Registration of legal entities, patents, trade marks at this stage may be a waste of money and time. Because the idea can not shoot, the team will burn out and collapse. There are startups that register, OOO, insisting that they increase the value of the project in the eyes of potential investors. Or even register a foreign company in order to formalize the share of the participants. Investor really interested in other things. It does not impress costly, and the presence of legal entities at an early stage may even complicate the deal. The share of participants it is possible to secure the gentlemen’s agreement. If your team has no such confidence, then consider that you have no team.
The office is also a source of savings. Many startups in Silicon valley started in garages. A small team can get together in the apartment, in cafes, coworkings. In Moscow, for example, there are free coworking centers in the framework of GBU “Small business”.
Marketing: while a business model does not need to spend much money on advertising. Customer base to increase even earlier. Need to find the cheapest channel, albeit quite small, to attract a small flow of users to analyze their behavior and make measurements to estimate the conversion in check, to know whether a product whether to return.
It is impossible to save time on the nomination and verification of hypotheses. Startup or develops, advances and tests hypotheses — or dead. No need to delve into the revision of the service, not feeling the product: defining empirically the best solution to the problem, which you created your product. It so happens that the current hypothesis is not justified, and we need to change the product dramatically. Startups it’s called “make the pivot” — to change the idea, and then some of the founders felt sorry for the work done and money spent. They hesitate, wasting time, or turn a blind eye to the problem and not develop the project.
Here we can recall the story of Airbnb. The initial idea of the project — a cheap bed with inflatable beds for people coming to the conference. But it was not sold. On the road to success, the company has done a few pivots before becoming what it is now. And the inflatable bed and remained in the title.
Savings on the investment phase (seed)
So, the idea verified, and obtained confirmation of demand of a product: there is a real data, statistics that you can show investors that they believed in the project. At this stage, the company gets not much money and a high risk of failure: in the Russian market only 10% of projects pass this stage. Therefore, investors are cautious: the market average of the first investment tranche is $100 000-500 000. So when investing, must also be able to save, but on the other.
The first thing worth saving is your salary. Investors do not give money for a business plan that outlines the space the salaries of founders. Because there is a conflict of interest by appointing himself a salary above the market, the founder is trying to earn on investors and not on your business, which is still highly unprofitable. The main motivation of the founders in a startup — their share, which should grow quickly in value, if the project is developing properly. If you get a better salary, then you are less concerned with the development of the project.
Increasing staff dear staff, you also run the risk of quickly ruined. The wage Fund (PAYROLL) in companies tends to increase. To save it will allow you to:
options to key personnel: ability to obtain shares in the company to become a shareholder is a powerful incentive for professionals;
— remote collaboration with experienced specialists: if there is no technological necessity of human presence in the office, take an employee on udalenku (remote work implies lower wages and a greater choice of candidates);
— hiring young talent, able to learn quickly;
— invitation of trainees under contract with the University.
Not your staff — hire the minimum possible number of employees. Many believe that with a large number of employees to do the superfood, faster to market, but often get the opposite effect. It seems that we need someone for this job? First, try to solve the problem on their own. Hire one in the case that you have to solve regularly.
The technique also can be saved:
— not to buy equipment if employees can work on their computers. In this case, you can issue a lease, pays the man for the use of its equipment;
— use preferential tariffs. Many services like networks / codacy / rates is pivotal for startups. Usually for teams of five (or less) people are free;
— opensource. Have outdoor services there are drawbacks, but their main advantage — no fee. For example, for internal communications instead of paying to Slack, you can use the free Rocket.Chat.
As for taxes, there are different ways to effectively and legally optimize them. When a company a little older, is to take an experienced Finance Director who knows all of the nuances. He will pay for his salary. For example, the law allows companies that have a wide list of IT services, to pay insurance premiums twice less — 14% of salary instead of 30%. For this you need to obtain accreditation in the Ministry of communications. While the revenue of your company has not reached 2 million rubles per month, you can keep accounts on the outsource and save on chief accountant. If a startup is associated with research activities and you understand how to commercialize it, become the participant “SKOLKOVO Foundation”. This program provides broad benefits. You will have to invest in cool professionals, but it’s worth it: this is a contribution to the competitive advantages of the product.
What is impossible to save
And now we come to what a startup at the stage of investment it is impossible to save.
In no case do not skimp on the quality of the product. If the market is new and the project has no competitors, it is possible to grow rapidly only at the expense of marketing. But as soon as the competitor with a better product, people will recognize. A good example is Google. In the late 1990s, the Internet was a lot of major search engines. Who remembers AltaVista or Lycos?
At the stage of pre-seed you can cut back on marketing, and now need to quickly increase the user base. Typically, marketing is the biggest part of the cost of growing of the project: sometimes more than half the total cost. Budding startups often believe in the myths about viral mechanics, word of mouth — they like to think they came up with such a cool idea that she herself will sell. But such examples are units, and almost all of them were born at the dawn of the Internet. If you have a cool product, then word of mouth can work in addition to traditional marketing, but not yet recruited a large base of users, this tool works badly. And quickly gain, you need marketing budgets.
Any startup in the beginning there will be a financial hunger. Sometimes even exhaustion. Once they were on the verge of death, and frosting all work, after all, be mindful of what not in money happiness. Sometimes professionals are ready to work for the idea if she’s pretty and promising. Such people are very valuable, they are the nucleus of the team, the main resource of a startup. And it’s better to avoid extreme situations and to learn from others ‘ lessons. From our experience there are two.
1. When you have an idea and no money, the need to economize on everything, except the search of ways of development. You can not save the hypothesis testing is necessary to accurately determine the parameters of the future product.
2. After receiving seed investment, it is possible to save on everything, except create a quality product and promotion.
According to the American research company CB Insights, a few hundred of the interviewed owners of failed startups so appreciated the reasons for the failure: 42% lack of market demand for a product or service, 29% of respondents said among the reasons for cash shortages, 23% — the wrong team, and 19 percent too tough competition, 18% — the problems of pricing and costs. Another 17% of respondents said about the bad or the wrong parent product, and that there is no business model. Thus, the startups agree that the key indicators that determine whether a startup’s future is not only money, but a good team, a quality product and the market demand for it.