Every entrepreneur has questions when starting a company.
There are several sets of questions that every startup entrepreneur will face in the early days of starting a company. Typically the first question when starting a company is, “What do I do first?” Others questions include, “When do I start hiring? Who do I hire first and what do I pay them? When do I start thinking about raising money, and from whom?”
While there are no standard answers to any of these questions when starting a company, there are some general guidelines that will at least get you thinking the right way.
Think About Your Startup at Different Stages of Growth
This is the first in a series of articles in which I’ll discuss how to think about your startup at different stages of growth. Over the next few weeks, I will present different scenarios for various stages of a startup and give you things to think about. This should help ensure you have the right mindset for starting a company, no matter what stage of growth your company is in at any given moment. My advice is based on over 30 years of experience as a startup founder and CEO, but truth be told no situation is the same. The intent is not to completely describe your business, but hopefully your situation is close enough to one of the scenarios covered in this series for you to get value from this.
The first scenario we will explore is the foundation of all successful entrepreneurs.
Basically, you and an idea.
All Great Companies Start with a Great Idea
We all have ideas on occasion. We see something or experience something and we think to ourselves, “What is really needed here is [insert your brilliant idea here].” What makes you different is you are actually thinking beyond the idea and seriously considering taking the next step by starting a company that addresses this idea directly. This thinking already differentiates you from the other 99 percent who maybe shrug their shoulders and say to themselves, “Someone ought to do something…” and go on with their lives.
Sometimes the difference between success and failure is simply the difference in how a person thinks. Using the above example, for instance, a successful person more likely thinks to themselves, “I ought to do something…” rather than, “Someone ought to do something…”; and, it’s this type of mentality that separates the doers from the dreamers. At the end of the day, it’s the doers who start a company when they have a great idea and it’s the dreamers who look back years later and say, “I had that same idea once, I couldn’t/should’ve/would’ve started that very same company if it wasn’t for [enter lame excuse here].”
Having a great idea doesn’t mean you have the time or the resources to start a company.
So You Have an Idea, and You’re Ready to Take Action
But, now what? You have a full-time job, you can’t afford to work for nothing for very long, if at all. You may have the technical chops to start making progress (most high-tech startup entrepreneurs come from the technical world), but what is the first thing you should do to make your great idea a great new company? You are losing sleep thinking about this idea and you are ready to take action.
Here is some advice on starting a company, if this is you.
What to Do with Your Big Idea
Step 1. The Sanity Check
First, find someone to sit down with and talk about your idea to make sure starting a company is actually a good idea. This needs to be someone who can understand the idea and render an opinion that you value. This first sanity check will give you some direction and validation. Find someone who has done something like this before, someone you can trust. The odds of someone taking your idea and running off with it are very small; don’t fret over that or worry about non-disclosure agreements or the like. Just get a second opinion.
Step 2. Write it Down
Second, start writing it all down. Before starting a company, you will need a business plan, so you might as well get started. This doesn’t need to be anything formal, it can quite literally be a stream-of consciousness document. Date it and get someone to witness and sign it. If your idea is ultimately patentable, this will establish when you had the idea. The process of writing the idea down will make you start thinking about the next level of details and help you make decisions about whether to pursue it or not. If your idea is good, you should be more excited about starting a company after this documentation process.
Step 3. Create a Prototype
Third, assuming you are from the technical side, start noodling on a prototype. If you have the next great iPhone app for helping people find roommates, start writing a little code and see if you can get something running. As you discover details during this process, go back to your document and update it.
Validate Your Idea Before Actually Starting a Company
These are all things you can do to validate your idea without having to take the big next step. Nights and weekends were made for this kind of thing. Engage with trusted friends and family to test out your idea. It may be worth creating a non-disclosure agreement (NDA) to protect your idea, however remember everyone has ideas. It is helpful to have a business name to support your idea during your validation process. We like this handy business name-generator tool for inspiration.
If you are in a situation where you can do all of this exploratory work on your own, all the better. However, please be careful if you are currently working for a company as a full-time employee.
Currently Employed? Watch Out for Assignment of Invention
Remember that stack of stuff you signed when you took the position? In there, somewhere, is probably something called, “Assignment of Invention.” It’s a pretty standard form and almost always part of the document package when someone is hired.
Assignment of invention can be a roadblock to starting a company.
Basically, it states, and you agreed by signing it, that the company owns anything you create, even on your own time, while employed by them. This seems onerous, but think about the company’s situation. If they allowed employees to claim ownership of anything they did at work or while working for the company, it could create a very chaotic environment.
Working Around Assignment of Invention Before Starting a Company
The question is where to draw the line, and there is no clear way to do that, so the assignment of invention document is typically all-inclusive regarding your time. If you have signed such a document, you should probably negotiate with your company and establish guidelines around working on your project exclusively at home, especially if your idea has anything to do with what your current employer does.
Don’t Jump the Gun and Rush to Form a Corporation
Generally, a company will be OK with you working on your own time on something, as long as what you are doing doesn’t overlap in any way with your real job. Don’t ignore this. Get any agreement in writing.
At this point, you probably don’t need to form a formal corporation or company. It’s too easy to get bogged down in the corporate process and forget about actually documenting your idea. The actual formation of your company can come later.
Now, get to work on that document. That has to come first.
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