How To Set Up A Tech Company

Actionable 7-Footstep Guide to Get-go a Tech Company (With No Money)

Written by Robbie Richards

Hither's a question we get asked a lot:

How do you start a tech visitor with no money?

Well - permit's only kick things off by proverb the boilerplate survival rate for a startup is effectually x%. That's right -- ninety% of startups are shuttered earlier they grow enough to sustain themselves.

Why?

As research from a large database of startup post-mortems shows, failure often centers around a few major mistakes:

Almost one-half of failed startups shut the doors because they didn't brand a product people actually needed. Some failed because they ran out of greenbacks, others considering of an ill-equipped team.

While the stats paint a bleak picture, knowledge is on your side. Past knowing the biggest traps to avoid, and having a solid gameplan in place to build, market and sell an app people actually want to use, your startup has a fighting adventure for survival.

Then, where do you start?

In this article, we'll cover an actionable 7-pace plan to showtime a successful tech company:

Build an MVP the market wants
Validate the app with early on adopters
Iterate to meet product-market fit
Build a skilled and unified founding team
Go the funding yous need to abound
Develop and practice an agile methodology
Generate funding and scale team

This guide is rooted in lean startup methodology, and so let'southward look at an introduction to how winning startups think before diving into the step-by-pace guide.

Don't Overcomplicate, First Lean

For a tech visitor to brand coin, you'll demand a marketplace that'south set to purchase, the right feature set to solve the pains of those users, pricing your market place can afford, and a hundred other things that you can't peradventure know at the outset without doing painstaking research and spending a truckload of coin:

That's why startups perform best when they're grown iteratively, based on user feedback from a constantly-improving app. Eric Ries outlines this successful methodology in his book The Lean Startup. This radical guide to getting a low-cost technology business organisation off the basis before you lot run out of money has go the startup bible.

To run a lean startup, don't become bogged down in creating an LLC directly away. It's unnecessary legal baggage.

Truth is: you can go into business with a general partnership and co-founder. This keeps your costs downward, and saves y'all dealing with problems like organizational construction and taxes before you lot even have a product to sell.

In the lean startup methodology, the tech is far more important than the structures that support it. Your production is what'south going to make you lot coin, afterward all, so start with the build.

If you have the skills or are willing to learn to code, you tin start laying the foundations for a new tech startup as a side hustle, allowing the day job to pay the bills. This will give you an early prototype you can accept to other potential co-founders.

Every bit a non-technical founder, however, y'all need to sell your vision to a prospective CTO (chief engineering officer) -- this way, the applied science costs nothing but time.

Ok:

At present that you take the bare business essentials in place, and at to the lowest degree one technical team member, it's time to set the wheels in motion.

vii Steps to Build a Successful Tech Visitor

#1. Shortlist the core features of an MVP

About slap-up startup ideas are the event of a founder being unable to find a good solution to their hurting. In the words of Paul Graham:

"The verb yous want to be using with respect to startup ideas is not 'recollect up' but 'notice.' At YC we call ideas that abound naturally out of the founders' own experiences 'organic' startup ideas. The most successful startups near all begin this manner."

If you're developing a product based on your own pain, y'all might exist the nigh qualified person to list its core features. Only, assuming that others share this hurting and are looking for a solution, you tin bring on early adopters to help refine the value proposition.

Nailing downward the features, collecting feedback and validating the concept is critical to ensuring your product roadmap is pointed in the correct direction.

Since 42% of failed startups close downwards because of poor product-marketplace fit, making informed choices at this phase is disquisitional to survival.

You can apply a elementary framework like this to ascertain user goals and see how different pain points map to core product features:

What is the overall idea?
Who are the customers?
Who are the end users?
Why would they desire it?
Why are we building it?

You have to be very selective when edifice an MVP.

Focus on providing the minimum set of features users need to accomplish a goal or realize value; your project direction app needs attachment uploading more than than information technology needs support for custom emoji.

3 mistakes to avoid when building an MVP

Overcooking your MVP

The idea behind starting pocket-size is to start quickly.

