Zappos is a great example here. Founder Nick Swinmurn needed to validate if people wanted to buy shoes online – something that was unheard of back in 1999.
# The Crucial First Steps to Build a Successful Tech Startup



###### Paolo Dotta

Author and iconic 1950s motivational speaker Earl Nightingale famously said:

Everything begins with an idea.

I would argue that, for an entrepreneur, this is a fallacy that often leads to the wrong mindset.

Instead, I would say that for us entrepreneurs, everything begins with a problem to solve.

In entrepreneurship, that’s all ideas are – potential solutions to peoples’ problems.

Take Altar for example. My co-founders and I built over 10 startups between us before building Altar.

In that time, we faced the challenge of trying to onboard tech stakeholders with an idea on a napkin first-hand.

We also noticed that entrepreneurs around us were struggling with not just the tech decisions but also the product reasoning.

Daniel, André and I saw that the market clearly needed more than a software agency.

They needed holistic advice on product reasoning combined with high-quality software development. But they also needed guidance and help them avoid the many pitfalls founders face early on.

They needed somewhat of an extended team of co-founders, much more than a software house.

It was that shared vision that led to Altar.

First, identify a true problem a group of people have. Then find a solution that is 10x better than what’s on the market today.

So that’s one of the first crucial steps when building a tech startup: finding the right problem to solve.

Throughout this article we will cover more of these crucial first steps, starting by talking a bit about the entrepreneur. About you. And how to know if this is the right moment to jump in.

#### Contents

## The Right Entrepreneur for The Right Problem

Having worked with dozens of entrepreneurs at Altar, I’ve found the most successful execution comes from entrepreneurs with three major aspects:

- Industry Expertise
- Money to Get Started
- A Strong Network

A prime example of this is Philip Shoch and Apiax. We started working with them four years ago to build their MVP.

Fast forward to today and Apiax has raised over $8M in funding and is winning startup award after startup award in Switzerland, which you can check out here.

But it wasn’t just the business vision that made Apiax the success it is.

Philip and his founding team had industry expertise, some capital in their pocket and the right network behind them to help them execute on that vision.

While it’s not impossible to launch a successful tech startup without these three aspects, you’ll have a much stronger chance to avoid adding your project to the pile of 90%+ that fail every year.

Now let’s look at these three points in more detail:

### Industry Expertise

When you have expertise and experience in the industry you’re tackling, you don’t just understand the problem. You understand the ecosystem surrounding the problem. So you’re better equipped to deal with every problem that surfaces – oh and trust me; problems will surface.

It’s not impossible to ‘learn’ your way to a good idea, but I believe the chances of success are a lot lower.

If you have a unique insight in which you have a high degree of confidence due to your personal experiences or expertise, it’s like starting halfway down the field.

You still need to validate each part of your product, but you have far fewer potential failure points.

### Money to Get Started

Whenever I advise entrepreneurs on how to fund their early-stage tech startup, I share what startup founder and VC Paul O’Brien once told me:

No startup in the history of the world can raise money just to get going.

Unless you’re Elon Musk, unless you’re Mark Zuckerberg, no one is going to give you money just to start something.

So startup finance has to start with your:

- Savings

- Debt

- Friends and family

Period.

You need to be in a position where you can fund yourself until you gain some traction.

This is something I learned myself the hard way. When I pitched my first tech startup vision to Marvin Liao from 500 startups, he eloquently told me:

Paolo, I don’t give a shit about ideas… show me how you’re executing on it.

Only once you’ve gained some traction – and de-risked the investment – can you start to ask angel investors for an injection of capital.

If you can’t scrape together enough money to get to that point, you’re going to have a tough time launching a tech startup.

Not to mention that you’ll be in a much stronger position to negotiate and won’t have to forfeit half the company’s equity – a decision you would regret later on.

### A Strong Network

Connections.

At 45, you’ve been in your industry longer. You’ve had more time to build and strengthen connections.

This is going to make it a lot easier to find advisors, investors, talent, co-founders, you get the idea.

