By Colonial First State
So you’ve had a great business idea in the shower, you’ve workshopped it with your mates and you reckon it could be a real money spinner? Not so fast.
The internet is filled with startup fairy tales, complete with unicorns and the occasional angel (investor). They tend to follow a formula. A 20-something entrepreneur (possibly with a friend) comes up with a great idea, moves back into their parents’ garage, survives on 2-minute noodles and launches what becomes a billion-dollar tech giant.
But those are the success stories. It’s important to know at least three out of every four startups fail and that a huge amount of work needs to happen between having your big idea and your first day of doing business.
Take it from Rebekah Campbell who has tried and failed – and then tried and succeeded – at launching a number of startups. She’s the founder of startup education platform Zambesi.com and Australia’s largest mobile ordering and payments platform for cafes, Hey You.
Here are her top tips.
If you go around asking people ‘is this a good idea?’ you’ll probably get the answers you want. “Everybody will say ‘yes, that’s a great idea – I would use it’,” says Campbell. But this isn’t the answer you need. “You need to have conversations with people you expect to use your idea, and really listen deeply,” says Campbell.
She recalls an idea she had to abandon – a startup providing better, more engaging career advice to high school and university students. “I went out and asked potential users – students – questions like: have you been to see the career adviser?” she recalls. “I found out that everybody said no.” There wasn’t a market for the idea so Campbell let it go. “If everybody was saying ‘yes, I’ve been to see the career adviser and they were terrible’, then I would have known there was a problem and I could create a better version,” she said.
Build the basics
One of the biggest mistakes people make is spending too long trying to get their product just right, says Campbell, who last year launched what’s been described as ‘Airbnb for education’ – Zambesi. “I was so embarrassed when I put the Zambesi website live – it looked so terrible that I didn’t want to send it to anyone,” she says of the online marketplace for people seeking help from startup industry leaders. “But if I didn’t, I wouldn’t have known if it was going to work or not.”
Because while user interviews are great, nothing beats the real thing. “The very best feedback you can get is from building a very basic version of your product – using WordPress or similar – and finding out if people actually use it,” Campbell says.
“You can spend ages twiddling and getting everything perfect and then someone else launches and you’ve missed your moment.” “You need to have conversations with people you expect to use your idea, and really listen deeply”.
Hold off on spending big
Raising capital too early is another big blunder, Campbell says. “Wait until you really know there is a market, that people are buying your product and you’re generating revenue, or you at least have very good engagement and growth,” she says.
Campbell also advised against using capital for initial product development. “Build as much as you possibly can before getting other people on board. Investment should be for growth once you’ve already got a product you know is going to work,” she says. “You can obviously refine and build a better version of the product, but you should know that the product is going to work before you take on other people’s money.”
Campbell admits she made this very mistake when developing Hey You. “I raised almost $1.5 million from investors before I even tested the idea. I ended up hiring a bunch of people to build the product and it didn’t work,” she recalls. “We were stuck with this big overhead so we had to pivot to the next vaguely plausible thing that was kind of connected to the original idea to show we were making progress.”
If you do however need money for development, Campbell suggests applying for a government grant and getting creative about raising funds, without giving away equity.
Launching a startup is not for the faint-hearted, Campbell says, you’ve got to jump in head first. “There’s no point having your fulltime job and being stuck in side-hustle mode,” Campbell says.
“If you intend on building something to change the world, you have to be willing to commit your life to it for a period of time.”
Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from colonialfirststate.com.au or by calling us on 13 13 36.