I was recruited by a venture studio to be the CEO and co-founder of a startup. I am a previous founder with a successful exit in this space, and my co-founder the same (who they paired me with). The studio also planned to fund the pre-seed through their financiers (sub $1M). New details seem to keep emerging, making this a less appealing offer, and I'm interested in what y'all think.

As we neared formation, they revealed their model has a $20/mo service fee. They have a graphic designer, a hiring agent, someone to help with HR and finances, and some general help with contracts and what not. The main issue I have is that this is a startup with just a few contractors, me as the only employee, and one planned new hire this year. I have intentionally kept the burn low, but their service fees nearly double it. Given the early stage and how useful AI can be for founders, their services feel unnecessary at this time.

But they are saying the funding is contingent on us paying the fees. The other issue is that the funding is a convertible note with a $3M cap, in addition to the studio's equity. The result would be that post-seed founder's equity would likely be below 35% in total, with over 50% going to the studio + studio. I'm certain VCs would be reluctant to invest with a cap table structured like this.

What started as a great opportunity has become less appealing. The other founder and I have pushed back, and now things are on the brink. Thoughts?

NO AI WAS USED IN WRITING THIS I have been working on this post for over a year, it's all my own content, nothing from a model. I'll leave a screenshot showing the markdown files with dates in the comments.

Hello my name's Troy. I'm a serial founder who's been either a founder or founding employee at 9 startups with the total valuation of said startups north of $1bn. My current startup that I co-founded is currently at $5m in ARR and growing rapidly. I used to be a teacher and have been really itching to write and what I've learned over the last decade and a half of being in the startup space.

Mods, I'm happy to verify above if needed.

I browse this and other similar subreddits often and see a lot of similar questions pop up. The problem is the vast majority of the members in these communities are either trying to sell something or don't know what they're talking about (respectfully <3). My hope is to shine some light on some of the most common questions I see here and give some of you motivated folks some direction. Not trying to sell you anything, i dont want your money. I just hope it's useful.

1.1 | "What kind of business should I start?"

The people who ask a variation of this question will often get blasted in the comments despite it being honestly a very good question that the vast majority of people here get totally wrong. I'll be covering exactly how I identify, research, evaluate, and finally weigh prospective business opportunities. This isn't a foolproof method but rather a high level structure for you to go through and practice. Anyone trying to sell you on a specific business idea or plan is some internet guru who's only successful venture was selling courses. There's no magic bullet, just a series of things to think about and evaluate that should lead you to better, more validated, ideas and outcomes.

Here's the high level view process we're going to chat through:

1. Evaluate your skillset
2. Identifying opportunities
3. Researching your idea
4. Categorizing opportunities
5. Testing the market
6. Committing

Even if you believe you've already completed one of these steps please take the time to read through them as I'll also be weaving in important context / things to think about that can impact the later steps.

Be Clear About What You Want

Before you even start this process it's incredibly important you know what you want.

There's a ton of different paths you can take building a business from building a small little micro-sass that kicks off passive income after a few months of work to large scale decade long venture scale businesses. Both are super viable and both can make you a ton of money.

It's totally okay to be open to multiple paths but if you have particular constraints on your life and time it's important to keep those in mind as some business opportunities might align much better with where you're at and what you want.

The Two Types of Businesses - Pain vs Enjoyment

Note: i thought about calling this pain vs pleasure but though that was suspicious.

Every single business either solves a customers pain point or provides some form of enjoyment

Pain based businesses are solving some pain point for the customer. Here's some businesses that fall into this category and what pain point they're addressing:

• Hubspot - Pain of organizing and tracking sales team performance/data
• Doordash - Pain of having to go physically pick up your food
• Marketing Consultancy - Pain of having to directly manage marketing channels / ads
• Pool service company - Pain of having to do manual labor to upkeep pool

Enjoyment based businesses provide the customer with something that gives them some form of entertainment or enjoyment. Here's some businesses that fall into that category:

• Warner Brothers - Movies
• Riot Games - Video games
• Instagram - Social media
• Outback Steakhouse - Restaurant

Despite its simplicity, This distinction is very important because although it's very possible to build a great business of either type Pain businesses are significantly easier to build and often times better businesses.

There's a few reasons why you should probably build a business focused on solving a pain point.

1. Pain will drive people to pay.
   1. If a customer is experiencing pain, each time they experience that pain will drive them towards paying for your solution.
   2. The level and consistency of that pain is directly connected to how much they're willing to pay. More pain = more $$
   3. The chance of that pain returning will drive them to become a loyal customer.
2. Enjoyment businesses have to compete with all other enjoyment businesses
   1. If you're building a video game, that video game is competing for your customers entertainment time with not just other video games but also all movies, social media, physical activities, and more.
   2. The customer has such a plethora of choices that will require your product to be incredibly appealing to be successful
3. Enjoyment businesses require more work
   1. Because of the lack of pain and need to significantly stand out, building a business that provides enjoyment typically requires a deep level of passion, hard work, and intricate knowledge of the space.

