Rubicon is over a decade old. We’ve seen a lot of mishaps, solved a lot of problems, and worked with plenty of entrepreneurs to understand some of the biggest pitfalls. After reflecting on some of the biggest mistakes, we’re sharing six things to do after ideation.
- Crunch the numbers.
We’ve seen it time and time again. An entrepreneur has a great idea but no back of the envelope financial model. An idea might be fantastic, but without the numbers to back it up, founders risk going into massive debt without any return. Don’t get us wrong, we understand that sometimes debt is crucial to making the company work; but, if you can’t pay off the long term debt balloon payment when it is due because the company isn’t generating any revenue, not good. This is one of the biggest reasons that startups fail. You need the numbers on your side.
The fundamental metrics must work for the company to get off the ground. Ask yourself this question: do the numbers work? Sit down and crunch them. It can be as simple as: (1) how much will it cost to produce; (2) how much will we charge; (3) how much do I pay myself; and (4) how much will it cost to put it on the market? If the returns will allow you to keep the lights on, run with it.
Build a Prototype.
Another common mistake is that some founders jump in too quickly without testing a minimum viable product. Your idea might be revolutionary, but you need the market’s validation. Interview your potential customer target market and ask them: What do you think? How can this be better?
One of our clients built a software solution for special ed in schools. Before the founder launched the product, he cobbled together a makeshift database and tested it in actual, real-life schools. Teachers loved it, provided feedback, and helped him build a viable tool.
Too many entrepreneurs think the market wants something, but forget to ask if their solution actually solves the problems they are trying to fix.
Build a prototype, test it, and iterate.
Check Employment Agreements.
If you’re moonlighting – working at your prior employer and working on your idea on the side – check your employment agreements to make sure your idea is truly YOURS.
Particularly if your idea is similar to your current company (e.g. your data analyst at a grocery chain and your idea is to aggregate data for all grocery stores), you might run into some issues. Meaning, your employer could own the IP rights and possibly the whole idea. There are ways around this, like waivers and resignations, but consult with a lawyer first to understand your options.
Share Your Idea.
A falsity that entrepreneurs are told is to not share their ideas. Ideas themselves do not have much value, instead it is the execution of the idea that can be the big money maker.
We encourage our clients to tell everyone and get solid feedback to build off of and improve from. This goes back to prototyping: you need customer feedback to validate the market’s need for your product or service.
Another thing we see entrepreneurs do wrong is make everyone and their mother sign NDAs. It is just NOT necessary. Not everyone is out to destroy your idea. Most people will want to help. Consult with a lawyer about when it is appropriate to execute NDAs, but know that most of the time it is not necessary.
Share your idea far and wide. You will be inspired by the things you learn.
Assign IP to the Company.
This is a huge DO. What is the DON’T? DON’T let your anyone have the rights to IP by failing to assign all IP to the company. Failing to assign IP can become extremely costly in the long run.
Short term, you may be able to persuade your IP holder with a six pack of beer. Most of the time, this becomes super ugly, especially at investment stages when the IP is your most valuable asset and your former co-founder has huge leverage. Take Snap for example, a previous co-founder sued and ran to the bank with $157.5 million.
Lesson learned: assign all of the IP rights to the company and don’t let individuals run away with it. When things get ugly, they will get real ugly.
Talk to a Startup Lawyer.
We understand that most founders don’t have the money to talk with a lawyer at the onset; however, something that founders don’t realize is that most startup lawyers will talk for free during an initial meetup. Invite a lawyer out for coffee and ask about must dos, like: incorporation, filing a trademark, and how to assign IP to the company.
The point is, you will need to hire a lawyer in the future. Go to coffee, ask some questions, and find the lawyer that will best fit your needs down the road.