Your MVP doesn't demand to serve multiple audiences and use cases; it merely needs to be validated by one niche. Get a small, highly-targeted segment of your market to buy into the thought and you lot become the cash needed to expand an MVP and accept information technology to a wider market.

Choosing the wrong market segment

Knowing who to sell to is simply as important to building an MVP with market fit. Getting an engaged customs of early adopters to provide feedback doesn't happen if yous're going after the wrong segment, and without those early adopters you lot won't get the fourth dimension and insight needed to iterate and abound.

Refusing to pivot if the MVP won't stick

Even though you've done your research on the audience and feature set up needed to compete in the market, information technology might be that your MVP is simply being marketed to the wrong customers or missing features that persuade customers to buy.

"Failure in validating your MVP simply invalidates a small way to acquire customers — non the whole business organization model." -- Swarnendu De

#2. Pre-sell the MVP

A lead capture page for the GrowthHacker Projects MVP, which funneled qualified companies into a concierge demo.

One fashion to combat the problem of running out of greenbacks is to bring paying customers on board as fast as possible.

This gives customers a fiscal pale in the success of the product -- they'll be willing to help "co-develop" the product in render for getting the features that they ask for (and will desire to pay for) built.

Sales = validation!

Ane of the biggest inflection points for whatsoever company is finding out people will actually pay for what you have, or plan to build.

Here are the unlike types of MVP pre-selling strategies you lot can utilize to quickly validate a production concept:

Single-feature MVP. Focus on nailing one user goal, to validate the need for the feature and build early adoption.
Piecemeal MVP. Proceed costs low by combining existing products and services to come up with a unique offer. For example, your product could be the result of some Zapier zaps or a code-complimentary paradigm built with Bubble.
Concierge MVP. Exercise some or all of the software's work manually and work closely with customers to understand how best to improve. With that information, automate the manual work with technology.
Wizard of Oz MVP. An MVP that seems like a software service, merely its results come from manual piece of work. This is a way to validate the results your app will provide and whether customers volition pay for them.
Crowdfunded MVP. A lot of successful startups came from a video of a one-off prototype uploaded to Kickstarter -- with crowdfunding, you tin can generate buzz and go feedback on a product before you've put information technology into product. This keeps costs downward while giving yous coin to survive on.
Smoke test MVP. Validate need for your thought by sending paid traffic to a pre-release signup page. The number of signups will assist you estimate the level of interest.

#3. Source talent with equity

Non technical? No problem.

You'll be able to notice an excited technical co-founder if you lot accept the right startup idea and equity offering.

You don't take to spend coin sourcing talent -- instead, utilise a platform like VentureStorm to get continued with your perfect CTO or CEO.

In that location's a lot of fence over the matter, merely startups typically offer technical co-founders around x-35% in disinterestedness. This is considering future funding volition farther dilute disinterestedness, so giving away a clamper shut to one-half can exist a take a chance for CEOs looking for investment.

#4: Acquire customers

Once the MVP has been validated and you have iterated with user feedback, the adjacent step is to release the product into a wider segment of your target marketplace.

You lot tin can meet all the right user goals with all the correct features, but if no one knows your production exists you will lose out to a competitor.

In the world of SaaS, information technology's a land catch. You need to accept the oxygen out of the room.

For startups that don't have enterprise budgets, large-scale paid ad campaigns and a well-oiled sales team are largely unattainable.

Lack of upkeep is definitely a disadvantage, but not a game-ender. It just means you have to become scrappy, and do difficult manual promotion that doesn't scale.

This often involves finding where your customers hang out online, and getting involved in the conversation.

Generating early buzz with online communities

Every startup remembers their kickoff Hacker News dwelling house run or Product Chase launch -- probably considering the corporeality of traffic information technology blasted at the servers took them offline.

A popular piece of content or well-received product launch that shoot to the top of sites similar Reddit, Hacker News, and Product Chase can send tens of thousands of visitors to your site. It's a tactic used equally part of regular content promotion and bigger product/characteristic launches.