Again, it’s not impossible to build a tech startup without these meaningful relationships. However, if you take the time to develop your network, you’ll have a major asset behind you not just for this project, but for many more projects to come.

When you look at just the Zuckerbergs and Gates of the world, you’re really cherry-picking the examples that the media likes to show.

Expert Tip

Start developing relationships with people who’re relevant to your tech startup as soon as possible. You’ll not only find talent, but you’ll also find customers, advisors – and maybe even investors.

Yaron Samid , Serial Entrepreneur & Startup Founder

Daniel, CEO of Altar, Product and Software development company specialising in building MVPs, full custom software development projects & creating UX/UI that is both functional and beautiful

##### Do you have a brilliant startup idea that you want to bring to life?

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## You Have The Competencies, Money & Connections. Now to Get Things Off the Ground

### Start Sharing Your Idea With Anyone That Will Listen

You can tell anybody your business idea. You can sit on it for ages and let it marinate because no one will steal it.

A hundred people might have the same idea as you.

But most likely you’re the only person willing to put the work into it to make it succeed.

Because the work is the hard bit.

Your idea is only as valuable as the execution. And that execution won’t be better if you try and figure everything out yourself trust me. I’ve been there and it’s another lesson I’ve learned the hard way.

Execution takes more than hard work – especially in a tech startup. Critically, it takes diverse expertise and opinions.

And you can’t get that alone.

Specifically, the moment where  he revealed the most valuable resource he had when building his fintech, Moneymour:

People. Or rather, the ability to ask for peoples’ help.

And I genuinely believe that this simple, yet a fundamental piece of advice is crucial to the success of any business.

It’s the right people in your team that will help you overcome any hurdles you face – regardless of if your product or business vision needs to change or pivot.

The right advisors will be able to help you avoid common mistakes and give you valuable industry expertise.

It’s the right investors who won’t just inject capital but will also serve as advisors and mentors.

It’s the early adopters that will believe in you, and your vision, much more than the product at that stage, and help you shape a better version. Then they’ll share it with their friends and colleagues.

This mindset was also part of the reason Giacomo managed to sell his tech startup to Klarna before he even launched.

As I’ve heard my CMO, Rui, say more than once to our clients:

No matter what stage you're in, talk to people. Clients, potential clients, advisors, investors, mentors – build as many bridges as you can.

Or, as Giacomo puts it:

Embrace that ability to ask for help, it’s one of the most valuable resources you have. You’ll be surprised how many people will be happy to help.

You may even find your co-founder this way. A great example of this comes from Wade, who I mentioned earlier.

He found the co-founder for his latest tech startup, Degree Insurance, through sharing his idea with mutual friends on a listserv:

We got together and we hit it off. He joined the team as outside counsel. Then inside counsel, then general counsel, then as COO and now as co-founder.

It’s been an incredible dynamic. If you had handed me Aladdin’s lamp and said make a wish for your perfect co-founder I couldn’t have guessed that he existed.

Which leads perfectly to the next point, finding your co-founders.

### Finding the Perfect Co-Founder

As I’ve already mentioned, sharing your idea with the right people can help you find a co-founder.

That being said, it’s important to properly vet any potential co-founders.

You have to think of it as a business marriage. They will be with you in sickness and in health, therefore it’s important to choose the right person or it could end in a messy divorce.

Look for a co-founder that has the confidence to know their strengths and the humility to know their weaknesses.

Egocentricity can kill a startup, especially if it poisons the founding team. In my experience there are eight key traits that all great co-founders embody:

- Technical Hard Skills
- Leadership Skills
- Passion & Commitment
- Zero Fear of Failure
- Fast Learner
- Lateral Thinker
- Alignment & Communication
- Obsessed with Perfection

And while finding someone with all these traits won’t spell success, it will decrease your chances of failure.

And when it comes to building a tech startup, it’s all about staying lean and shortening your time to market.

To learn more...

Once you’ve shared your idea, and started to surround yourself with the right people, you need to start thinking about how you’re going to build it.

