Over the course of the next 12 months, the Concept Ventures team will be publishing a series of actionable articles, essays and resources on how founders can prepare for pre-seed funding. This will take you on a journey from ‘making the decision to begin’ all the way through to closing your first funding round and beyond.
In Month 1 we will cover the key questions founders should consider before taking the plunge, including ideation, problem seeking mindsets and founding team construction. All of these resources, and more, will be available on the Concept Ventures blog.
Everyday, thousands of people globally decide to start new companies. Nearly every major business in the last few decades grew from the humblest of beginnings, sometimes originating as a side-hustle or weekend project at first, and at other times a blind leap of faith from the get-go.
Whenever a founder truly takes a decision to begin, and inevitably quits their jobs or drops out of university, they have deemed themselves ready to embark on the ultimate mission - putting your career, reputation and sanity on the line.
If you’ve always dreamt of starting a business, but aren’t sure on whether or not now is the time to do so, we’ve covered some of the key points that you should consider below, as well as added some perspectives from Concept’s portfolio founders.
Power, Money or Change? There is no real right answer or motivation, but if you want status/power, you may have to wait some time (and get extremely lucky) to achieve Bezos or Musk levels of influence. Probably easier to become a politician? When it comes to getting rich through startups, there are generally far ‘safer’ and reliable ways to do this, such as joining already established startups or looking to other career paths altogether. That leaves Change - most successful entrepreneurs of recent times have set out on a laser-focused mission to change the world, initially in a very specific way.
Founding a company is probably the single most time and resource intensive career decision you could ever make. Even with the greatest discipline and superstar team around you, things are going to go both very badly and very well, leaving you under excessive pressure to solve problems day, night and weekend.
If it’s your life's work & mission, then it’s probably a little easier than if you are doing something you’re building ‘for the sake of it’. Ultimately only you will know if you really are ready for the commitment and challenge ahead, and of course think of those around you.
Not every business (in fact very few) are truly venture scale companies. If you aren’t hellbent on building a multi-billion dollar enterprise, that's absolutely fine (and probably normal) but it may mean you should have a think whether or not the path of Venture Capital is for you (which we will discuss in later posts). As soon as you bring external shareholders onboard, with extraordinarily high expectations, it makes it much more difficult to turn back.
This, above all other questions, is the most important one to ask. Why are you starting this business? Why will users or customers part with their hard-earned money to buy what you’re building? If you don’t have a clear answer or vision here, maybe you should continue to ideate a little longer before taking the plunge.
There’s never a convenient time in your life to change job, move house, or start a family, but that’s not necessarily true for founding a business. Realistically, being a founder consumes most of your waking energy and focus, so make sure you’re at a time in life where you can afford to either take outsized risk (early in career) or have the means to take a reduced salary for a 12 month period at least.
Going about building a large business as a solo-founder is definitely not impossible, as seen with Amazon (Jeff Bezos), Dropbox (Drew Houston, later found a co-founder) and eBay (Pierre Omidyar) to outline a few examples. That being said, it is broadly recommended to find others to come along on the journey with you, generally someone who complements your strengths, and helps to strengthen areas where you’re weaker. Ideally you will have known them a long time, trust them deeply and understand their approaches to work and workplace culture.
‘Founder-market fit’ or relevant domain expertise is important for building any business, but not always entirely necessary. The main factor is that it enables entrepreneurs to move more quickly and efficiently as they spend less time absorbing new information, given they already understand their respective markets. Before starting any business you should ask yourself ‘why are we the team to solve this problem?’ and ‘what makes us better suited than anyone else who tries to tackle this?’. This helps with defensibility and talent attraction in the early days, compounding heavily at scale.
If you have the right founding team composition, you shouldn’t really need much to begin beyond your own time, a laptop and internet connection. With the advent of no-code tools, teams can get started talking to potential users/customers, validating the problem they’re solving and beginning to ‘do things that don’t scale’ before they even have a technical co-founder or a product (but it would be recommended to start thinking about this early).