For instance, below is a 2007 Hacker News relic from Dropbox founder Drew Houston:

Not only did this post get the attention of product experts, information technology also got thousands of users to weigh in on Dropbox.

For small sites that could hateful a 60%+ increase in sessions overnight. Bank check out the Prove HN category to see what'southward hot, and attempt to replicate the formula.

Reddit is some other site that consists of thousands of communities - everything from SaaS to data visualizations. It'due south well-known that Reddit hates self-promotion, but submitting content that'due south genuinely relevant and useful to a specific community can be a way to get vital attending in the early days:

This post links off to a promotional resource but gives the community the full text in a Reddit post -- this makes it easier for users to read and comment, and is seen equally less spammy than only dropping a link in the subreddit.

Four startups that grew by doing things that don't scale

Tinder

(Source)

Apps similar Tinder alive and die past the size of their networks. It's a hyperlocal app, so it needed to onboard a lot of users in close geographical proximity for the pilot flow.

Tinder launched a serial of pop parties in California and made information technology mandatory to accept the app installed to gain entry.

People attending the parties installed the app, and Tinder's user base of operations grew to xv,000 overnight. The "network event" broiled a viral loop into the product, helping to retain existing users and concenter waves of new ones.

In 2022, information technology was announced that Tinder had 5.9M paying users.

Quora

Developing a community-driven product without an actual community is a tough inquire. In the early on days of the site, Quora founders would start and appoint in threads to provide an illusion that the community was a lot larger than information technology actually was.

Herd mentality took agree, and presently thousands of new users were flocking to the site to engage in the conversation. Somewhen, it hit a critical mass and the founders no longer had to seed new conversations.

Generating a wide diversity of question-respond content around unlike topics is as well a mode to rank in the search engines for specific long tail keywords. Past seeding Quora with a range of frequently asked questions in the startup/tech/coding worlds, it became wiki for information that could be expanded with different community perspectives.

Information technology's vital at the start to provide a way for users to see how they should use the platform and why it'due south benign to them – the Quora staff did this by leading past example.

Bonus resource: Cheque out footstep #12 in this guide to learn how to mine Quora for a high-traffic threads. This is a peachy way to engage in the conversation, provide value, and generate targeted referral traffic to your tech startup.

Twoodo

Information technology might not exist a game-changer for a mature product, but 72 signups tin brand a massive difference for an early-stage startup.

Twoodo managed to attract 452 unique visitors which converted at a rate of sixteen% with a strategy that involved the founder making targeted comments on 40 blogs. The whole project took just 6.5 hours, but helped the visitor country its first customers.

Stripe

(Source)

Stripe founders, at present a hallowed duo in startup circles, got their product used by early customers with very hands-on tactics. The founders visited leads in person, where it was easy to gain access to their computers and do custom set-up work for the Stripe API (remember what we were saying earlier nearly how an MVP tin be partly manual at first?).

"If you were interested in Stripe, they would set information technology upward for yous on the spot. They didn't go dorsum to their office and send you a link by electronic mail hoping you lot'd sign up. There was no choice. If you said, "yes" to endeavor Stripe, they would grab your laptop and set up information technology up for y'all." -- Mikael Cho

Bonus resource: Want more inspiration? Check out this growth hacking guide that looks at the specific strategies and tactics 77 hyper-growth companies used to country their first paying customers.

#five. Look at the numbers

By pushing new users into the production funnel, you become data on how well the app performs in the hands of existent customers -- practice they stick, or churn out quickly? What changes demand to be made?

While signups are bang-up, but they only tell part of the story. If yous can't go users to adopt the product, yous'll leak revenue and discover information technology near impossible to get funding.

Here's a shortlist of the nearly of import metrics every tech startup should be measuring:

Active users

Active users regularly return to use your product. They didn't log in and leave never to be seen again -- they get real value from the production, and are one of the most valuable assets for your business.

