Startup
20.07.22

Startup life cycle: why is an IT product better than a child?

I have already devoted a year of my life to the creation and development of my startup. Although I’m not yet thirty, however, in recent years I’m increasingly being asked when I plan to have a baby. So, I have something better than a child at the current stage of life – my own IT product. I worked on it seven days a week and on top of any schedules. I thought about it every day. I gave this cause, perhaps, as much attention and care as a responsible parent should give to his child. I decided to write about the life and evolution/life cycle of a startup in general and the idea came to me to try compare it with a child.

The entire process of developing, launching, and establishing a business project can be divided into 6 main phases. And I will describe them using a metaphor that should be close and understandable to absolutely everyone.

First: find a solution

Usually, mature and responsible people do not have children suddenly. First things first, a person must agree with his/her partner on how they together will provide a good life for the child. The couple weighs all the pros and cons to understand whether this should be done and, if so, why.

In the same way, the idea precedes the creation of a business. You see an unmet need in yourself or others, you conclude that your product will be in demand because it will help solve real problems. Although this is cynical, it must be admitted: children are also born out of selfish considerations. If this, of course, happens as planned, and not as a result of a casual affair at a student party. Both the child and the startup are needed to help you reach your full potential and ensure a comfortable old age. Therefore, it should be based on an effective and competitive idea.

To determine in advance whether the product will be in demand on the market and whether it will bring the expected result, it is advisable to conduct an experiment that will help you understand whether you have found the best solution to the problem. So young couples get pets, go to a psychologist, and special training, hoping to understand whether they are ready to become parents. And in the case of a startup, it is important to determine the target audience for a product or service and carefully study it.

You should analyze the experience of competitors, as well as interview potential customers; find out what solutions to the problem they have tried, tell them about your idea, and ask them to evaluate it. So future parents consult with their relatives and acquaintances who have a similar experience. And you have to note the pain points of the target audience and adapt your solution to the new needs and opinions of potential customers. Simply put, if possible, insure yourself against the mistakes of other parents.

Second: preliminary search for resources

This stage is closely related to the previous one. You need to make sure that you can allocate a sufficient budget for the “child”, that is, for the product. If in the case of fatherhood and motherhood this means creating an initial reserve of savings for the period of the decree and later life, then when considering a business project, we are talking about finding potential investors. You will most likely need to invest your funds as well until the business becomes profitable. But in any case, with startups, you usually have to rely much less on your money, while with the provision of a child, only your parents will help, if you’re lucky enough.

According to PwC, an international consulting company, two-thirds of European startups are initially self-financed. The best source of funding to start with comes from people you know, such as relatives, friends, or neighbors. They are unlikely to want to feed and dress your child because they will not receive any profit from this. But they may well invest in a business if you can convince them that they will surely earn money on it. Resource-intensive enterprises need to seek external funding from the very birth of the project.

You can still check the interest and engagement of the audience using the relevant Internet resources, as well as by participating in pitch competitions, special conferences, and other events organized to present startups. It also makes sense to try to register in an accelerator or get into the so-called “incubator”, where experienced entrepreneurs take promising ideas under their wing for a share of the income. If your project is approved and taken under guardianship, then in the future you will be provided not only with funding but also with training courses, as well as other business services. To some extent, this is comparable to how you feeling sorry for your spouse would turn to a surrogate mother for help.

Third: MVP launch

The third stage is the first practical stage from the list of the life cycle of a startup. You need to test the idea by creating an MVP (Minimum Viable Product). It is a simplified version of your products that could satisfy the needs of the first customers and provide a valuable experience for the final stage of development. MVP minimizes risks and reduces startup costs because it makes it easier to understand how best to optimize the budget. If you had the desire to test your parental powers and hypothetically you could have an android child like in the great game Detroit: Become Human, then it could probably be compared to an MVP. But in the modern world, there is not yet such an opportunity, so here the child loses to a business project.

The main goal of an MVP is to allow you to test a prototype with a target audience before you start taking your business to the next level. Therefore, at this stage, you will need to use all available channels of communication with customers to obtain maximum information. We only need real reviews. Conduct customer interviews, A/B tests, and advertising and crowdfunding campaigns.

Fourth: budget formation

Unlike the second phase, where you only checked whether the project could interest the audience and attract investments, in the fourth stage you need to directly receive money for the creation and launch of a fully functional product. You have to prove to future investors that the idea is ready for full implementation. You will back up your arguments with statistical data collected during the MVP. Imagine that your child has already grown up, is finishing his senior year and he needs to be given a good higher education, which will become his lucky ticket to adulthood. So, MVP indicators are like exams and test results.