Once you have a really strong grasp on what you’re doing and who it is really serving, you can then think about raising money and adding fuel to the fire. Before that, you will likely hear the ‘it’s too early’ response from investors.
This may sound odd, but it’s incredibly important for founders to be aware of their strengths and limitations. Nobody is perfect, and no single person has the complete package. The early hires or partners you choose to work with should heavily complement what you bring to the table. If your skills are more technically facing, you may struggle with seeing the bigger picture or executing sales. Due to this you may want to pair up with a more commercially minded co-founder. Creating the right blend of people within your founding team should always begin with introspection.
The team at EF summarised it well, so there isn't too much more for us to add;
"There are three good reasons not to have too many co-founders: it introduces too much relationship complexity; it is expensive; and it’s hard to focus. At EF, we recommend people build a co-founding team of two. We’ve found teams with three or more co-founders succeed even less often than solo founders. In external data, two is also the most common number of co-founders for billion dollar startups."
As you may have guessed from the above, a startup is rarely defined by their idea or market alone, and instead by the people behind it. Search Engines, Social Media and Consumer Marketplaces had all been tried before, but it was often not until the right team had executed effectively that the category was won.
And this also works the other way, with many startups beginning with an amazing group of people that work on a, well, not so amazing product. At some point in their journey they might decide to change ideas and pursue a new objective. This is what is called making a “pivot”. Y Combinator success stories are full of such pivots, be it a completely new idea two days before the demo day (resulting in $4.8 million in funding to date) or five pivots in six months (now raised $12 million).
Pivoting is not just an exception in the startup ecosystem, it is the rule. This is even true for startups that attracted venture capital funding from world-renowned firms such as Union Square Ventures! Fred Wilson, partner at USV, estimates that about two thirds of all companies in his portfolio “made complete transformations or partial transformations of their businesses between the time we invested and the time we sold.”
That’s why we at Concept seek to invest in people first, and their ideas second. We recognise that course changes happen and that they are a part of many successful founding journeys.
No use just hearing from us, so we spoke to some of Concept’s portfolio founders to hear more about their real experiences with starting companies and the challenges associated.
I faced the same problems again and again as a CTO, and saw them in other CTOs I was coaching. There’s a constant need for a more capable team that can keep up with changing requirements. But the only options I could see were hiring and outsourcing. Existing learning options were ineffective. I’d seen what scalable, effective learning could look like when I was a Cambridge student, and Skiller Whale’s earliest iterations were an attempt to apply a Cambridge University methodology to coaching tech teams.
I’ve been founding and building startups for the last 11 years, so my initial focus was on proving that other people felt the same need, and that our coaching model would make tech teams more capable.
That depends on how good you are at focusing and saying “no”. We were always very focused and happy to ignore distracting ideas, and we’ve rarely had to work more than a 40-hour week. We’ve both had some 50 or 60-hour weeks, but that’s never been the norm. My cofounder and I have also had 2 children each since founding the company, so 60-hour weeks are no longer an option anyway.
Not much - I’ve founded some companies before.
One week recently, we had two customers sign up on the same day AND I met someone in a non-professional context who said “Oh, Skiller Whale - I’ve heard of them!“. But probably the best part of all was our first ever company on-site. We’re a fully remote team, but we finally got to all meet in person for the first time and hang out.
Look After My Bills was actually a pivot from our original start up which was called The Big Deal. It did collective bargaining for consumers on cost of living issues like energy bills. That came about because we wanted to see if we could use campaigning as a way of growing a start up. We didn’t have any money for digital ads or any paid media so the approach made sense. After a few ‘ok’ years that morphed into Look After My Bills - automated switching - thanks to customer feedback. I was personally also driven by launching something that was my own thing. Where the buck stops with me. After years of having bosses I wanted that responsibility. And the opportunity to work with a brilliant close friend came up so the timing was right.