### Figure Out How to Start Lean

Getting off the ground means figuring out how to validate your proposed solution.

In other words, how do you make sure you’re building something that people actually want?

This starts with diving deep into the solution you’ve got in your mind and making sure you’ve got a precise idea of the market you’re approaching.

At Altar, we have a structured process to do this. It’s the process we use with every tech startup we work with (including the award-winning fintech, Apiax who I talked about earlier).

This process starts with nailing your unique value proposition:

#### Step One: Nail Your Value Proposition

The first step in nailing your value proposition is to carry out the following exercise.

Go through the following questions, answering each of them as clearly and simply as possible:

1. What is the Problem/Pain we’re trying to solve with our product?
2. Who is our main target? Define all stakeholders involved in your product.
3. How do our stakeholders deal with this problem today? Carry out a competitor benchmark.
4. Why is our solution better than the current market solutions?
5. What are the main reasons for people to switch to our solution/What are the potential reasons for people not to make the switch?

From these questions, you should be able to easily create a clear, product-centric elevator pitch:

We’ve created [name of product] for [our stakeholders] who [state the problem/pain they’re facing] . This product will solve the problem by [state your product’s key benefit] . Unlike[the current market alternatives/competitors] our product will [explain how your product differentiates you from your existing competition] .

If this exercise has resulted in a clear elevator pitch, it’s time for step two – deconstructing the assumptions within said elevator pitch.

If your elevator pitch isn’t crystal clear, go through the exercise and try again!

Expert Tip

Focus on getting your MVP’s value proposition incredibly clear. If your grandma doesn’t understand it’s probably not clear.

#### Step Two: Deconstruct Your Elevator Pitch to Discover the Main Assumptions to Validate

These are the assumptions you need to validate with the people who experience the problem you’re tackling.

Let’s use Airbnb as an example.

Founders Brian and Joe knew that hotels were really expensive. They also knew that hotels, most of the time, leave customers disconnected from a city’s true culture and vibes.

What they didn’t know, however, was whether or not people were happy to invite strangers into their home. They merely assumed people would.

So, looking closely at your elevator pitch determines what the assumptions are that require validation.

Then, you’re ready for the final step.

#### Step Three: Decide How you Intend to Validate Your Solution

Sometimes it takes a full product or MVP to validate your solution in the market.

Other times, you may get some traction with a non-functional MVP – saving you both time and money.

Zappos is a great example here. Founder Nick Swinmurn needed to validate if people wanted to buy shoes online – something that was unheard of back in 1999.

He could’ve spent a lot of time and money building a fully-fledged eCommerce platform, hired a warehouse and hired a shipping crew.

But that money would’ve been wasted if he discovered people preferred to go to the mall and try the shoes on before committing to buying them.

So he didn’t do that. Instead, he built a simple website where people could see what was available and place an order.

When he received an order, he would go to his nearest mall, buy the shoes and post them to the customer.

While this wasn’t a sustainable business model, it was a quick and inexpensive way to prove his assumption: People will buy shoes online.

In fact, it proved the assumption so well that Zappos reached unicorn status and was eventually acquired by Amazon to the tune of $1.2B.

Drew simply uploaded a video explaining the value proposition and spent a few bucks on marketing.

Overnight 70,000 people signed up to his mailing list wanting to try the product.

The video had validated that Drew’s solution was something people were ready to try. He had validated customer intent.

As iconic as the example of Dropbox is, it’s a stark reminder that true validation isn’t just about customer intent, it’s about customer action.

Remember that validation is a two-step process.

With a landing page and a form, you’ll probably be able to validate customer intent:

“WOULD my audience buy this?”

If they leave their email because they’re interested, meaning they might have the intent to buy.

However, it’s impossible to validate customer action.

You can only validate customer action if people buy and use your product:

“IS my audience buying this?”

This is the real, concrete, validation piece that (sooner or later) you’ll have to achieve.

Expert Tip

Don’t infer that there will be a demand for the product you’re going to build. You have to quantify customer action – not the intent. The burning question is will users like your product enough to take action at a cost that will enable you to run a sustainable business?