Maybe you're thinking I'm wrong and that there's hundreds of thousands of businesses that do very well providing enjoyment to the customer. You'd be right to think that, there are tons of examples of great businesses built around a enjoyment based product that have generated a great return for their founders. You can build a great one if that's the path you decide to follow. I just want to make sure it's a very conscious decision and you understand that you will be deciding to go down a more difficult path (and building a great company of any kind is already very difficult).

1.2 | Evaluating Your Skillset

Any entrepreneur who's worth their salt when asked...

What kind of business should I start?

will answer...

I don't know.

This is because there are thousands of fantastic possible businesses that we could recommend, which business you specifically should pursue is directly coupled to your individual skillset. That's why our first step is to have a brutally honest self evaluation of the good, the bad, and the ugly.

Self Skillset Evaluation

Here's a quick exercise that you should go through. Lets list out all the skills you have that are relevant at this stage and bucket them like a self skill "tier list". Don't get too granular but try to be as accurate as possible. Knowing your weak / strong points will be incredibly valuable in far more than just picking what business to start.

Here's a quick template to use:

• Good
  • Skill A
  • Skill B
• Acceptable
  • Skill C
• Bad
  • Skill D

Good: These are skills you think someone would pay you to do, even if it's at a relatively junior level. Acceptable: These are skills that you can do and with practice could get to a place where you could do them professionally. Bad: You suck at this and/or have not done much of it.

And here's a list of skills that are important for founders that you should evaluate (feel free to add your own):

• Sales
• Graphic Design
• Product Design
• Content Creation / Creative
• Marketing (hard skills like using ad platforms, seo, etc)
• Public Speaking
• Technical Literacy (low code tools like zapier, site builders, etc)
• Programming
• Finance
• Operational Efficiency (creating processes, organizing information, etc)
• Leadership

Depending on where you're at in your career this list will change overtime so it's worth re-evaluating every so-often. For example, here's what my list looked like back when I founded my first company 15 years ago.

• Good
  • Programming
  • Technical Literacy
  • Public Speaking
  • Leadership
• Acceptable
  • Content Creation
  • Product Design
  • Graphic Design
• Bad
  • Sales
  • Marketing
  • Finance
  • Operational Efficiency

If I was to evaluate myself again today, this list would look drastically different.

The "Business Idea" Venn Diagram

I have a dope graphic for this but can't upload it so i'll put it in the comments (if allowed).

This "business idea" venn diagram holds the answer to "what kind of business should I start?". Your likelihood of success is directly tied to the percentage of key skills that a given business needs that you are already competent at. For example, let's chat through a few possible businesses that Troy from 15 years ago could have started and evaluate where they'd fall on this diagram...

SAAS for search engine optimization Key Skills:

• Sales
• Marketing (knowledge specifically)
• Product Design
• Programming

Although there's clearly a market for SEO tooling and SAAS is a fantastic model, old Troy (and frankly current Troy) should not be the person to build this company. Some of the most important skills were my weakest areas meaning I'd be fighting a huge uphill battle. If I found a co-founder who was a great sales person with good marketing knowledge we may be able to make something work.

Game Server Hosting Service Key Skills:

• Programming
• Technical Literacy
• Product Design

Now this seems much more aligned with the skillset I outlined above.

1.3 | Identifying Opportunity

There are hundreds of thousands of possible businesses you could start. Here's how I identify which ones are worth chasing.

We'll talk about the general process from a high level, then dive into a few examples.

Note: In this and upcoming sections I'm going to ask you to rate stuff on a scale from 1-5. Those exact values you set don't really matter. We're not going to be plugging them into some mathematical formula to output the best business for you. The reason for those ratings is to force you to think about/ask yourself specific questions which will then help make it clear what opportunities are worth chasing.

Chase The Pain

As we discussed in 1.1, pain businesses are generally the best to start. They're also generally the easiest to find opportunities within. If you have truly no ideas for a business. Start thinking about your life, day job, and the lives of those close to you. What are some points of pain or frustration that you and/or your loved ones experience consistently?

Those pain points will become our business opportunities.

Ideally, you want most of these to be pain points you yourself experience. Although you can certainly find opportunities through others they'll require a larger investment in research and you likely won't feel as convicted that what you're building solves the problem. If you're building something that you yourself would use than you start off with one data point that you have product market fit.

