Becky Center is the CEO of Indiegogo the crowdfunding platform that unites innovators with early adopters.
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A query of U.S. Census Bureau data reveals that through 2023, Americans submitted nearly 62% more applications for new businesses than the same time period in 2019. The post-pandemic drivers for this are well documented. Many have determined now is the time to follow their entrepreneurial dreams.
If this is you, this article serves as your guide to understanding the biggest challenges for starting a business and strategies for how to overcome them.
Focus on the problem — then research, research, research.
Having an idea is the fun part, but while market demand will seem obvious to you, consider first looking at the problem you are solving instead of the benefits you will provide. Take a deep dive into researching what consumers are doing now to solve a particular problem, and what the shortcomings are with the current approach. Gathering this insight will inform all your next steps.
Find a co-founder, ideally someone who has done it before.
One of the most productive ways to sidestep some of the challenges of starting a business is to partner with someone who has already been through the process. The wisdom they gained while starting a previous business will help you avoid unnecessary trial and error and failures.
Choose carefully—you don’t want someone who agrees or disagrees with everything you say or do. Rather you want someone who offers different perspectives that creates a good balance that will net a stronger product or service for your customer.
Bootstrap initial funding through personal funds, friends and family, angels or crowdfunding.
Create a forecast. This is a detailed strategic financial plan that helps you make decisions about your business. This should include money you have, money you need and any expected costs. Some resources I’ve found that work well include Financial Forecasting, Analysis and Modeling and Term Sheets & Valuations.
Next, outsource. It’s a fact of life: you can’t do everything yourself. There are plenty of subject matter experts out there who can help with things like marketing, accounting and legal advice, and relying on them will let you focus on bringing your product to life.
Then, there's funding. A lot of people use personal savings or get investments from friends and family members in the early stages. Angel investors are another idea, but know that they’ll invest in exchange for equity in your company. Banks will generally give out small business loans, but pay attention to the interest rates.
I'm biased, of course, as the CEO if Indiegogo, but crowdfunding is a great way to get those initial investors. If you run a successful campaign, you’ll be able to get your business off the ground while conducting additional product research and creating passionate fans.
Finally, build your MVP—your minimum viable product. It's something that has enough features to attract those all-important early-adopter customers who will help you validate your product idea. It may not have all the bells and whistles that you’d like it to have, but once you get your MVP into customers’ hands, you can collect data on improvements for the next round.
Create product/marketing launch plans.
Marketing is one of the make-or-break challenges of starting a business. You might have a world-changing product, but if nobody knows about it, then it will never catch on. Develop the channels for how you will get the word out. Perhaps set aside funds to work with an online influencer, or align with a like-minded organization where you can share contacts.
You will need to identify an ecommerce platform to drive interested customers. One of the great things about crowdfunding platforms is that they will handle financial transactions for you.
Secure first paying customers and learn from them.
Learn from your first paying customers. Collect feedback and reward those who take a moment to share their thoughts. Perhaps create a Facebook group and invite your early customers to join. Consider sending out emails with surveys or include a feedback request in the package with a fulfilled order. However you choose to do it, make sure you’re asking for feedback and demonstrate when you’ve implemented it back to these early adopters.
Raise the first institutional round.
Now that you have proven that the product has traction and will sell in your chosen market, you’ve crossed one of the biggest hurdles for Series A funding. Here is what VCs are looking for in your pitch deck:
• Industry/marketing opportunity: VCs want high growth potential and high verticality.
• Good management: A management team that’s good at execution, well-networked, forward thinking and has a strong track record
• An addressable market: Your target audience should be large and growing.
• Market penetration: If you’re able to show VCs that your product is already being adopted, they’ll be more likely to invest in you.
• Business model/value proposition: Is your business scalable and extensible? Does it provide a high value to the end user? Quantify this in any and all ways that you can.
• Technology risk: Do you have something that’s robust and scalable, or is the tech going to break if it’s put under the stress of growth?
• Competitive threats: Are new entrants into the field or new technology going to make you yesterday’s news any time soon?
Closing thoughts
While these aren’t the only challenges of starting a business, this list should help you anticipate hurdles. Remember that this is a marathon, not a sprint.
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