This article throws light on the key fundamentals that every entrepreneur should understand before getting into a new venture/start-up.

Which first? Build a product or An Audience to buy the product? 

It depends on timescales you want to launch in, as well as the type of product you’re building.

Building an audience that can accelerate growth can take years, can distract your from building the product but at times it’s a great advantage to be a nobody and for no one to know about what you’re doing so that you can make mistakes under the radar!

When you build an audience first, you can evaluate the product capability, usage and viability by understanding the customer needs, wants and pain points. This way you’d have already established a group of people who can provide feedback to you and can test things out.

At the end of the day, when you seek funding, investors look for traction so if you have an audience who uses your product, you’ll be able to show an existing demand for your product in the market.

What is an MVP?

All products or services start somewhere. Something quick and dirty you can build that you can test with your customers and improve it based on feedback. An MVP is the minimum feature set you can build that validates your hypothesis, shows you deliver customer value in the smallest possible time.  The following are some great examples of MVPs that became industry giants:

  • AIRBNB – Brian Chesky and Joe Gebbia tested their idea by providing accommodation to people who came to town for a design conference. They took pictures of their loft, created a Web page and started with 3 paying guests.
  • FACEBOOK – This was originally intended to connect students together via college and let them post messages to their board.
  • AMAZON – Jeff Bezos started off selling books online with a very very simple Web page
  • TWITTER – Born as a side project apart from Odeo’s main podcasting platform, the free application allowed users to share short status updates with groups of friends by sending one text message to a single number

You’re raising money for your start-up. You have a product and a little traction — now you need to grow. Who do you talk to? 

Raising capital is a critical part of building a successful business. Your company might have a brilliant idea, a dedicated team and can even generate revenues to some extent. But to get your startup off the ground, capital is essential.

So, understanding the basics of raising funds will be critical to your startup’s success. If you’re clear on the basics, you’ll have less chances to derail. 

Here are some steps you can follow:

  • Prepare yourself for the road ahead, understand and grow your investor network
  • Build passion into your pitch – the first step
  • Tap investors that offer capital in your niche
  • Decide Between Selling Metrics vs. Selling a Big Vision
  • Prequalify Your Investor
  • Don’t be needy and act like raising money is the only objective
  • Follow the 30-20-10 rule to nail your pitch (30 seconds to state your objective, 20 minutes to finish your presentation and 10 slides to tell your story)

What influences the value of your start-up?

Consider the following factors that influence the valuation of a seed stage start-up:

  • Traction: Principally the quantitative proof of customer demand, traction shows that a start-up is taking off, its development and growth
  • Reputation – One of the most important things that an investor looks at before investing is the founder’s image and his capability.
  • Prototype – Development of a prototype is a major factor that can influence the decision of an investor. So, before planning to pitch an investor, make sure the prototype is ready.
  • Pre-valuation Revenues – If your product has hit the market and is already generating revenue, it could sway the investor’s decision in the favour of that start-up, and prove to be a real deal sealer.
  • The industry – If the start-up belongs to a booming industry, it is highly likely that investors will pay a premium. This implies that it is important to choose the right sector!