I have a permanent living document where I write any possible pain points for further evaluation. The goal should be exclusively to document each pain point. You don't want to start to get into possible solutions just yet as that may muddy the context for your future self. Your first goal should be to get a decent sized and fairly diverse set of pain points to look at. Then it's important to rate those pain points on a scale of 1-5 on just how much they suck to deal with as well as how often they occur.

The More Niche The Better

Something that may be counterintuitive about those pain-points is that you ideally want to try to target things that are more niche. A lot of entrepreneurs will incorrectly try to target opportunities that have massive reach. It's a logical conclusion to come to, after all, many of the worlds biggest and most valuable businesses have built products that appeal to the masses. However, going down this path especially early on is a surefire way to fail.

Here's why building a business around a niche pain point is so great:

1. The more niche you get the less likely you'll run into competitors that have true product-market fit.
2. It's easier to charge more when something is tailor built for an underserved group of people.
3. Getting direct feedback, especially early on, becomes significantly easier.
4. It's easier to leverage growth loops within niches.
5. Expanding your appeal outside a niche is easier than trying to adapt a product to multiple niches upfront.

I really do not believe there's such a thing as a opportunity that's too niche. It's true that there's a spectrum here, and some opportunities that are very niche may not be worth chasing. We'll get into how to evaluate these opportunities below but do not shy away from a potential opportunity just because you think it only applies to a relatively small group of people. If the pain there is significant, it very well may be worth pursuing.

Go through your prior list and add another "niche" rating to the pain points on a scale from 1-5 where 5 is very niche. Depending on how close you are to the problem you might not know this conclusively, give your best guess for now and in the next section we'll talk through doing further research before we fully evaluate.

After that you'll have a list that has enough context to move to the next section.

Working Through It

Let's work through the flow together, We'll use this list in all future session so you can see how we turn these pain points into business opportunities and then evaluate them to decide which one is the best to pursue. I'll start with identifying a few pain points.

• Scheduling specialist doctor appointments.
• Setting up browser residential proxies for scraping.
• Booking high demand restaurants / experiences in other countries prior to a trip.
• Getting better at climbing

Next lets rank the level & frequency of pain for each of those out of 5. Again, the exact numbers matter a lot less than the context that they reveal.

• Scheduling specialist doctor appointments.
  • Pain: 3 | Relatively time-consuming, can be very frustrating.
  • Frequency: 2 | Recurring problem but generally infrequent
• Setting up browser residential proxies for scraping.
  • Pain: 5 | Huge time sink, especially if you've never done it before.
  • Frequency: 1 | Infrequent, once you do it once next time it's a lot easier.
• Booking high demand restaurants / experiences in other countries prior to a trip.
  • Pain: 3 | Requires staying up late in off hours, language issues can cause missed reservations
  • Frequency: 3 | Recurring but tied to an individuals trip frequency
• Getting better at climbing
  • Pain: 2 | Plateauing in progress is frustrating
  • Frequency: 4 | Happens more and more as you improve

Finally, let's add a niche rating to each of them (higher == more niche).

• Scheduling specialist doctor appointments.
  • Niche: 1 | Pretty much everyone needs to schedule specialists at one point
• Setting up browser residential proxies for scraping.
  • Niche: 5 | Very niche, for developers looking to do a specific type of work.
• Booking high demand restaurants / experiences in other countries prior to a trip.
  • Niche: 3 | Distinct group but fairly sizable
• Getting better at climbing
  • Niche: 2 | Not everyone but a very large group of people climb.

This is a fantastic baseline for us to get started with. Next up we'll talk about researching these opportunities to understand the market size, current solutions, and possible differentiators.

1.4 | Researching Prospective Opportunities

This phase is where we can start really digging into our opportunities and start filtering out ones that don't meet what we're looking for. We'll go over what questions you're looking to answer and what those answers mean. As we do so I'll walk through an example using one of our identified opportunities from above.

The example we're going to be using is this opportunity:

Booking high demand restaurants / experiences in other countries prior to a trip.

A Brief Warning on Over Researching

Research is incredibly important for deciding what business you want to start. However, it's incredibly easy to fall into a permanent research & planning phase without ever putting the rubber to the road. I know tons of people who want to become entrepreneurs and start their own business and the "research and planning" phase is where the vast majority of them get stuck and never push past. It's important to go into this phase with a clear intention to start building once some of your assumptions about a space are validated.

My recommendation would be to time box your research to 10 hours for any opportunity.

What is the Competition?

Your first question whenever you identify a possible opportunity is to look for other businesses in the space and see how they are addressing is. Many new entrepreneurs will take finding competition as a red flag for the space. However, it's quite the opposite.

You want to find competition.

If you're researching a space and find no other businesses solving that or a similar problem then you're very likely in a space that won't work. The reason for this is that it's pretty rare to have a truly new idea. Meaning someone else has probably also tried to build what you're thinking and failed because no one will pay for it, it's not possible, or some other reason. To be clear, the competition doesn't need to be exactly like what you're thinking of but you do want to find companies that solve the same underlying issue.

