Kategorie Academic Lab

Avoid typical founder traps (Part II)

There are many things you can avoid when starting a start-up if you consider different aspects. We share the most important findings with you so that you don’t have to make any mistakes. 😉

1. A Target-Oriented Strategy

A strategy should help you say no to certain things. Saying no means focus!

Adjustments (pivots) should be anticipated as early as possible and implemented as quickly as possible in order to stay on the road to success. It helps to develop hypotheses that can be confirmed or falsified by measurement. A look at this helps to deepen and structure.

With the strategy you should be able to ensure that you have a gross margin of 20% left for the development of your business. You may ask yourself: why only 20%? The reason for this is that you can ensure that you stay one step ahead of the competition (because you have a budget for research and development). In addition, you can (and must) build a money buffer for bad times.


Pricing

Pricing depends very much on the product, business model and industry. In the B2C environment it can be said that the threshold for purchasing decisions for products below 200€ is significantly lower than above. The range between 201€ and 10.000€ is so-called no man’s land. For the individual, private consumer, the price for an initial purchase is too high and still irrelevant for B2B customers. The relevance for the latter customer group increases from the €10,000 threshold. From this point on, however, business is transacted through an invoicing contract.


Corporate Culture And Staff

One principle still prevailing in the startup world is “hire fast / fire fast”. Not every employee may like this approach, but there is uncertainty on the employer side as well. In this scene in particular, start-ups are constantly recruiting capable employees away from other start-ups, thus ensuring a high fluctuation rate. Therefore, the first tip for increasing the number of staff in your start-up is “hire people who are smarter than you”. In order to bind these people to the company in the long term, we give you the following advice: “Create a unique working environment in which employees feel comfortable and want to stay”. As a founder you should use your influence to promote and shape corporate culture at any time (e.g. through small rituals). Make sure that the company’s vision and mission fit. Basically, the more unique the culture, the less interchangeable it is. This can be helpful in reducing the usual fluctuation.


2. Sustainable Financing

Financing is essential for the success of your startup. Therefore you should pay attention to the following points:

  • Know the common vocabulary (Term sheet / Valuation / Shares / Virtual Options)

  • Know different financing models (Shares / Debt)

  • Nothing is easier than the first round of financing

  • Nothing is more expensive than the first round of financing

Pitching

In order to cut a good figure in front of an investor, a convincing pitch is indispensable. Roughly speaking, it should include the following topics:

  • Problem and Solution (Product)
  • Description of the market and how it is reached
  • What competencies does the team consist of?
  • How do individual stakeholders benefit?

Make the investment options simple and ensure that all points and options are comprehensible to each stakeholder. Further information and advice can be found here or at #CampusFounders. Besides all the tips and tricks, make sure that you don’t tell wild fairy tales and stick to the truth!

As an alternative to the classic investor round, you can also fall back on other forms of financing such as crowdsourcing campaigns in the B2C sector on kickstarter.com or in the B2B segment on seedmatch.de as well as ICO’s such as Neufund.org.

If you want to read the first part again, click here.

No matter which tips and recommendations from this article are useful for you or not, Campus Founders is always there for a personal consultation and can also refer you to other experts. With us you meet like-minded people of the startup scene in the Heilbronn area and you can network with each other, ask questions, profit from the expertise in our network, look for reinforcement for your own startup team and and and and!

Avoid typical founder traps (Part I)

There are many things you can avoid when starting a start-up if you consider different aspects. We share the most important findings with you so that you don’t have to make any mistakes. 😉


1. One idea alone does not make a successful startup

Having a good idea is a major prerequisite for starting a business. But how do you know what a good idea is?

Basically, many founders adhere to the motto: “Make something that people WANT”. In fact, this is not enough for a successful business model. The challenge you actually have to face is called “Make something that people WANT TO PAY FOR”. Every idea must be translated into a concept for which potential customers are willing to spend money. Without this approach you might have a good product, but not a really good business model. The first, resource-saving prototype should therefore iteratively test customer acceptance and corresponding satisfaction of needs in advance with limited functionalities (according to the methods of Eric Ries’ Lean Startup).

