Advice for internet startup newbie
I might soon be part of an internet startup. We're talking with a relative about setting up a consultancy & business news service on a certain sector, and I've generated a part of the idea and accepted to take on the technical/editorial side for a while (I've almost a year til when I start my master's, and will probably work up until when I start my thesis; so almost two years). If things work out, this might be a dream job (except academia) for me, and even very lucrative. But I'm fairly n00b in this space, both business and professional work, though I have the technical skills. Thus I'm seeking general advice on
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how to organise this thing: how to make sure we communicate well on dates and plans and how to make educated guesses when setting up an agenda
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how much will it cost: we'll start with making a database and running a sector-specific blog/news site as publicity (though I'll make sure the content is quite decent, not just a showpiece), but then later we'll introduce a tangential online service and a mobile app leveraging that crowd
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working with non-techies: I'll be the only techie in this startup and I need to help people with gathering, storing, organising and utilising historical data with certain variables, ensuring they keep an accurate record and can make quality queries easily; the 3 people apart from me will be non technical
I think quite a bit of you here have been involved in this sort of scenario, so maybe you could have some advice for me. I'd appreciate anything, examples of approaches, links to tools, what not, anything you think could be useful. Thanks a lot in advance!
Before I touch on the questions you asked, I'm going to throw a few back to you:
What's the business model? Subscriptions, app purchases, B2B services, ad revenue?
How will you be funded in the short term, and what's the plan for moving from initial funding to self-sustaining?
It's going to start with B2B and subscriptions, parallel to sector news. We will introduce an app as we go along, but I'm not sure if it'll be free or not (app will be an instrument for the service, not the core product itself). We're going to consult people on the business sector's certain variables, using data we'll collect. We'll use the blog/news site to engage the public and build community. B2B subscriptions for consultancy will be the main source of income, we believe that we'll be able to make reasonable offers at rather high prices, and have some potential customers already.
We'll have some investment from a business person who we know, who's in the sector we target. Up until when we'll introduce the apps (web and mobile), we don't expect to have too much expences, it's mostly a database, maybe a UI for using it, and a (possibly static) website. It's when we build a community and introduce the apps that we'll need more personnel, more tech resources (servers, app stores, SDKs, dev computers, &c). Also, up until then, we'll be a couple shareholders and one employee. We'll be able to find office space for the employee at a rather low or no cost. I'll work remotely until we'll employ additional devs, then we'll reconsider. So, in short, we'll start out pretty small and will be adding more parts as we grow.
I expect ~$200/year for utilites and ~$3.5--4k/year for the employee (it's just about minimum wage here, ~TRY21k/year) quite rough guesses at this point), but hopefully it won't take a year to arrive at the apps phase. We expect to attract quite a bit of investments from the sector.
Edit: $200/year, not $200k/year
OK, cool - from this, it sounds like you have three separate components. It might sound obvious, but it's surprisingly easy to lose focus and fall into the trap of "doing work" (productive or otherwise) rather than "creating value". The former is often wasteful, but OK when someone else is paying the bills; in a startup, you can't afford that waste.
Here's how I see your three components:
It also sounds to me like the B2B part is much less scalable than the others, meaning that you could potentially end up scaling your costs faster than your revenue. Something to keep an eye on when you're allocating resources.
Having potential customers lined up is a good sign, not only because it suggests a market demand, but because you can work with them to cater to their needs as you build the business. Listen to what they say, respond to their needs, and remember that you're walking a fine line here: you need to cater to the customer, you absolutely have to have the flexibility to react to the market, but sometimes you also need to be firm and stick to your plans. The trick, of course, is figuring out which comes when!
This is good. Contacts are everything, and having someone in the industry put their money where their mouth is will give you credibility. Presumably, they will also be making introductions to customers and business contacts, and those personal introductions will carry extra weight. Make use of this to gain clients and reputation, and with any luck you'll have your own extended network quickly enough to make it sustainable.
Unless I'm misinterpreting, the community isn't actually making you money. Be wary of spending too much on it as a loss-leader or marketing channel.
An early-stage startup is a unique environment, and your first employee is a huge part of what you're going to build. It's not just another job, it's something that is at times very challenging, very stressful, and very emotional. There's a lot of uncertainty and the pay is likely worse than a comparable position in a large company. Make sure your early hires know what they're getting into, make sure they see you pushing just as hard as they are, and make sure that there's a very solid stock option scheme for them to share in your success if it all comes together.