Yaron Samid , Serial Entrepreneur & Startup Founder

At this stage, if you’re going to fail, you should be aiming to fail fast.

Failed customer validation is actually a success. Because you understand early enough that you should concentrate somewhere else. No further money and time will be wasted.

However, staying positive as all entrepreneurs have to, let’s look at what happens when you find that all-important customer validation.

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## You’re Moving Down The Runway. Now to Deal With The Tech Side of Your Business

Launching a tech startup isn’t a one-person show. You’ve got to have collaborators or co-founders.

You may have already found a technical co-founder when you began sharing your idea. If so, feel free to skip this section by clicking here.

However, if you’re yet to find a technical stakeholder you have four options ahead of you (one awful, three good).

#### Option 1: Learn to Code

Spoiler alert, this is the awful option. Simply put, if you focus on learning to code you’re not going to be focused on your business vision, go-to-market strategy, fundraising, etc.

You’ll end up increasing your time to market which is going to cost you money. Moreover, you’re not going to be as good as a developer who has decades of experience in their chosen field.

I can’t recommend this option.

#### Option 2: Hire Freelance Developers

This option can work for those of you who have some tech knowledge under your belt.

Managing a tech team requires you to understand the basics of tech. But even if you do, beware of this option if you have little or no experience managing a tech team.

Not only can it bring several headaches (trust me on this one) the risk here is that it pulls your focus from other aspects of your tech startup that I’ve already mentioned.

#### Option 3: Partner with a Software Development Company

In terms of management, this is by far your easiest option.

However, working with an agency comes with its own set of risks. You have to be extremely careful when choosing an agency to ensure you avoid bad code quality, communication issues, lock-in clauses and more.

If you’re considering partnering with a software development company, I recommend reading this article – it will give you a structured process to reduce the inherent risks associated with outsourcing.

#### Option 4: Onboard a CTO/Technical Co-Founder

This is by far the most idyllic option – if you can find the right person for the job!

If you already know someone who you would make a “soulmate CTO” then go onboard them and never let them go. By this, I mean someone you trust (and like) both personally and professionally –  á la Jobs-Woz.

If you don’t have this person, it’s going to be nigh on impossible to find them with an idea on a napkin. Great engineers already have well-paying jobs. Or they’re already cofounders of their own tech startup.

For more information...

A quick note before we move to the next step: If you do consider working with external help, it may be good to reason on whether you should outsource your software development or not. I wrote a detailed article with the pros and cons here.

## You’re Gaining Speed. It’s Time for An Injection of Capital

And here are some more tips on how to navigate the entrepreneur-investor relationship:

### 1. Forget About NDAs

If you go down the road of asking investors for NDAs you’ll just get turned down.

It’s extremely unlikely that an investor is going to steal your idea – and he’s probably already heard 1,000 like it.

Moreover, if you can’t patent your idea, then the value isn’t in the IP. It’s in your go-to-market, expertise, competitive landscape etc.

I always turn to a piece of advice angel investor and serial entrepreneur Armando Biondi gave me on this subject:

For me, if you ask for an NDA the conversation is over. There is a level of trust where you need to be willing to give to people playing this game, as a founder.

Also, as an investor, I look at around five pitches a day. So it’s very likely that something you’re pitching to me has already come across my desk in one form or another, and is bound to again.

If I sign an NDA I’m prevented from investing in a similar company purely because you asked? I’m sorry it makes no sense.

### 2. Start Talking with Investors From Day Zero

What I mean by this is, start talking to investors before you need money.

As I already mentioned, no one will give you money just to get going – unless your last name is Musk.

However, you should be building relationships with investors, and sharing your idea with them, as soon as possible! Take Yaron Samid’s advice here again as an example:

My main advice to first-time founders is to create a network with investors early. Reach out and build relationships with investors before you ask them for money.

Tell them what you are thinking of building. Ask them if, based on your KPI goals, they would be interested in investing in the future. Find out what KPIs they would like to see based on your vision.