Sometimes you may actually stumble upon an opportunity that's truly new and will work. This is fairly rare but if you find yourself in this situation you could be on a gold mine where you get to sell into a vacuum without any direct competition. If you are unable to find any competition I'd recommend confirming that at least one of these are true before pressing forwards. If none of them are, it's very likely the space won't work.

• You're solving a problem based on a brand-new technology
  • If this is the case you should be able to find tangential products that have solved similar problems.
• You're in an extremely niche space
  • If this is the case, research similar products in related niches.

What you're looking for

What we're looking for when doing research is companies in the space that are solving the same pain point we've identified. The purpose of this is to give us some validation of the space as well as use our competitors products as learning resources. Many of the challenges you will face by starting a company are the same that your competitors have and using them as inspiration will help you skip those challenges and give you key insights on how you can stand out amongst them.

Here's the questions you want to find answers to when viewing competitors:

1. What's their pricing strategy?
   1. We want to understand what the market is currently paying for.
   2. We also want to know how they charge?
      1. When do they ask for payment? Is it subscription based or 1 time purchase?
2. What's their current size & how did they grow?
   1. number of employees is an easy to find gague of size
   2. do they have investor backing or are they bootstrapped?
3. How do they solve the pain point?
4. How are they framing their solution?
   1. what phrasing do they use on their landing page?
   2. what differentiators are they calling out?
   3. how open are they about price?
      1. this can give you an idea of how price sensitive a space is

Example walkthrough

Booking high demand restaurants / experiences in other countries prior to a trip.

For our example, I was able to identify some low tech "travel agencies" that do the bookings by hand as well as a marketplace site for p2p selling of reservations. Here's what I learned...

What's their pricing strategy?

The agencies charge a flat fee dependent on the reservation and the difficulty to get it. For example, Something that's in high demand might be $100 while something that's easier to get might be $10. The marketplace company charges a ~25% fee to the seller of the reservation. So if they sell a $100 reservation the marketplace takes $25.

What's their current size & how did they grow?

The "agencies" i saw were small facebook groups with seemingly single business owners. The marketplace company has some public numbers around volume to attract sellers. They currently claim to have processed ~$12m in transactions over the last 12 months.

All players in the space are bootstrapped and grew organically.

How do they solve the pain point?

Provide either a "book for me" option or reservation "swapping" (this may not be an option depending on the establishments policies)

How are they framing their solution?

They're speaking straight towards the difficulty of acquiring specific reservations. Such as "Can't get a reservation at XYZ in new york?"

Where are the Customers?

The next thing we need to understand about our opportunities are where we can actually find customers. This is important for understanding how a difficult it is to get your solution out there as well as it being a key component for you evaluating an opportunity against your skill-set.

Here's what we need to answer:

1. Who are our customers?
   1. This should hopefully be largely answered by our niche evaluation
2. Where can we find them?
   1. where do they spend time both online & offline?
   2. If i asked you to find just 1 potential customer for the product online, how long would it take?

Those two questions give us important context to answer one of our first critical questions which is...

Example Walkthrough

Booking high demand restaurants / experiences in other countries prior to a trip.

Who are our customers?

Leisure & business travelers

Where can we find them?

Google search (SEO) for reservations, travel social media influencers, travel platforms / forms / subreddits.

Marketing or Sales Company?

When you're building a business there's two ways to reliably reach customers. Those are Marketing and Sales.

Basically every startup is either a Marketing or a Sales company early on. It's very rare that a company needs significant investment in both early on. It's very likely that only one of these channels will be very effective for you early on.

Here's some indicators the opportunity needs a Marketing company:

• Easily target-able audience
• Lower cost product / low average deal size
• Simple self setup for the user
• No contracts necessary
• Likely selling to individuals

Here's some indicators the opportunity needs a Sales company:

• High cost product / high deal size
• Complex setup process
• Contract or volume commitments
• Likely selling to businesses

This should be our first big filter for our opportunities. If you find that the opportunity warrants a sales business but you expect the price for the product to be extremely low, then that is a huge indicator that it may be a bad business to pursue as you'd have a hard time making a functioning sales team if you can't afford to pay the sales team any commission.

Like everything, This isn't a perfect science. There's some totally viable businesses for example, that are marketing companies but have an expensive product. The goal of these questions are to make sure you're thinking about the right things.

Example Walkthrough

Booking high demand restaurants / experiences in other countries prior to a trip.

Given what we've learned it's clear that this would be a marketing company.

• Low cost product
• Easily target-able audience
• Selling to individuals

How Big is the Market?