Note: An idea alone does not make a successful startup. It depends much more on the combination of idea, implementation and the team. As so often in life, a certain amount of luck always plays a role.


1st advice: “Good Feedback Is the Key to Improvement”

Good feedback is important if success is not to depend solely on luck. Feedback, however, should not only be captured from customers, but also from various stakeholders. These can provide helpful tips, suggestions or further contacts. Don’t be afraid your idea could be stolen immediately – if someone is more successful with your idea than you are, then you haven’t done it well.


2nd advice: The idea – a real “painkiller” or just a “nice to have”?🤔

The following values can be used as an indicator of success: You are on the right track if you get a third of potential users to pay money for your product or service within a month of the first contact. This, however, does not apply to B2B business models.

It is also helpful to keep up to date with the latest industry-specific and cross-industry technology developments, because every new technology is an opportunity: looking for gaps in the way things have been done and how they could be done. In this context, find out which (added) value can really be created with your idea! Is it a real “painkiller” or just a “nice to have”?


3rd advice: Competition is GOOD for now.

With regard to the competitive situation, it is fair to say that competition is good in itself. The absence of competition is rather bad, as competitive advantages are not clearly presented and potential customers may misjudge the added value of the solution. For the subjective price sensibility this situation also supports the decision. Accordingly, the claim should be: Simply try to always have at least one unique selling point compared to your competitors – in the majority of the dimensions of your business model.


2. “Great things in business are never done by one person. They´re done by a team of people.” – Steve Jobs

When putting together a successful team, it is particularly important to combine interdisciplinary competencies. A triangular relationship of the following competences usually proves to be successful:

  • Design
  • Development/Software Developer
  • Sales

Founder teams of three people with different competencies can only rarely be realized. However, the rule of thumb is that founders should have strengths in at least two disciplines. Ideally, the co-founder should be strong in at least one other discipline. A famous example of this combination are Steve Jobs and Steve Wozniak: Steve Jobs was a strong salesman and had a very strong sense of design. Steve Wozniak, on the other hand, had great technical expertise.


1st advice: Design Tools

Nowadays it is possible for every layman to develop a design with tools like Sketch or Adobe Illustrator. This is especially important for the development of a first prototype or clickdummy to provide the potential customer with an appropriate “look & feel” of the service or product.


2nd advice: Learn “Development”

If you have no technical background as a founder, you should have at least one co-founder on board who has this knowledge. Our advice for you: In this day and age it can never hurt to learn simple HTML on the side. Therefore there is already a large selection of private providers like the CodeAcademy. Furthermore it is helpful to have knowledge of “Ruby on Rails” and “Technical Dept”. Technical Dept means additional development effort in programming. This can occur when code that is easy to implement is used at short notice instead of using the best overall solution.


3rd advice: Know your sales terminology

This is about selling, selling, selling! You should understand your own “product/market-fit”, growth (5%-7% per week; over 10% is very unusual) and the analogy of related business models. From a marketing point of view it is logical to have knowledge about the corresponding market (B2B, B2C), distribution channels (online, social, classical communication) and market dynamics.

In this context, you will always come across technical terms and abbreviations that (for Starters) are explained below:

  • CAC = Customer Acquisition Costs: How much money do I have to put into marketing until someone buys my product?

  • CLV = Customer Lifetime Value: How long will a customer pay me money before they change their mind and go to another provider?

  • Retention = How addictive is your product or service?

  • DAU/WAU/MAU = Daily/Weekly/Monthly Active user: How many daily, weekly, monthly permanent users do you have?

  • Understand your traffic sources: Where do your users come from?

  • CR = Conversion Rate: How many of your users become customers?

  • ROI = Return on Investment: Ratio between the net profit and the investment costs resulting from the investment of some resources.