And they will tell you. They’ve seen hundreds of companies and thousands of pitches. They can see the signs of a company that is going to have compelling growth.

Collect this information from a few investors. Then go out and execute those KPIs by scraping together some friends and family money.

If you succeed you can go back to the investor with facts and figures rather than just a story. Then you can start talking about a proper early-stage venture round.

Firstly, that puts them in a position where they have to take you seriously.

They’re going to look bad not investing in your startup if you did what they said they needed to give you some capital.

Second, it makes you look exactly like the kind of founder they want to back. It makes you look credible and your business predictable. They don’t know you; their biggest fear is you’re just somebody who’s selling them smoke & mirrors.

So, when you tell them you are going to do “A, B, C” they may doubt you.

But, six months later when you have proof you did “A, B, C” you tick a box in their brain.

You show them you’re a responsible, credible entrepreneur they can trust who has a good grasp on the growth levers of your business.

### 3. Find a Great Startup Lawyer & Do The Paperwork

As you start officially involving third parties in your tech startup, it’s important to have the legal side in order.

And while it’s not the most exciting part of building a tech startup, it is a vital one.

Find a great lawyer that knows about startups and the fundraising journey. This is super-important. I can’t tell how many startups went wrong because of poorly executed legal matters (including one of mine in the past!!).

### 4. Watch Out For Angel Investors

There are no two ways about it. Nowadays investing in startups is cool. Anyone with a half-decent bank account has started pouring money into random startups.

Which, for the startup ecosystem, looks great right? More money = faster growth.

Well, the reality is, it’s not great. Because half of these “investors” know absolutely nothing about the industry they’re investing in.

Which for you, the founder, sucks.

When you raise money, you’re looking for more than a check. You’re looking for “smart money”.

You want an investor who has experience in the market you’re attempting to disrupt.

And if they’ve already built a company in that market, then it’s a huge bonus. They won’t just know the industry, they’ll understand the journey you’re about to take and will have faced many of the hurdles themselves at least once.

However, you’ll be able to raise money more successfully when you show investors that you’re going to go big (you “want” money).

As opposed to making investors feel that, without their injection of capital, you’ll die in six months or less (you “need” money).

When you’ve secured some funding, it’s time to start thinking about using that capital to extend your team.

## You’re Nearly Off the Ground. It’s Time to Start Hiring

It’s important to keep in mind that your early employees will help you set the culture for the entire company moving forward. Therefore it’s vital you hire for both technical hard skills and soft skills that align with your cultural vision.

One lesson that I’ve learned (the hard way) in my entrepreneurial years, is that you’ll make lots of mistakes. And when it comes to HR, those mistakes are usually more costly than others.

You’ll read that understanding people is more an art than a science, and it’s heavily experience-based.

In my opinion, this is true to a point.

Like with any activity, the more you recruit, the better you’ll become at it. The process to hire your 20th employee will be vastly different from the process you use to hire the first one.

The problem is it’s the first 20 hires that are the most important.

I believe hiring is less about art and more about processes.

Something that solidified this belief was when I read  Who: The A Method for Hiring” by Geoff Smart.

It’s a simple process that everyone (yes, everyone, even the greenest first-time founder) can and should follow.

It teaches you how to handle an interview and where to focus your efforts. It’s helped me to avoid common hiring mistakes.

I was lucky enough to sit down with Geoff and discuss his hiring methods in more detail. In the conversation, we covered how to apply his methods to a tech startup – and Geoff shared his advice for entrepreneurs on all the aspects of the startup journey.

## Wrapping Up

The steps you take in the first six months of your tech startup are arguably the most vital.

From the problem you choose, to who you onboard to help you build the product that solves it.

And while there is no secret recipe, this guide will help you avoid many of the common pitfalls that come with launching a tech startup.

Thanks for reading.

###### Categories:







##### Paolo Dotta

Co-Founder

Paolo started working in banking in Milan and London. After the financial career, he created a startup and then joined Altar where he mainly deals with business development and fintech projects.



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