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Copy file name to clipboardExpand all lines: learn-pr/startup/fundamentals/2-found-startup.yml
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prefetch-feature-rollout: true
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title: Should you found a startup?
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description: Consider questions that explore your suitability for founding a startup. Examples include your motivation, expertise, financial freedom, and risk tolerance.
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title: What makes startups succeed?
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description: Learn how startups succeed. An original idea and a team of employees can lead to success, as can a scalable business model and good timing.
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title: What makes startups fail?
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description: Learn why startups can fail. Factors include inadequate demand, competition from free products, unnecessary secrecy, and disagreement among cofounders.
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title: Summary
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description: Review startup concepts. Examples include personal considerations to keep in mind when founding a startup, and factors that can lead to success and failure.
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In this module, we're going to focus on startup basics so that you have a solid guide to lead you on your journey with [Microsoft for Startups Founders Hub](https://startups.microsoft.com/?azure-portal=true).
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In this module, we focus on startup basics so that you have a solid guide to lead you on your journey with [Microsoft for Startups Founders Hub](https://startups.microsoft.com/?azure-portal=true).
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We'll start by discussing some personal considerations:
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We start by discussing some personal considerations:
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- What it's really like to found a startup; not the hype, but the nuts and bolts of the journey and what to expect.
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- What's it really like to found a startup; not the hype, but the nuts and bolts of the journey and what to expect.
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- How to manage your time and energy.
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- When to transition to building your business full-time.
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We'll also discuss what makes a startup successful, and why having a business model that's repeatable and scalable is essential. Just as importantly, you'll learn about some of the most common reasons that startups fail so you can avoid making these mistakes.
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We also discuss what makes a startup successful, and why having a business model that's repeatable and scalable is essential. Just as importantly, you learn about some of the most common reasons that startups fail so you can avoid making these mistakes.
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Finally, we're going to talk about what founders should focus on in the first year of managing their startup. This discussion helps you map out the next few steps of your own journey.
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Finally, we talk about what founders should focus on in the first year of managing their startup. This discussion helps you map out the next few steps of your own journey.
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## Learning objectives
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In this module, you'll learn:
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In this module, you learn:
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- How to think about the startup journey from a personal perspective and prepare for the road ahead.
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- How to decide if you're ready to pursue your idea full-time.
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- What factors help startups succeed and how you can take actions early on that will improve your chance of success.
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- What factors help startups succeed and how you can take actions early on that improve your chance of success.
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- What mistakes cause startups to fail and how to avoid them.
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- What to focus on in the first year of launching your startup.
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## Are you passionate about solving a specific problem?
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To be a successful entrepreneur, you need to be passionate about solving a problem. Many successful entrepreneurs have reported that they would've pursued their idea regardless of whether there was a business opportunity; they were that passionate about solving that particular problem.
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To be a successful entrepreneur, you need to be passionate about solving a problem. Many successful entrepreneurs report that they would have pursued their idea regardless of whether there was a business opportunity; they were that passionate about solving that particular problem.
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The [road from startup idea to successful business](https://techcrunch.com/2018/07/31/what-every-startup-founder-should-know-about-exits/?azure-portal=true) is often a long one, with the typical time from launch to exit being anywhere from [four to ten years](https://about.crunchbase.com/blog/startup-exit/?azure-portal=true).
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The [road from startup idea to successful business](https://techcrunch.com/2018/07/31/what-every-startup-founder-should-know-about-exits/?azure-portal=true) is often a long one, with the typical time from launch to exit being anywhere from [4 to 10 years](https://about.crunchbase.com/blog/startup-exit/?azure-portal=true).
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Bear in mind that few startup founders set out with anything like this commitment up front. It's entirely rational to start a company with a modest time horizon and become more committed as the opportunity solidifies and the company grows.
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Nevertheless, it'll be much easier for you to devote meaningful time to solving a problem if you're passionate about it. This is especially the case in the early days, when there's likely to be lots of hard work and before you've reached any significant commercial milestones.
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Nevertheless, it's much easier for you to devote meaningful time to solving a problem if you're passionate about it. This is especially the case in the early days, when there's likely to be lots of hard work and before you reach any significant commercial milestones.
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> [!TIP]
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> Ask yourself: Am I passionate about solving this problem, and can I imagine devoting years of my life to working on it?
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## Do you have deep domain expertise?
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The odds of a startup succeeding are always higher if the founders have unique insights into the problem space—or *domain expertise*—in which their startup will operate. These insights are typically acquired over a long period of time (either through work or a personal interest), accompanied by a thirst for understanding problems and exploring potential solutions.
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The odds of a startup succeeding are always higher if the founders have unique insights into the problem space—or *domain expertise*—in which their startup is going to operate. These insights are typically acquired over a long period of time (either through work or a personal interest), accompanied by a thirst for understanding problems and exploring potential solutions.
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In fact, in the early days of many startups, these unique insights are the only competitive advantage the company has, so it's important to make sure you're able to identify and articulate the insights on which you're going to base your startup.
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In fact, in the early days of many startups, these unique insights are the only competitive advantage the company has. So, it's important to make sure you're able to identify and articulate the insights on which you're going to base your startup.