No matter what tips and recommendations you may find useful or not in this article, Campus Founders is always there for personal advice and can also refer you to other experts. With us you can meet like-minded people of the startup scene in the Heilbronn area and you can network with each other, ask questions, profit from the expertise in our network, look for reinforcement for your own startup team, and and and!


To be continued…

Next week in the second part there will be more about typical founder traps that will help you and your business not to do the same mistakes. Stay tuned!

Books for startups & entrepreneurs

Just in time for the upcoming cold winter season and Christmas, we brainstormed in the team and recorded our favorite book recommendations for startups, entrepreneurs and the bookworms among you. Which books have inspired us, brought us forward, opened up new perspectives or are even on our ultimate reading list? In a team as diverse as ours, a few interesting titles have been mentioned, which we would now like to recommend to you as well. Here you can find out what the individual books are about and why we decided to read them:

1.1 Our first book advice: Stephan Hawking – “Short answers to big questions”

Content: Is there a God? Where do we actually come from? Does artificial intelligence help us to preserve the earth? In his latest book, Stephen Hawking explains the consequences of human progress – from climate change to artificial intelligence:

Summary: This book should definitely be at the top of your to-do list or wish list for the cold and festive days! Stephen Hawking’s ability to present complex facts in a way that everyone can understand, even if you’ve never studied the subject before, and his charming humor make this book a highly entertaining must-read. Enjoy it!


1.2 Second book advice: Christoph Keese – “Disrupt yourself”

Content: About half of all jobs will disappear. It’s quite possible that your own will be there. Christoph Keese shows how we can anticipate developments and change ourselves before the decision is taken. How we use our strengths to become innovators ourselves. The example of his interlocutors encourages us: If we act in time, we can look forward to a glittering future.

Our opinion: Christoph Keese is regarded as one of the top digitisation experts and is putting his finger on the wound with this book. At the same time, he gives hope and points out ways in which digitisation can no longer be feared, but can be used specifically for oneself. Great recommendation. 😉


1.3  Third book advice: Nassim Nicholas Taleb – „Skin in the Game“

Content: In his most provocative and practical book yet, one of the foremost thinkers of our time redefines what it means to understand the world, succeed in a profession, contribute to a fair and just society, detect nonsense, and influence others. Citing examples ranging from Antaeus the Giant to Donald Trump, Taleb shows how the willingness to accept one’s own risks is an essential attribute of heroes, saints, and flourishing people in all walks of life.

Our opinion: The subject of risk-taking, once in theory. This book is best read in the English original for the full effect. Taleb explains how bad decisions are made when there is nothing to lose. A new look at how managers and start-uppers differ fundamentally.


1.4  Fourth book advice: Byron Sharp – “How brands grow: What marketers don’t know”

Content: Marketers like to say that there can be no laws concerned with marketing, because consumers are far too individual and unpredictable. Research has shown this is utter nonsense. Marketing is a creative profession – much like architecture. And just like architects, marketers have to use their creativity within a framework of specific laws.

Read our judgment here: This book is something for start-ups who are already a little more “mature” and want to position themselves better in marketing. Sharp gives you some good ideas that can help you find the right strategy.


1.5  Book advice no.5: Gary Vaynerchuk – “Crushing it! Great strategies for more sales and more impact in social media”.

Content: You want to use social media to build a business, to bring your ideas to the people, to become a brand, but don’t know how? Gary Vaynerchuk as one of the leading social media minds in branding shows how to make it big on the established platforms (Facebook, Instagram, Twitter, YouTube), but also how to use Spotify, Soundcloud and iTunes for your own purposes.

Read the summary here: Gary Vaynerchuk is one of my absolute social media heroes and a gift for everyone who wants to read into the material. The book is very easy to write with many vivid examples and practical tips. I warmly recommend this book to anyone who wants to get more involved with their social media appearance in the near future. Good Luck! 😉



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