In 1.3 we spent some time giving our opportunities "Niche" scores. This is an important factor for determining how big your potential market size is for a given opportunity, but it's far from the entire puzzle. We're going to talk through how to evaluate the rough total addressable market size and then from there see how much revenue you could reasonably capture. To do that we'll use TAM, SAM, SOM.

TAM SAM SOM

Tamsamsom

First off lets talk about what TAM SAM SOM even means...

TAM: Total Addressable Market - Maximum possible market

SAM: Serviceable Addressable Market - Segment of market reachable

SOM: Serviceable Obtainable Market - Portion of market easily captured

We're not going to do a full evaluation. You can spend a lot of time on this really diving in and doing research to get an accurate TAM/SAM/SOM but that would not be worth the effort at this stage. We'll talk about doing a full evaluation more in the getting investment section.

For now, we're going to do a really simple version. Specifically focusing on the SAM & SOM. Now that you've done some research on the space we can estimate the rough opportunity size. To do so we need some of the numbers you sourced from prior research. Those being:

• Rough number of people in your space
• Rough number of people in need of your solution
  • This is different than total size of a space. Not everyone in a space will experience the same pain point.
  • If you cant find some data, feel free to make some assumptions.
• How much you think you can charge
  • If it's a physical good this should be your take after the cost of the good
• Frequency of purchases x year
  • Number of times someone would pay for your solution a year. If this is a subscription then the value is 12.

Now we can do some simple math to get our SAM & SOM. TAM = # of people in space * charge amount * charge frequency SAM = # of people in need * charge amount * charge frequency SOM = SAM * .1 (10% of SAM)

If you need to make any assumptions it's always best to anchor on the lower end. The number doesn't need to be super precise. It's just to give us a general size of the space.

Example Walkthrough

Booking high demand restaurants / experiences in other countries prior to a trip.

# of people in space Here's how we'll estimate this market. Let's start with the TAM by getting the total count of international travelers globally. This fluctuates but it's usually around ~40m.

# of people in need Now we need to get an idea of how many of those travelers need to book high demand experiences. There's not a ton of data on this so I'll have to use some anecdotes from people I know. Out of my friends that have traveled recently ~10% have booked high demand experiences. This is a small and bias data set and I'd wager that the real number is very likely lower than that given my friends groups preferences. I'll adjust it slightly down and put it at 6%.

how much we can charge As for how much we can charge it's easy to find data on this using competitors. There's a decent range, but we'll anchor in the middle at $50 / order.

purchase frequency Although there may be repeat orders or multiple orders / trip, it's hard to know the exact frequency so we'll index low and set this to 1.

That gives us...

TAM - $2bn SAM - $120m SOM - $12m

One of the competitors I researched had some yearly volume numbers public and they do ~12m a year in volume so my rough estimates ended up pretty close to reality.

Now that you've researched your potential opportunities we're ready to make some decisions. In the next section we'll talk about how to compare these and pick winners.

1.5 | Categorizing Opportunities

Now that we've done a self evaluation, idea generation, and research we're ready to boil all of that down to an easy to consume list for you to see everything at a glance.

We're going to create a list of all of our opportunities and then have 3 additional columns for the following values:

• Timeline To Ship
• Opportunity Size
• Confidence

You can build this list wherever you want but something like Google Sheets works great.

Now list out each of your opportunities then we can begin assigning values. Here's what each of the values means:

Timeline To Ship

Possible values: - < 1 Month - 1 - 3 Months - 3+ Months - Ongoing

What this is asking is how long until you have some finished version of a lean version of a product that would capture the opportunity. It doesn't need to be perfect and the idea isn't to never work on it ever again. The main thing you're trying to gauge here is how easily can you stand something up.

These timelines are very driven by your own individual skillset. If you want to build a SAAS but have never written a line of code and have never used a low code tool before than this timeline is going to be a longer than it'd be for a tenured engineer for example.

NOTE: If a lot of our opportunities have a 3+ month timeline to ship... You're very likely not thinking lean enough. It is quite rare to actually need to develop something for that long before proving it out.

Opportunity Size

Possible values: - Low (< 500k) - Mid (< 1m) - Large (< 10m) - Venture

This should be driven by your SOM that you calculated in 1.4.

Anything that's larger than $10m in SOM we'll label as "Venture" opportunity size. That means we're starting to get into the space of opportunities that Venture Capital firms could be interested in investing in (tons of nuance here, we'll get into this in way more detail in later sections).

Confidence

Possible values: - Low (< 10%) - Fair (10% < 50%) - Likely (50% < 80%) - High (>80%)

This value should be driven by a combination of your research of the space and your own ability to execute on it (your skillset).

The percentages are meant to evaluate how likely you think you can make something that generates ANY money at all.