In addition, investors are persuaded through shares. “Members of the admission committee” want to be sure that the student’s parents are solvent and ready to generously pay for education in the future. You can offer them ordinary shares that give all investors equal rights. If you want to interest a more capricious “examiner”, then preferred shares will help, the owner of which receives more rights than those who have ordinary ones. A convertible note can also help, which is when a company issues a debt instrument to investors with a specific interest rate and exact maturity date. Do not forget about SAFE (Simple Agreement for Future Equity) – securities that give the holder the right to buy a proportional number of shares at a price below the current market price for a certain time.

Fifth: achieve product competitiveness

During education, your child must acquire professional skills and knowledge to subsequently become competitive in the labor market and highly valued by the employer. Here, with an enterprise, everything is generally a thousand times easier than with a child. You need to polish the product and keep the audience. If customers come back to your products and recommend them to their relatives and friends, then you are on the right track.

It takes much more time and effort to make a child competitive in the outer and the real world. And, as it often turns out too late, it was necessary to start doing this not from the university, and not even from the graduating class. There were a billion little things to consider, starting to take care of a child even before he was born. And when he was successfully born, you should not relax, because everything does not end at this point, but only begins. You should have been monitoring his/her safety 24/7, instilling in him/her the right set of personal qualities from birth, found in him/her good cultural values ​​and life priorities. It was necessary to create a lot of conditions for the development of his intellect, constantly take care of his physical and mental health, and constantly teach the child everything in a row, from how to properly hold a spoon and ending with how to behave in an infinite number of different situations. And only if you did this job well enough, then there is some chance that he will not just wipe his pants at the university, but will get valuable knowledge there, and after graduation, he will be able to apply them effectively. Because a diploma in itself does not guarantee success in a career if a person as a whole does not know how to live and suffers from existential crises.

You can say that the product also needs a lot of time. This is true, but, firstly, fewer nerves will die anyway, and you will get disproportionately more pleasure from the process than in the course of that endless series of disappointments and sorrows, which we usually call raising children. All you need to get a competitive product is to find the most effective ways to reach your target audience, as well as eliminate any confusion that may arise in the course of a client’s interaction with your products or services. And you should also constantly improve the product, based on a correct understanding of the needs of customers.

What qualities does a successful startup have after this stage? It must be a working product with extraordinary marketing processes and a proven business model. As you can see, there are only three main components of the component that fit in one line. And what should be a “correct” child who will grow up objectively as a quality member of society and a worthy successor to your family? Humanity still does not know a concise, unambiguous, and only correct answer to this question.

Sixth: scaling

After the child has successfully studied at a prestigious university and received a diploma, it is necessary to get him a job. The time has come when parents need to introduce the child to adulthood, so that he is happy with everything, does not harm himself and people, and has good prospects. He must become truly independent and mature, go on a free voyage and not give you cause for concern. Needless to say, how laborious is this task? Yes, it is even difficult to make the child even just live to adulthood, not to mention the fact that by this moment he was a fairly intelligent, responsible, adequate, and purposeful person.

But with a startup in this sense, there are fewer worries. Everything is clear and without unnecessary puzzles. How do you know if a project is ready to scale? It is pretty simple. If all product distribution channels are full, and the business model is not developing, then it is time to expand. It is important not to rush into scaling, because rushing in this matter can lead to burnout or even destruction of the brand image. But when the time comes, you will only need to create new distribution channels, start moving into the markets of other countries and look for customers there.

The scaling of distribution channels is already the point when the enterprise moves into a real business, becoming something more serious than an efficient group of people working based on enthusiasm. From that moment on, you hire more experts and build strict discipline, hierarchy, and corporate culture. You start looking for outsourcing partners, trying to attract significant investments from venture capitalists for the long term.

Summing up

After the sixth phase, the business project is considered objectively successful, having achieved its basic goals. It has become popular, in demand, and profitable. It enters the international market. The value of the shares has risen many times over. If you wish, you can calmly sell the business to anyone, and go to a well-deserved retirement to do what you have dreamed of since childhood. Or you may never work again for the rest of your life.

Finally, returning to the parent question, let’s compare again. So, if suddenly you are incredibly lucky, and you raise worthy children, then in the end what will you get from this, what profit? What will you be left with when they leave your house and take care of their own lives? At best, with the fact that they may not hand you over to a nursing home, they will congratulate you on the holidays and sometimes fuse your grandchildren. At the same time, if you “raise” a worthy startup, then it will thank you properly, reward you with all sorts of goodies that you have dreamed of since childhood, and provide you with the most comfortable old age in various senses.

In my opinion, it is way better to invest in a startup first. And after a couple of successfully launched business products, I can think about my own child.

Written By
Rasim Nadzhafov
CTPO, Product/Project Manager, Entrepreneur

Permanent success is only attainable through self-education, flexibility, dynamism, and an insatiable curiosity for new things.

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