He has spent most of his career working in senior financial roles, with a brief stint running his own company. Although his startup – a \u201cfootball wiki\u201d – wasn\u2019t successful, he learned many valuable lessons from the experience. <\/p>\n\n\n\n
In this post, we\u2019re going to look at the main insights from his discussion. If you find the idea of running your own startup appealing, you\u2019ll learn exactly how to finance it successfully. <\/p>\n\n\n\n
1. Understand Your Idea Is Worth Nothing by Itself <\/h2>\n\n\n\n
Entrepreneurs should understand from the outset that an idea by itself doesn\u2019t have any intrinsic value. You could be primed to build the next Microsoft or Apple. But without implementation, nothing will happen<\/strong>. <\/p>\n\n\n\n Pau said that entrepreneurs need to seriously think about the practical dimension of bringing an idea to market. This involves validating your idea and finding a strong product-market fit. He recommended Steve Blank\u2019s customer discovery framework<\/a>, which consists of four consecutive stages: create the hypothesis, test the problem, test the solution and (if necessary) pivot. <\/p>\n\n\n\n In essence, you\u2019re asking, \u201cIs somebody willing to pay for my product or service?\u201d To convert your idea into a business, you need to be able to change prospects into customers. <\/p>\n\n\n\n You\u2019ll likely find that your friends and family say they love your idea. But when you ask for their credit card details, the excuses start to roll. So you need to talk to a broad cross-section of people to see if they\u2019re willing to pay for it. <\/p>\n\n\n\n Pau also recommended that entrepreneurs should think about working for a startup to learn practical skills like the ones described above, rather than jumping in at the deep end straight away. <\/p>\n\n\n\n In order to test, prototype and pitch your idea to investors, you need a preliminary war-chest. Pau recommends the \u201cThree Fs\u201d as an initial source of investment: friends, family and fools. <\/p>\n\n\n\n In the early stages, it\u2019s essential to demonstrate that you have traction to investors<\/strong>. You don\u2019t need thousands of customers. But you do need to show that there\u2019s definite interest in, and support, for your idea. Some businesses can produce revenues from day one. Most can\u2019t, however, especially if they\u2019re online. So you will likely need to account for this. <\/p>\n\n\n\n When you start to talk to bigger investors, you\u2019ll need to prove three things. First, that people are willing to pay for your product or service. Second, that you can generate margins and in particular contribution margins, which refer to the amounts left over after you\u2019ve deducted the cost of raw materials and the customer acquisition cost. And finally, that you have a short-term \u201csurvival plan\u201d that will cover you until you start generating sufficient revenue. Keep in mind that most startups don\u2019t make money for the first few years. <\/p>\n\n\n\n Once you\u2019ve validated your idea and generated some initial revenue, you can begin to look for other sources of money. <\/p>\n\n\n\n Pau said that government-backed soft loans are good for the early stages of most startups<\/a>, assuming they\u2019re available. He also suggested that angel investors should be considered seriously, but only as a last resource when other sources of capital have dried up. <\/p>\n\n\n\n A \u201cbusiness angel\u201d is looking for a return-on-investment by risking money during the early stages of a startup\u2019s life. This approach is becoming more and more popular as people look for alternative places to keep their money due to high levels of risk in the stock market, real estate, government bonds and so on. When looking for investors, make sure you do background checks and ensure that your values align<\/strong>. Don\u2019t sacrifice too many shares in your business. <\/p>\n\n\n\n Remember that you need to prove that your company can scale. And you don\u2019t need an elaborate business plan to do this. You just need to communicate your idea and broader strategy in an effective way. Pau suggested using a brief pitch deck to demonstrate proficiencies and opportunities without boring potential investors. <\/p>\n\n\n\n Finally, Pau emphasized that it\u2019s essential to consult with a lawyer and create a robust shareholders agreement. Many entrepreneurs overlook this point only to regret it further down the line. <\/p>\n\n\n\n When it came to the topic of hiring, Pau reiterated the well-worn sentiment that \u201ca company is only as good as the people it employs.\u201d Entrepreneurs need to recruit talented people if they\u2019re going to scale a company that can compete with existing players in the market. <\/p>\n\n\n\n But that poses a problem. Startups can\u2019t offer talented individuals the same package of benefits as big corporates. So how can you, as a founder, find people that are both highly skilled and committed? <\/p>\n\n\n\n First, leverage personal connections as much as possible. Second, if somebody is essential to your company, give them an equity stake<\/strong>. This is one way of ensuring that you keep top-tier talent when you can\u2019t pay them a salary available in a large company. You should also offer team members more freedom and flexibility than they might find elsewhere. <\/p>\n\n\n\n Technical skills are also essential. Businesses nowadays have to leverage new technologies to gain a competitive edge. So when you find good technical people, do everything you can to hold onto them. <\/p>\n\n\n\n2. Build Initial Revenue <\/h2>\n\n\n\n
3. Look for Early-Stage Investment <\/h2>\n\n\n\n
4. Hire the Right People <\/h2>\n\n\n\n
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