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There are four main ways in which startup founders can take advantage of their domain expertise to create value:
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- By identifying an important problem that many others don't realize exists. It's well known that many great startup ideas came from spending time "marinating" in the problem space, exploring interesting problems with potential customers and developing unique insights over a long period of time. Finding great problems to work on often means skipping over the problems on which everyone else is working and identifying others that are hidden or that seem unsolvable, but that still represent a great opportunity.
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- By coming up with a compelling solution that's unlikely to have occurred to others, and might even seem unlikely to succeed. Historically, many of the best startup ideas seemed wild at the outset, and it was only with hindsight that their value became evident.
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- By tapping into their existing network, or by using their profile as a thought leader, founders can make connections with customers that would be difficult for a newcomer.
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-In the case of *deep-tech* startups (those based on advanced technology or scientific research), by developing novel, cutting-edge technology that can become the basis for the company's competitive advantage.
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- By identifying an important problem that many others don't realize exists. Many great startup ideas came from time spent "marinating" in the problem space, exploring interesting problems with potential customers and developing unique insights over a long period of time. Finding great problems to work on often means skipping over the problems on which everyone else is working and identifying others that are hidden or that seem unsolvable, but that still represent a great opportunity.
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- By coming up with a compelling solution that's unlikely to occur to others, and might even seem unlikely to succeed. Historically, many of the best startup ideas seemed wild at the outset, and it was only with hindsight that their value became evident.
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- By making connections with customers that would be difficult for a newcomer to make. Founders can tap into their existing network, or use their profile as a thought leader.
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-By developing novel, cutting-edge technology that can become the basis for the company's competitive advantage. Especially with *deep-tech* startups that are based on advanced technology or scientific research.
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> [!TIP]
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> Ask yourself:
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> - Does my startup idea take advantage of the time and energy I've already invested in my career or my other interests?
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> - What insights do I have (that most of my peers don't) that will open up an opportunity that might have been invisible to others?
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As a startup founder, you need to work on three tasks to determine your startup's financial runway:
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- Understand the cost of building and launching your product. This should include all outlays, including legal, marketing, and staffing costs.
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- Understand the cost of building and launching your product. This estimate should include all outlays, including legal, marketing, and staffing costs.
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- Predict the likely revenues you'll generate when the product is in the hands of customers. Consider how long it will take to reach that juncture.
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- This is the trickiest part, and many would argue that forecasting future revenues for a pre-launch startup is at best a rough guess.
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- This prediction is the trickiest part, and many would argue that forecasting future revenues for a pre-launch startup is at best a rough guess.
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- Almost all startup pitch decks are heavily influenced by optimism bias. They have a revenue chart that goes steeply up and to the right. A good rule of thumb is to double the length of time you think it will take to get to revenue, and halve the amount of revenue you think you'll generate.
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- Determine how much capital you have and are willing to invest in the company prior to funding from revenues or external investment. If you have cofounders, this is a great topic to discuss as a team.
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- Determine how much capital you have and are willing to invest in the company before it receives funding from revenues or external investment. If you have cofounders, this is a great topic to discuss as a team.
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Answering these questions helps you develop a cashflow forecast that allows you to make informed decisions about where to invest time and money early on.
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Successful startups share a number of important attributes. In this unit, you'll learn about some of the most common shared attributes of successful startups, and you can score your startup against them.
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Successful startups share a number of important attributes. In this unit, you learn about some of the most common shared attributes of successful startups, and you can score your startup against them.
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By understanding what makes startups succeed, you'll be able to bake some of these attributes into your startup from the very beginning.
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By understanding what makes startups succeed, you're able to bake some of these attributes into your startup from the very beginning.
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The unfortunate reality is that the majority of startups fail. The good news is that in many cases, these common causes of failure are avoidable. As long as founders are aware of the most common startup pitfalls, they can take steps to mitigate situations before they worsen.
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The unfortunate reality is that most startups fail. The good news is that in many cases, these common causes of failure are avoidable. As long as founders are aware of the most common startup pitfalls, they can take steps to mitigate situations before they worsen.
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Bear in mind that your startup failing doesn't need to spell the end of your entrepreneurial career! Failing can be a great opportunity to learn what customers really want. Moreover, if the failure happens quickly and cheaply, you can pick yourself up and move onto another idea, applying the lessons you've learned from your first attempt.
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Bear in mind that your startup failing doesn't need to spell the end of your entrepreneurial career! Failing can be a great opportunity to learn what customers really want. Moreover, if the failure happens quickly and cheaply, you can pick yourself up and move onto another idea, applying the lessons you learned from your first attempt.
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In this unit, you'll learn about the most common causes of startup failure, and some of the relatively simple actions you can take (or avoid taking) in the early days to maximize the chances of your startup being successful.
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In this unit, you learn about the most common causes of startup failure, and some of the relatively simple actions you can take (or avoid taking) in the early days to maximize the chances of your startup being successful.
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At the end of this unit, you can work through a checklist to score your startup against the indicators of startup failure. This list helps you identify any issues that you might need to address.
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Without proven demand from customers, it's likely that you'll build either entirely the wrong product or a product that's not exactly what your target customer needs. This prevents you from creating a viable, scalable business.
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In another module, we'll discuss methods for validating your idea with customers before you spend significant amounts of time or money building your product. This is a vital step to confirm that customers will want your product and that it will solve a real problem for them.
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In another module, we discuss methods for validating your idea with customers before you spend significant amounts of time or money building your product. This is a vital step in confirming that customers want your product and that it solves a real problem for them.
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