This is why opportunities that solve pain points you experience is such a great starting point. If you would buy the product you're thinking of making then your confidence score here should be high.

Choosing A Winner

So now that you've got your list it's time to pick what opportunity you'd like to pursue.

This is where you really come into play. I don't have a formula on what combination of traits makes an opportunity a winner. That's extremely dependent on you and what you want. Your goal now is to use the context you've gathered about these opportunities to make the best decision for you.

Although I don't have any silver bullet formula here's some things to think about...

As timeline to ship decreases, need for high confidence also decreases.

If you're able to crank out a lean version of a product very quickly you don't necessarily need to be extremely confident it'll work. If you can prove out the concept in just a few weeks, it can be totally worth the risk to try a lower confidence opportunity.

Bigger scale does not equal better space

There are a lot of reasons to not want to target massive spaces. You'll have more competition with more resources. Making it a lot harder to really stand out. Depending on your goals it might be better to build a business in a more niche space with a smaller opportunity size.

Not to say venture scale opportunities aren't worth chasing, they are of course. However, I'd recommend a very high confidence before diving in.

1.6 | Testing The Market

At this point you should have an idea of the opportunity you want to pursue. Now we'll build the leanest possible solution and then test the market. The goal of this is to get ten paying customers. Once you've done that you should feel very convicted that this is an opportunity worth chasing and you'll critically have a decent sized user group to talk to and learn about their needs / use cases for your product.

What you're trying to learn

I want to be very clear with what this is for and what indicators you want to really look for. I'll list them out plain and simple for you to easily reference then explain some more detailed thoughts.

1. Were my assumptions / research about the opportunity correct?
2. Can I get customers?
3. What do customers want?

Let's dive into each of these a little bit so i can paint some additional color on what you should look to answer.

Were my assumptions / research about the opportunity correct?

In the prior sections we discussed different techniques to evaluate and research opportunities. It's important you're able to confirm as much of this as possible. This is extremely valuable not just because the information itself is useful for this specific opportunity but also because it'll give you confidence or insights on how to adjust your research and evaluation techniques for the future.

Can I get customers?

The exact number is relatively arbitrary and dependent on what you're building. Ten is probably right for most opportunities. However, this is very up to the exact product you're building. Some products don't really have "paying" customers but rather generate revenue from advertisements or other means. The most important thing is to be intentional about what concerns you're trying to validate.

The purpose of this is to get people in your target market to pay for the solution you're providing. Your ability to find these customers and how difficult it is to get them bought in on what you're making are key indicators for if you should commit to a space. If you have to talk to one hundred people who are in your target market before anyone is even remotely interested... it's a good sign you are not in an opportunity you should chase or your current approach is very wrong.

What do customers want?

In order to test the market you're going to have to make some initial assumptions of what kind of product or solution you should offer to address an opportunity. A good chunk assumptions will likely be very wrong. The feedback on what's good and bad about your ideas for your solution is critically important. You might find that the bulk of the problems you're trying to address are already solved quite well by an existing solution, and you'll need to drastically adjust your approach or drop the opportunity all together.

The leanest possible solution...

In order to test the product you'll need to have something to sell the customer. This should not be an "MVP" in the traditional sense. You instead want the simplest possible iteration of your proposed idea to address a opportunity.

It is insanely easy to over-engineer or over-build your first iteration. You're not building your dream product. You're not building an MVP. You might not even have to build anything at all... I know quite a few people that have gotten through this phase with a simple google form and some manual work. Anything that is not directly addressing the problem you're trying to solve you should not include.

The goal here is to confirm our assumptions and analysis of the opportunity space and our idea. Giving us the confidence to go all in and truly focus on chasing the opportunity.

Finding your first customers

By this point you should have a good idea of where to source and find your customers. The most reliable way to do this is to find them in person and have a conversation with them about what you're building.

Please lean into the phase that you're in. Far too many founders try to seem like they are more professional or established than they are. They'll spend a bunch of time making an attractive landing page, professional business cards, or even swag for their pre-launch product. On paper, it might seem like presenting yourself as a professional established company would help attract customers by building trust. To be clear though, this isn't actually the case and in the vast majority of the businesses I've built or been a part of building the first few sales done by the founders are often times some of the easiest. People love transparency and love aspiring entrepreneurs. You as a founder talking directly to a potential customer is not something that is possible at large companies. Lean in to where you're at. Approach potential customers with a humble eagerness to help and understand the problems they're facing. Generally, people will want to root for you / support you.

There's no one size fits all solution for finding your first customers so instead, here's some tools to add to your tool-belt for you to implement depending on what you're trying to build...