I actually handed my notice in without knowing what I would do next. But I knew I needed change. I actually took a well paid corporate job (previously I had worked in Government) and had even signed the contract. I took a holiday before my start date and while sitting on the beach in Cambodia with my wife I realised that I couldn’t do it and wanted to go my own way. Had a rather tough conversation with the CEO when I got back to the country!
Yes, it is. And you need to be ok with that. My co-founder and I would talk and message each other all day every day. At the start it’s extremely intense. And you will do everything - small and big. One minute working out strategy, another minute ordering donuts for the team. You have to be ok with doing everything and changing your focus at a moment’s notice.
Brutally, I wasn’t prepared for much! And I’m not sure how you prepare. I read a lot of books which help to a degree. But there is nothing like doing it yourself.
Without a doubt building the team. We were very lucky to have a brilliant group who were committed to the mission and committed to each other. That was special. Couldn’t ask for more.
Speed is your big advantage. Launch quickly. Speak to customers and iterate. Your product will go through many many changes over its life. Be ok with that and optimise for quick decision making. Don’t be discouraged by multiple failures. Talk to customers and build something people want.
With Ribbon, we’re trying to help other people make the products they are building more useful. Before starting Ribbon I was a product manager, and tasked with working with my product team to make decisions about how we could make our products more useful and delightful for our customers to use. We didn’t always know what our customers wanted or how they would react to product changes, so we treated decisions about what to build as “bets’, This allowed us to move quickly and make decisions with limited information. Still, many of our bets didn’t pay off, and we wasted a lot of time and effort building product experiments that didn’t result in an improved customer experience. I felt there had to be a better way to validate bets earlier in the design process without compromising on how quickly we could build products. That’s what we’re building with Ribbon, a quick and easy way for product and user research teams to engage their users early and often in the design and research process by making it easy to do in-product research.
I don’t know that there ever was a point where it felt like I was “ready” to start working on this problem. What we’re building at Ribbon is the research platform I wish I had access to when I was a product manager. Most product builders I speak with find it hard to validate their product decisions with targeted and rapid insight and feedback from existing and would-be users.This problem was present enough that I experienced it on a daily basis with my product team, and painful enough that it limited most product people I spoke with from doing their best work. After realising that it seemed sensible to start trying to fix the problem.
There are always many things that pull for our attention and that we want to get done, and not always enough time to do them. To counter this we are very consciously trying to make sure that we stay focused on the task at hand. Being clear on what we’re committing to and what we will not do frees up time and headspace to counter the intensity of building a company from scratch.
Truthfully, I wasn’t prepared for most things that come with building a company. Building a platform that helps people make the products they build more useful is such a broad task that there are countless things we’re having to figure out for the first time.The good thing is that many of the challenges with growing a company - such as how to grow a stellar team - have been solved before, and we can stand on the shoulders of those who have come before us to overcome them.This allows us to focus on the core problems we’re building Ribbon to solve, such as how we can help other product builders, designer and researchers understand their users and build products that are more useful.
My favourite part of what we’re doing at Ribbon is the team we’ve built; I really love working on problems with the team. In the early days it was just me and my laptop, but now I get to work with people that are far better at engineering, marketing and other disciplines than I am. It’s rewarding but also far more effective.
Start speaking with would-be customers earlier than you think. One of the most useful things we do as we build Ribbon is testing our assumptions through speaking with existing and potential customers. This can be hard to do continuously and thoroughly, but the more we do it the easier it becomes to make decisions about how we can improve our product to make it more useful for product builders.
Overall anyone can start a business, but not everyone necessarily should. You need to be really sure it’s something you can and will be able to commit to, and that you are motivated to build a large and enduring company for the right reasons.
The good news is, if you’re reading this, you have already made it further than some - and taking the leap to begin is often the hardest part of all.
If you are a founder changing how we Work, Play or Learn, do get in touch with the Concept Team. Next month’s post will focus on Incorporating a UK Company, and what you should bear in mind (with some advice from our friends at HJ Solicitors).