3 essentials for founding a startup and why you only need 2

04 Jun, 2016 0 Author

What do you really need to found a great startup? Most entrepreneurs think a killer idea is what’s needed. And a garage. And a good coffee machine.

Investors know any great startup is built three essentials:

  1. A great idea;
  2. A great founding team;
  3. And a great deal of cash.

The great idea must be a little crazy. If it were just a reasonable idea it would have been done before. Preferably the idea is also big or ambitious. Big ideas have a higher change to succeed as there will be less competition and it is often easier to get money for a moonshot  than for a small improvement.

Of course the idea must be tested against reality. Can it be done? Can it be done fast enough? Is the market ready and big enough? Is it easy to scale? Can you build a big enough barrier against competition?

Yet a great idea is useless without a great team that can execute the hell out of it. A team that can listen, learn and pivot so efficiently that it doesn’t burn through all the money to go from idea to killer proposition.

Finally, a great team with a great idea needs money to build several MVPs,  interact with customers, build the product and get it to market. The more technology required, the more money is needed. Typical semiconductor companies require 50 million to get a first product in the market. Any truly disruptive technology requires 10 years to enter the market and then another 10 years to become the market leader.

Ok, so killer idea, killer team, and a big wad of cash. In fact you only need 2 to get started.

It only takes two

If you have a great team with a great idea, getting an investor to chip in enough cash is easy. That’s their reason of existence. True, outside Silicon Valley it is more difficult to find patient capital with the deep pockets needed to fund a disruptive technology company. But given a solid idea and team it can be done.

What about a great idea and a lot of money? Hey, you can buy yourself a team. No experienced entrepreneur will walk away from a great idea that is backed up with lots of dough. The networks around startup accelerators are great to hook experienced entrepreneurs that are fed up with playing board member. This is also where you see government and subsidy schemes try to foster ideas: “We really need to do something cool with Cyber Physical Systems in the European Union and have $100M to fund initiatives”.

What if you have money and a great team but no clue what to do? The self driving electric car is already being made, drones are all over the place, social networks overcrowded. With just a team and money it makes no sense to found a startup right?

Wrong. Most ideas aren’t that amazing. Take YouTube, WhatsApp, or WeTransfer. All had been done before. But if you can execute better than the anyone else, you are set up for a winner.

Joel Spolsky proved the world this actually makes sense. He created a startup with a Google like environment of free lunches and cool gadgets that was so great to programmers they got access to the world’s best. What about the ideas these guys came up with? Ok they started making a bug tracker. Basically what every self respecting not-invented-here programmer does as a hobby to experiment with making a cloud service. They also put mercurial in the cloud. Solid products, but not exactly GitHub or as successful as Atlassian’s jira.

So myth busted? Well no. A few pivots later they made StackOverflow. And Trello. A Q&A site for programmers. And a kanban-style todo list with over a million users. All have been done before. But executed so incredibly well they changed the world of programming forever. Programmers today don’t need to know how to create algorithms anymore, you simply lookup the best solution on StackOverflow. Copy. Paste. Done. Your OS gives error 42? StackOverflow tells you what’s wrong and how to fix it.

So do you have the money and the team but no idea? Just start and make sure to learn and pivot until you have that killer proposition.

In the end it only takes two to tango.

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About Martijn Rutten

Technology entrepreneur with a long history in challenging software projects. Working with blockchain startups. Coaching startups and corporate innovation teams at HighTechXL. Co-founded Vector Fabrics on parallelization of embedded software. PhD in hardware/software co-design at Philips/NXP. More about me.