How to calculate agile users

Active users are usually analyzed by time period. And so, your monthly active users (MAUs) are those who take logged in within the final thirty days. Every app promotes different usage frequencies.

Twitter hopes y'all utilize the product every day, because in that location'southward always something new to see and it makes money from advertizing impressions. Something like Sumo is a tool users might need to utilise much less oft, because once you've deployed a popular-up form you don't need to log in and suit it every single twenty-four hours.

To calculate agile users, you'll need a free tool like Google Analytics or a paid, dedicated client data platform like Amplitude or Mixpanel. The calculations are done with user IDs and event tracking.

Memory rate

Retentivity charge per unit is often low for apps. Pocket-size improvements brand a big divergence.

Retention charge per unit is the metric y'all need to better if you want to grow your active users. It measures the percentage of users that log back in after signing upward. If your retention is low -- eastward.g., no ane that signed up a month ago all the same uses your product -- you lot're ameliorate off putting money into retaining customers than generating leads because it costs six-7x less to retain an existing user than it does to attract a new 1.

What'due south the bespeak in attracting new users if they're just going to stick around for a month?

How to calculate retention rate

Retention rate tin can exist calculated with this formula:

Customer Retention Rate = ( ( Number of customers at the end of a period - New customers created in that period ) / Number of customers at the first of that period ) * 100

Like the active users metric, 30 days is a good guideline. Diving deeper into the data, you tin also find correlations betwixt client profiles and behaviors that promote retention.

For example, a user that invites their team might be more likely to retain than one who just uses the product by themselves.

Net Promoter Score (NPS)

How happy are users?

The NPS metric gives you lot the respond:

As the image hints, users that participate in this survey are divided into one of three buckets depending on their response. With feedback of ix or x, a user is an nugget to your company -- they're doing marketing work for y'all - likely sending high-converting referrals your mode each month.

Users scoring 1-6 are detractors who are unlikely to have much good to say about your product, whereas the neutral scorers (seven-8) could get either way.

What exercise y'all do with this information?

Well, your overall NPS score is a solid measure of user happiness. The higher the score, the healthier your customer base. You can as well marketplace differently to each NPS segment -- for example, launch campaigns to catechumen neutral fence-sitters into production evangelists!

How to calculate NPS

The beginning footstep is to deploy an NPS survey. This can be done over email, during support sessions, or within the app itself. Tools include Delighted, Promoter.io, and Wootric:

Each data signal y'all go back from a survey is simply a number betwixt 1 and 10.

To calculate NPS, use this formula:

Internet Promoter Score = (% of respondents scoring 9 or 10) - (% of respondents scoring 1 to 6)

#half dozen. Stay Agile

The Agile Manifesto and the world of literature that surrounds information technology is always essential startup reading!

Collecting metrics and crunching numbers is great, just at this scale it'due south easy to become bogged down in data that might thing less than but improving your production.

With user feedback and reports on cardinal metrics like retention and activation, information technology's time to brand production, feature, and marketing iterations that impact your lesser line. This means making decisions based on express data and voices of a few dedicated customers -- it can feel like a leap of faith, but the one-time Facebook mantra of Move Fast and Interruption Things is nonetheless a valuable lesson for startups.

Your team and production volition grow as it gains traction, merely you need internal processes and construction to support that.

For many successful startups, that means:

Working in sprints. Iterate on the product in ii-calendar week bursts, evaluating functioning at the end of each sprint and having open up discussions most what went wrong and what went well.
Taking user feedback logging seriously. User feedback is so vital to startup success, but it'southward oft mismanaged. Create specific tags in your support ticketing tool that describe the feature or aspect a user is talking about (#feedback-sidebar-ui), or at least diligently upkeep a Google Sheet with the latest snippets of feedback.
Killing features or campaigns that don't motility the needle. You have such limited resources that you lot can't afford to press on in the wrong management. Does the data say that a beta feature you're pushing hard isn't getting much adoption?

#vii. Fund and Scale

The error a lot of startups make is thinking that step #vii is really stride #1.