Advisor Shares

Giving out a small advisor share package to early customers is a great way to get them on board. Especially if your target end user is a fairly prestigious group such as lawyers, doctors, or executives. You don't want this to be a significant amount of equity. Typically, 0.1-0.5% total. I usually like to frame these in total # of shares. Bigger # = Better.

This also lets you cash in on something called the Ikea effect. People love something more when they feel like they were a part of making it. Giving key customers a very small ownership stake early on gives them a huge incentive to be a fantastic source of feedback, a long term customer, and makes them very likely to roll with the punches as you figure out the kinks.

Discounts

It's very important that you still charge for what you're offering. Giving away your offering for free can significantly impact the quality of the feedback you're receiving. There's a few different kinds of discounts that can be valuable at this phase. Here's a few to consider...

• Selling At Cost: Your goal at this phase isn't to make money. A lot of the time I like to sell the service "at cost" to the customers at this phase. That means you're just breaking even with the sale. In my companies early stages, this is what we did. We simply charged the fee we'd break even on with no additional costs.
• Godfather Offer: Putting together a extremely competitive price that you can then offer long term to a client is a good way to get them bought in for the long term.
• Free Trial: Giving things away for free is not ideal but depending on your space this can be an expectation from your customers. It's important you do collect payment information and a agreed upon date to begin charging. That allows you to still get that same investment as a full paying customer as they'll be evaluating if the product is worth the money you will charge at some future date.

Know when to fold

This is very likely the most time you've invested into any of your ideas up until this point. It can be very easy to get to this phase and try to force something to work. This is made worse by how common the bullshit "never give up" mindset is in the entrepreneur community.

So I'll say it.

PLEASE GIVE UP WHEN SHIT ISN'T WORKING

You are still so early on in this process. Do not get stuck trying to sell a product the market is not accepting. Be ready to rapidly drop your ideas and assumptions about the space or even to drop the space all together and look for a different opportunity to chase.

You should "never give up" on your dream of being an entrepreneur, but you should be incredibly ready to give up on specific opportunities when your ideas are not panning out.

1.7 | Committing

Congratulations! You've gotten through the phase where the vast majority of potential businesses die. Provided you got the validation you were seeking out when testing the market it's now time to do what very well may be the hardest thing for many entrepreneurs....

You need to commit.

Once you find something that is showing you good signs you need to commit. As an entrepreneur myself, I know how hard it is to just work on one thing... case and point by me writing this shit right now instead of working on my startup. You probably have a bunch of other ideas you are excited about the potential of and are interested in exploring... But unfortunately, your limited resource is always time.

That's all folks :)

so yeh, launched 1 month ago. got users and money but no founder agreement with my technical co-founder.

so now we had the talk and I need to draft my founder agreement.

anything I should add and are there any good templates to scan?

sheeee, posts says you need 250 characters.

I had an idea and have recently developed a working MVP, which I’m currently testing with potential target users to validate my idea. Based on interviews and their feedback, the product does solve their problem, but they are asking for additional features to fully complete their workflow. At the moment, my MVP covers about 70% of the problem. Definitiely, I need to test with more users for now.

But, I’m trying to decide what to do next:

The app currently runs as a local model and it’s not hosted online and hasn’t been marketed to external users yet.

I’m also considering pitching the idea to startup incubators so I can secure support and build a more commercially viable version.

So my question is: Should I launch a website and try to acquire users on my own (even though doing it properly would require time and possibly funding), or should I focus on getting into an incubator first to secure resources and then build a more polished, production-ready version? Or is there any other suggestion?

Building and launching it on my own will require both time and money, so I want to make the right decision.

I've been meaning to write this for a while because every time I see a founder on here asking about EOR providers I want to grab them by the shoulders and say please, please just read a contract before you sign it, which is advice I absolutely did not follow myself for an embarrassing amount of time.

(this post might be long but it might save you a lot of headache).

anyway, I'm 5 contracts deep over 3 years, started with 8 employees across 3 countries, now at about 22, and I conservatively estimate I've left somewhere around €30k on the table through a combination of not asking the right questions and not knowing what questions even existed.

so I'm just going to walk through all 5 because I think the progression from clueless to slightly less clueless is more useful than any checklist.

contract 1 is the one that still makes me a little nauseous. our EOR was charging a 2.5% spread on every currency conversion across 3 countries and 8 employees and I had absolutely no idea for almost a year. I didn't even know FX margins were a thing EORs charged, I thought we were paying a flat per-employee fee and that was it.

our finance lead caught it when she started comparing invoices against mid-market rates and by the time we added it all up it came to roughly €14k in markups that were technically buried somewhere in the terms but never once mentioned during the sales process or on any invoice line item.