If possible and practical, I'd also suggest that you work from the same physical space at least a couple of days a week. You're going to go through a lot together, and the ability to grab lunch together and blow off steam is in some ways as important as the work itself.
On the wages side, I don't know enough about the Turkish job market to comment! On the $200k general expenses, if it excludes salaries then that sounds very high based on everything else you've said.
From what I see, other than the manpower, you just need a few servers which should come in far below $1000/month (and AWS, Google Cloud, or Azure will all give you a five-figure welcome credit if you push for it). It's good to overestimate your expenses a bit and keep a buffer, but I'm either missing something big or there's an order of magnitude difference in expectations here.
Investments, or sales? The more of the former you take, the less control you have over your business and the more pressure there will be on you to perform to your investors' criteria. A trend I see often in the startup world is to consider large investments as a sign of success. They aren't, they're a sign of faith that you might have future success - certainly not a bad thing, but not a goal in and of itself. As far as possible, focus on sales and treat investments as you would treat loans: a necessary evil, only to be taken on if the payoff is great enough.
Thanks a lot for your in depth reply!
That "k" is a typo, a big one unfortunately :) it's $200 only, excluding wages, the yearly cost of running a static website (I plan to use sth. like publii if it will be able to scale) and paying for a couple services that'll provide mail, productivity apps, and secure offsite backups, excluding physical equipment like computers, and other requirements of an office space like rent, etc. I expect it to grow to $500-1000/year when all those will be decided and factored in, and grow quite a bit more when we start app development (employ devs, pay for a mac build server and devices for testing, &c). On manpower, I'll have to deal with my cofounder underestimating certain things w.r.t it, but he has contacts that'd be eager to participate in something like this from the early days, so we'll smooth that out before we formally begin the adventure.
The community is important to us because in the sector we want to participate in we have big players who act as intermediaries in sales and gatekeepers as they feed off of an uncertainty among the sellers and high prices for their services. We want to leverage the community to bring in a more public competition into the sector and empower sellers (who are our target audience with the consultancy business), among which our investors, my co-founder, and other potential initial customers. Ultimately we aim to provide tools for more effective sales to the sellers, and leverage the community to generate comptetition and coerce the big players into it. But we'll also help them utilise this competition space to create more approachable products for the sellers; our thought is that these big players are well aware that their gatekeeping is losing them many potential customers. We'll also leverage the community as a source of potential customers. Our target audience is local sellers that range a very wide gamut of operation size, from personal deals to very large businesses, so ideally we'd help smaller dealers to move up the stairs and be able to purchare our consulting services, and build a loyal community in order to take precautions against aggressive competition when we introduce this to the public.
I'd actually like to have the office space, and I'll talk to my co-founder about this. But we're quite far apart in the province, so we'd either rent out a place in downtown or use coworking space initially. Ultimately that'll depend on funding, so we'll be talking to our investor about that.
W.r.t investments, I think sales will bring in quite a bit of money, but investments will abound soon if we will be able to implement out plan. Personally, I agree to you and dislike VC economy and sellouts, but in this instance I won't be the one to decide, because I'll be ephemeral in this company. I was already in the market for a job while I'm sorting my masters out (a totally unrelated subject), when I'll complete that, I'll be leaving this company (assuming we'll exist until then) to pursue my academic career. Our basic plan is to leverage my know-how and my cofounders contacts and experience to create a successful operation, and then parting ways (business wise) when we'll be able to substitute a dependable, decent CTO in my place. So, in sum, when investments will come, it'll be my co-founder to decide about them, but I think he'll listen to my advice which will be in accordance with yours.
Again, thanks a lot! That was a very informative comment.
Lucky I was commenting on it being too high rather than too low, in that case! Since you really are on a shoestring budget, take advantage of all you can in terms of service credits - I know I was surprised to see how freely they're given out. To take Google as an example I've worked with personally (but not the only option, Amazon and Microsoft offer similar programs), you should be eligible for at least a few thousand. Don't be afraid to negotiate, either, and/or play the different providers off against each other a little. This should be a decent starting point: https://cloud.google.com/developers/startups/
I still have a healthy skepticism here, and I think @BraveNewLinux said it better than I could, but there's plenty of space for us to be proved wrong, and you no doubt know your business sector better than us!
