining marketing objectives and tools;
  5.     Drawing up a marketing calendar and monitoring its implementation.

 

Bringing the product to market

Entering new markets is an ambitious task that requires full focus on consumers and the ability of marketers to convert feedback into actual improvements in the product in order to increase its value for the consumers. In this regard, it is necessary to use all possible tools to achieve the set results:

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

The correct use of these solutions will make the product launch on the market as thriving as possible.

 

Team formation

No matter how good an idea is, it will remain just an idea without people who can implement it. Therefore, team building is the cornerstone of startup management. When choosing people for your project, you should understand the specifics of a startup as a workplace and proceed from this. Motivation for team members is a key aspect, so here are six tips that you should consider when building your dream team:

  •     Don’t try to motivate with money. A startup is an investment in the future, make people believe in the project rather than provide them with all the benefits from the start.
  •     Keep a little less people than you need. In a small but motivated team, this will help maintain working dynamics and stimulate communication.
  •     Don’t be afraid of staff turnover — it will harden your team and help on the way to creating a Dream Team.
  •     Do not assign others to hire employees at the early stages of the project development.
  •     Recruit those who are stronger than you — this will upgrade both you personally and the whole team.
  •     Look for people for specific tasks. Narrow specialists are the optimal employees for a startup. They are familiar with the nuances and motivated to learn and develop.

 

Business processes and organizational structure

Of course, the life of a startup consists of many business processes. Therefore, it is essential to create the right organizational structure to maximize your team’s effectiveness. To do this, we offer you some tips:

  •     Determine your decision-making structure in the company, which will be the main one for creating effective corporate governance tools in the company.
  •     Create a staffing table that will determine your strategic vision for the expansion of the team, the personnel reserve, as well as the budget of the team.
  •     Automate. Delegate. Control. Without this, it will be challenging to increase speeds at the initial stage.
  •     Get ahead of the team’s responsibilities, as well as job descriptions. Bureaucracy, you may say. But it increases the efficiency and focus of employees.
  •     Write down the order of interaction of departments.

 

Startup economics

In this section, we will not talk about accounting. Instead, it will be about metrics that startups should pay attention to when planning activities. Unlike traditional enterprises, startups are evaluated mainly by Retention & Engagement and Unit Economics metrics. This is because perspective is much more critical in startups than current profitability.

The Retention & Engagement group primarily measures user activity indicators, for example, DAU/WAU/MAU — the number of unique product users in the context of a day, week, and month. Unit economics is the modeling of profitability per unit of goods. The leading indicators of this group are LTV and CAC. The first means the amount of revenue that the company plans to receive from one active client for the entire time working with them, and the second indicates the cost of attracting a client.

 

Sources of funding

A startup requires sufficient investment until it begins to generate profit for the owner. A founder’s own finances are usually not enough to fully implement his or her ambitions. Therefore, we suggest you possible sources of funding for your startup.

  •     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.
  •     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
  •     Business incubators and accelerators are also a good source of fundraising and expert support at early stages.
  •     State grants are an excellent way to attract large funds for founders who are ready to comply with all the bureaucratic subtleties.
  •     A bank loan requires historical indicators of the company’s financial result and often requires collateral assets, which are not always possible to obtain in early-stage development projects.
  •     Startups do not necessarily have to exist separately from the corporate market. However, partnership with a large company is a chance to get funding and support for many years.
  •     Business angels operate almost like venture funds. However, the amount of funding they provide is typically smaller while the return they expect is much higher.

 

Working with investors

To obtain the necessary capital for the development of a startup, it is essential to build proper communication with investors. In this regard, we have identified the main points that should be fulfilled in order to build the right relations with investors and attract the necessary financing.

  •     Be honest with the investor. Do not try to deceive the investor with inflated project indicators or hide information. Transparency in partnerships is necessary for fruitful cooperation.
  •     Prepare a clear business plan for the project and an informative presentation to get into the investor’s field of view.
  •     Show that your startup is relevant and has potential for growth. If your business is based on outdated technology and has low sales and profit potential, the investor may not be interested in it.
  •     When investing in a startup, an investor looks at the project team in many ways, so do everything in your power to present it in the best light.

 

Deal structuring

After the investor is found, it is necessary to choose the right structure for the transaction. This is a vital point for early-stage companies. Therefore, it is worth seeking legal advice.

There are many tools for attracting financing for early-stage startups globally, and in Russia, the main tools are – the sale of shares or a convertible loan. The sale of equity share  involves the sale of a company’s stake to an investor for a certain funding amount. The size of this share depends on the estimated value of the company, which is agreed with the investor.

As for the convertible loan, this type of transaction is used when it makes sense for the participants to postpone negotiations on the value of the business to a later date. The evaluation of the company will be carried out after a certain period, and during this time interest will be accrued on the funds contributed by the investor. After this period, the investor will be able to either withdraw the money or convert it into shares based on the current valuation of the company.

After due diligence on the part of the investor and negotiations regarding the price/value of money, the participants of the transaction come to the conclusion of an agreement and the preparation of a legal binding in accordance with the chosen instrument.

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