Ask the Expert I Have a Great Idea for a Startup. Now What Do I Do? Stories You May Like Cornell-Based Program Cultivates Stability for NY’s Farming Families Tips on ‘Body Positivity’ from an Expert in Adolescent Nutrition April Fool! ‘Daily Sun’ Parodies Poke Fun at Life on the Hill The author of a new practical guide offers tips on parlaying your brainstorm into a viable business By Beth Saulnier David Muchow, GR ’66–68, has spent decades as an attorney, entrepreneur, investor, and consultant. Now, he has channeled that experience into a hands-on guide: The 7 Secret Keys to Startup Success. It covers a host of practical dos and don’ts—from creating a business plan and courting investors to managing risk and safeguarding intellectual property. Muchow, who is based in the Washington, D.C., area, spent two years at Cornell Law School before leaving for roles in the Johnson and Nixon administrations. While he completed his JD at Georgetown, he has remained an active Big Red alum. What are the most common pitfalls for startups? There are many reasons they fail. For example, startups often don’t budget enough for expenses; don’t put things in writing, which leads to personnel and legal disputes; and fail to protect their intellectual property. What are the perils of asking friends and family to invest? It doesn’t matter how many times you tell them, “This has to be money you can afford to lose.” If you lose their money, you feel bad, and it affects those relationships. So I recommend investments from sophisticated investors. They understand that failure is often a reality. When launching a startup, why is it vital to have formal contracts? Suppose you’re the CEO and your employee says, “I’ve been working hard and I haven’t been paid yet.” You say, “Don’t worry, I’ll take care of you.” Three years later, when the company is making $10 million a year, the employee’s lawyer shows up and says, “We want 30% of the company, because that’s the value the employee added.” So with deals or making promises, put it in writing. That means hiring a lawyer. How can the average entrepreneur, who might not be able to afford big bills, get proper legal advice? Find a lawyer from a referral or the Internet who has worked in the startup space. Lawyers do deals, so say, “I’m a startup. I don’t have any money.” Some lawyers will do work pro bono, or let you pay them over time. Why hire a lawyer? One client gave me a sales document to review. Buried in it was a clause that held the entrepreneur personally financially liable for anything that happened. Getting a good lawyer and accountant costs money, but will save you more. How much market research should one do? At startup, your business idea is only a hypothesis; you don’t really know what your product is, or who your customer is. To find out, talk to 100 potential customers. If you don’t, you’re likely to create something that doesn’t work and has no market. At startup, your business idea is only a hypothesis; you don’t really know what your product is, or who your customer is. How can someone launch without a lot of resources? First, you need traction. Investors often say, “Show me that your product is smarter, better, or faster, and will sell.” You need a first deal. If you don’t have sales yet, try this: have a prospective customer sign a letter that says, “If you can do what this product claims, I will buy X number of units over Y period of time.” That might help—but of course, a paying customer would be better. Stories You May Like Cornell-Based Program Cultivates Stability for NY’s Farming Families Tips on ‘Body Positivity’ from an Expert in Adolescent Nutrition Could you explain the “valley of death”—and how to avoid it? It’s the point at which you’re working on developing your product or service—you’ve spent all your money and called all your friends and relatives—but you still don’t have a product or income. You’re spiraling down into a deep hole. You can help avoid that by having a realistic budget over three to five years. When will you need money, and how much? Set up kill dates for failing projects; run lean. If you have money, you can make mistakes and still do well. But if you don’t, your startup dies. In the book, you warn that just blogging about your idea can get you in trouble. How so? It’s hard not to tell folks about your new idea. But, with exceptions, if you give away your secret sauce by blogging, then it’s in the public domain—no longer “novel” in patent speak—and you may not be able to get a patent. Here’s the dilemma: you need to talk about your product to investors and potential customers, but you don’t want to give away your intellectual property. How do you do that? Just talk about what your product does. But don’t talk about your “secret sauce,” such as how it’s built, operates, and is designed—because if those inventions are “novel,” they can be patented. Another thing you stress is that even though startups are notoriously time-intensive, work-life balance is vital. Why? You can run a startup and still maintain healthy relationships that are not destroyed by working so hard. For instance, I try to walk in the woods for 20 minutes every day. When you have so many inputs, your brain can only deal with the most urgent things. When I come out of the woods, I’m more centered and ideas pop up that I never would have gotten behind a computer screen. A philosophical question: are some people great at coming up with ideas, but not so great at running a company? You bet. It’s a different skill set. As a CEO you need to be humble and honestly look at your strengths and weaknesses. Where are the gaps in your skill set—and whom do you want on your team? As a CEO you need to be humble and honestly look at your strengths and weaknesses. You worked your way through law school as a door-to-door salesman. What did that teach you about marketing? Use a soft sell. The homeowner comes to the door. You’re on your knees with your sales kit. You hand out three free samples, one after the other; the fourth thing is the Fuller Brush catalog. By this time, there’s this poor guy on his knees trying to make some money, and he’s given you three things in a row. The odds are more than 75% they’re going to buy something. How does that translate to the startup world? Finance your product up front, so the customer doesn’t have a capital expenditure. Say, “I’ll let you try this out for six months. I’ll still own it—but if it meets these criteria, you agree to buy X number of these at Y price.” Some entrepreneurs are excited just to get something field tested and hear people say they like it, but they never end up with a contract. You can give some samples away, but make sure you structure the deal to lock in a sale at the end. Top: Illustration by Cornell University. Published November 11, 2022 Comments Buy Proxy Server 13 Nov, 2022 A lot of of the things you mention happens to be astonishingly appropriate and it makes me ponder the reason why I had not looked at this in this light before. This piece really did turn the light on for me as far as this subject goes. 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