Glad to hear - best of luck on the funding and logistics for this one.
Understandable. Again, I'd agree with @BraveNewLinux that entering a startup with the plan of leaving early-ish is difficult. Not impossible, but difficult. Make sure you, your co-founder, and your investor are all on the same page and clear about expectations up front and in writing. Nobody wants a surprise 18 months down the line.
No worries, I'll talk about this stuff all day if anyone lets me. Feel free to drop me a message if you ever have any questions.
Again, thanks a lot for your advice, quite useful. Indeed I didn't know we could negotiate with cloud providers even as a small enterprise like we are.
I am truly inexperienced with this stuff and how to scale things up. Back when I worked at an e-commerce startup, we spent $1800/month for AWS alone, but ours was a shittily-put-together herd of Django projects (instead of apps, have I known better back then, maybe we could've saved the startup; they had 3 projects that imported forms and stuff from one another using stupid hacks, and when I joined they were developing this thing for 8+ months and had written less than half of it only, all 8 months produced was 5000 lines of spaghetti). I always thought that that was huge. But ours was an app that used CPU. I think that if I stick to static content, I can shave off quite a bit of the price for hosting and serving the website. But maybe I'm just being wrong and too optimistic?
I've actually come to doubt the blog part, TBH. I'll re-evaluate it, maybe if we focus on data collection and consulting, we'd be better off. My co-founder really liked the idea, but frankly I did not think it through and out as much as I ought to. Disrupting the gatekeepers will remain our goal, though. They are harming our sector and swallowing small-to-mid entrepreneurs' hard earned money, and worse, if they keep on shooting themselves in their feet, they'll fall on us and cause lots of troubles.
Edit: I take the advice on early leave. It's at least a year, and my co-founder and investor are trustable (the former is my second cousin, the latter his long time business partner), but things being certain and in writing would help all of us. Sadly it's traditionally seen as a sign of absence of trust among peers here in Turkey especially in the small-to-medium business circles.
Thanks a lot! and have a nice time! I'll definitely keep it in mind that I can ask for advice here, this discussion is proving really useful!
Just for clarity, the cloud providers won't change their prices, but their startup teams have a lot of discretion when it comes to how much credit to apply to your account. It costs them very little in reality, and they're betting that you'll spend more with them in the long run after you're established.
As for costs, it's very project dependent, but $1,800/month is fairly serious hardware. As in, probably pushing towards a million MAUs for a basic e-commerce service kind of hardware. Tildes itself is only running about $100/month in server costs! Static hosting costs next to nothing, so if that's really all you need then I wouldn't worry at all.
Thanks! I plan to keep it static up until when I'll introduce APIs for the apps, but we'll see.
If you plan on leaving, that always makes the question of compensation tricky. Generally, a new biz doesn't have the money to pay you full rate, so they compensate with stock. But giving away too much stock to a (former) employee is kind of a red flag.
Are your partners people you trust? I leaned the hard way to "never do business with people you don't trust". Contracts don't mean squat.
Blogs/etc take a loooooong time before they payoff. Be wary about thinking "this will get me business". In the beginning, you have nobody looking at your blog, so your blog posts literally don't matter. (And your website for that matter.) Find some biz problems and solve them. This is the only thing that matters. Don't undersell yourself, every biz deal must be profitable. It's OK to maybe do 1-2 jobs where you don't make a profit. Consider doing them for free instead of charging a wimpy rate, and think of them as paying for marketing material you can put on your website.
Looking forward to it!
I don't really get what you mean by a canvas, but if you mean an overview of the business plan, you can check out out interaction with Greg under this topic, I've exposed almost all there is to it except what's not yet planned and the actual secret sauce stuff.
We're very early stages, still planning and about to start testing the idea when we're all set about funding and the business model. In a very brief summary, we plan to advice people in our sector about certain variables using data we'll manually collect (at least in the beginning) and very educated estimates, and run a blog/sectoral news website on the side for community building. Then we'll use that community, if we manage to obtain it, to increase competition between intermediaries so that our investor and other people in the sector can obtain more competitive prices.