Almost three years ago one of my very good friends closed up shop on a startup that she founded with another friend. She spent about two years and 50k of her money with some contributions from friends and family. She spent a few years working as an engineer to recover financially. In the last few months she has become enamored by an idea for an app and she has built a prototype and is on her way to an MVP. At the moment she is prepared to quit her day job to work on this full-time. I’m interested in hearing your advice for someone who’s diving back into a startup for the second time. I would like to be her advisor in this project and be as helpful as possible as well.
I subscribe to the age-old mantra "If first, you don't succeed, try, try again." As such, I applaud the effort to get back on the horse... As a multiple-time entrepreneur myself, I'll share a few things with you (and your friend)
1. Take advantage of any advisors and mentors possible (like she is doing with you :) ) to help her along this new journey. It gets lonely frequently as a small business owner and having only an echo chamber to bounce ideas and issues off only end up hurting your chances for success.
2. Connected with the above, be sure to have some folks that are independent in an advisory/mentor role. Friends, family and most investors have a hard time telling you the cold hard truth, to your face, which again, only hurts your potential.
3. Before fully committing yourself to this new endeavor (e.g. quitting your day job), I suggest preparing:
(a) A business plan, which includes a full financial model. The plan doesn't need to be a publishable document of 40-60 pages but instead covers all the basics necessary (financial, marketing, market/ competition, risks, and infrastructure) to make potentially and outsider comfortable that this can be a viable business.
(b) Create a written "autopsy report" on the earlier failed business - identify what went well and what went wrong with it, so these lessons are learned, and trouble can be more easily spotted in the future.
* Slightly more than a single piece of advice, but hopefully helpful... -Paul
Do not fall in love with your idea, fall in love with your customer. You may not find a problem that is worth solving but you will waste far less money and time. If you truly want to find succeed at a startup , you should first go find a problem that has yet to be solved or not solved fully enough that has a large enough audience to sustain a profitable business. In many cases, you do not have to build anything to start. Review books, videos, etc. from folks like Justin Wilcox, Cindy Alvarez, Tony Ulwick among others. Please see this blog post for more names and more info - https://www.linkedin.com/pulse/7-rules-find-out-what-customers-really-need-4-min-read-bill-flynn
Single piece of advice: thoroughly examine (in the harsh light of complete honesty with oneself) why she failed the first time to avoid making the same mistake again.
For instance, did she spend a lot of time developing an app that nobody wanted to use? And is she doing market validation before coding away this time? That's a common fault among us engineers, but still a dangerous practice. Did she assume she could "build it and they will come"? That's also dangerous; initial traffic requires some PR and discovery to break out from the sea of apps people are already wading through.
I'm well acquainted with those, because they were my initial mistakes when I started my first couple of companies.
Focus on building a Great Functional team. Pick and recruit great people. Work on making sure they work together as a team. Smart functional teams always find their way to success.
Most important question: Does she understand her role in the failure of her last business. That's not to blame her for the failure, but to say, has she taken an honest examination of what happened with the prior venture and what she could or could not have done differently. That can be very useful to finding a new way forward. Confidence built on an understanding of your own shortcomings can be the best defense against making mistakes again. Was the collapse due to funding? Perhaps it was because she wanted to be operator and visionary? Did she and her partner do ALL the necessary competitive analysis before asking for money? Did they know people would want what she was selling--the answer to that is often, surprisingly, no. With that self-awareness in the bank and clear-eyed awareness of strengths and weaknesses as demonstrated in prior performance one can gain a profound advantage in running the next business to success.
Know what caused the failure the first time. A failed entrepreneur is way ahead of someone who is a first-timer if they learned from their first time.
The percentage of failing apps is huge. Do not quit your job until your MVP is validated. Then you may consider hunting for some seed money. And only after you properly monetize your app you should consider quitting your job. Try to put together a great team compensated with equity that can balance out the fact that you are invested only part-time in this endeavour. Do your marketing right and see if there are similar apps out there. There probably are. Look for the failed ones and why they failed and don't repeat their mistakes. Focus on simplicity. Complex simplicity is key in the design of a good app. Create a prelaunch campaign. If you cant define a clear customer for your app, if there are to many targeted users, you are doing it wrong. Any experience from your previous startup learn from it. All though not everything applies here. It is a different business model. Good luck.
Single thing? Don't make the same mistakes you made the first time - make all NEW ones! Entrepreneurship for many people, myself included, is an iterative process. Some folks get it right the first time but many crash and burn. Some dust themselves off and try it again. Others, like my dad, never go near it again. Thus, I applaud your friend. And I applaud your willingness to be an advisor. Not having one might have been one of those old mistakes...
1. Learn from past mistakes and ensure they don't happen again
2. Perhaps manage expenses better. Of course, the expenses will vary depending on the business. However, if it's the typical app that she can build herself, then the expenses shouldn't be too high. I would say tell her to go back and analyze the expenses incurred from the last startup, and figure out if any of those expenses were actually worth it. Most startups fail because lack of funds, so this is an extremely important skill to learn.