Getting funding to scale should come later on in the startup journey. Showtime, y'all need to constitute product-market fit, get early on adopters, and iterate fast before implementing a large scale become-to marketplace strategy:

"Funding is advisable for products that have some traction in a large market place. For the 99 percentage of companies that don't fit this bill, external capital can exist a recipe for disaster. If yous're at the invention stage, merely call up that necessity is the mother of invention, not coin." -- Dave Bailey, VC and serial founder

Scaling as well early on can hurt a immature startup. Boris Wertz of Version 1 VCs advises that at that place'due south nothing damaging virtually scaling up things that serve many users for little cost -- like better server infrastructure or self-serve acquisition -- merely scaling upward on things that burn through money without producing reliable results, like large sales and marketing initiatives, is oftentimes a factor in failure.

For these reasons, seek out funding when you've already got a validated MVP and a list of agile paying customers. This will separate your business from the many others vying for investor capital.

Here are some of the funding options available for early-stage startups:

Crowdfunding

Aslope accelerators and angel investors, crowdfunding is one of the few funding options available in the early on stages before a product generates real revenue.

Services that can help crowdfund your startup include Kickstarter, IndieGogo, and Fundable -- the options bachelor are either pre-selling an MVP, or selling percentages of company stock to investors.

Angel investors

Angel investors are often ex-founders that take a combination of startup experience and tons of cash from their last big exit. They tend to invest in companies that have valuations of around $3m, and volition typically invest around $150,000.

Accelerators

Accelerators don't just offering money. They offering connections, mentoring, and opportunities that would otherwise exist out of achieve for nearly startups.

When a startup's application to an accelerator is accepted, they will unremarkably surrender around seven-10% of their company equity in exchange for $25-$125k.

While near accelerators accept a sizable chunk of equity, MassChallenge takes a 0% cut and however offers $3m in cash annually to startups as part of its accelerator programs.

MassChallenge is a not-for-turn a profit community of investors with access to angel groups, police force firms, marketing agencies, PR firms, venture capital firms, and corporate executives -- everything a startup needs to become fix and go to market.

Founding teams as well have access to staff grooming sessions and workshops on strategy, marketing, fundraising, and squad alignment.

Interested? Register hither.

Ready. Gear up. Build.

It's obvious from the stats that starting a tech company is no walk in the park. With something every bit complex equally software and as unpredictable as team chemistry, there is bound to be a large margin for error.

Notwithstanding, if you follow these steps you're gear up with a battle-tested framework that successful startups like Dropbox, Uber, and Buffer have all used to build, validate, and marketplace.

To recap:

Define what your MVP will and won't be. List the features, and think about the lightest manner to solve one important user problem.
Pre-sell your MVP. Leverage connections, crowdfunding, and fume tests to build buzz and raise greenbacks.
Offering equity to build a great founding team. Tech startups need a CEO and CTO at the bare minimum. Utilise talent-sourcing sites to discover a co-founder with the right skills, free energy, and vision.
Hustle to reach your get-go few customers. Without user feedback, software tin be built in the wrong direction, wasting resources and ultimately killing the company. The money your kickoff few customers pay is of import, just their input on what features to build next, and why, is priceless.
Analyze your data and pin (or don't). Use client analytics tools to capture the ways users apply your app, measure retention, and other success metrics. If something'due south cleaved, find out what it is and fix it.
Practice active methodology. As your team and product scales, it gets too complex to manage informally. Active helps startups build products in quantifiable sprints of piece of work, and in short enough cycles to adjust to customer feedback.
Become funded, scale your team. If you've made it this far, you have a validated thought. To make coin and grow, you just demand to double downwards on what works. That's what funding gives you the freedom to do.

It's a long road, but when you think near how fraught with pitfalls it is, the fact that 10% of startups survive is a proficient thing, because with the correct activity plan yous'll position yourself alee of the majority of other businesses trying to build the tech company the wrong way.

This mail service has been updated course the original that was published in Febraury 2022.