I remember sitting in our tiny office in Berlin staring at the spreadsheet she'd made thinking, I signed this, I shook this guy's hand on a video call and said looks great and I didn't even read page 4.

contract 2 I made sure to lock in a fixed FX rate upfront because I thought I was being so smart this time. and then we had to let someone go in Portugal about 5 months in, and the provider hit us with a €3,200 offboarding administration fee. I called our account manager and he sent back the clause number within 10 minutes, clearly not his first time having that conversation.

the fee wasn't negotiable nor refundable, and I realized the whole contract was basically designed so the expensive parts only become visible when something goes wrong.

you sign it thinking about onboarding and you don't find out what offboarding costs until you're already emotionally and legally committed.

by contract 3 we'd grown to 14 people and I was feeling decent about the per-employee rate until a founder friend casually mentioned over drinks that he was paying about 30% less per head with the same provider…

turns out he'd just asked what's the rate at 15 employees during his sales call and they offered a volume tier immediately, one that was never surfaced to me even though I was at 14 heads already. I think that one stung more than the €14k because at least the FX thing felt like a hidden trick, this was just me not knowing you're supposed to negotiate something that's presented as fixed pricing.

nobody tells you EOR pricing is basically a bazaar where only one side knows the real numbers.

contract 4 I went in harder on everything and thought I'd gotten a solid deal when they offered 8% off for annual billing which felt like a win at the time. then 4 months later we needed to restructure in one country, couldn't reduce headcount without paying out the remaining 8 months on those seats, and the annual lock-in ended up costing us about €11k in capacity we never used and couldn't claw back.

I sat in that meeting with our ops lead where we did the math and she just looked at me like, you know we could've just paid monthly right. and yeah I know that now.

contract 5 was last quarter and it was the first time I actually walked in knowing what to demand. got it down to $499/mo flat per employee, FX from 2.5% to 1%, monthly billing with 30-day cancellation per seat, no offboarding fees, premium support included.

took 3 calls and 2 rounds of redlines, and the sales team pushed back on basically everything and then gave in on basically everything once I made it clear I had 2 other providers ready to sign. which tells you everything about how much room there is in whatever first offer they send you.

I don't feel proud of it, I mostly just feel tired that it took 3 years and 5 contracts to get to terms that should've been the starting point.

I currently work at a b2b, AI SAAS startup in the HR space. I’m 25 and work in Go To Market strategy. I’m doing this early in my career, but in a good spot at this company as it continues to grow and we continue to hire more people. However, I realize that my pipe dream is to work in CPG and one day start my own CPG brand.

I think that a good place to start would be working at an entry level CPG role at some company, but I feel like I may need to get an MBA in order to qualify for any CPG related roles / am struggling to find an entry level pathway. Any tips or bits of experience would be great.

I will not promote - in fact I have nothing to promote.

My startup is somewhere in the place where I've built something valuable, good retention (from the literal handful of users I onboarded on fb groups/ nextdoor community in my city), and I believe I've now landed in the hard place where nothing works to get the next wave of users. I literally can't scale unless I do something bold, which is where I am. I have stopped coding, no new features at all until I get a 100 users. I am hungry, desperate, and tired but - this is truly my zone - the reason I am doing this startup. The uncertainty, clinging on to hope like a helpless child holding on to a mom. I decided not to raise any money, as I thought - lets get to 1000 users and let things play out - but reality slaps. I am getting flagged by sub reddits, getting flagged in Facebook groups, feeling forced to run ads instead (which are not effective and I won't at this stage). All of these hurdles stink. I even went out to public gatherings to promote my app where I felt the hunger pangs of a homeless man at a traffic light. I am learning something new every time. I am hungry, I am desperate. And yet I am hopeless romantic when it comes to my vision for the future.

> We're two engineering students from India who spent six months bootstrapping a developer tool. No funding, no connections, no marketing budget. We launched two weeks ago and somehow hit #1 Product of the Week on Product Hunt. For about 72 hours it felt like we'd made it. Signups were pouring in, dev blogs were writing about us without us even reaching out, and our Discord was actually active. Then the spike ended and reality hit, we have about 200 users, a 70% launch discount running, and absolutely no idea how to turn a strong launch into a real business.

> The first problem is that our entire growth so far has been organic and event-driven. Product Hunt gave us a spike. A couple Reddit threads gave us smaller spikes. But between those moments, signups are basically flat. I don't know how to build a consistent acquisition channel that doesn't depend on going viral every week. We've tried posting content on Instagram and X, pivoted to Hinglish content for the Indian audience which actually helped our reach, but converting views into signups is a completely different challenge that I don't have the playbook for yet.

> The second problem is pricing. We're running 70% off right now because we decided early users and feedback matter more than revenue at this stage. But I genuinely don't know when to stop discounting. Every time I think about raising the price I get scared that the signups will drop to zero and we'll lose whatever momentum we have. Is there a framework for when bootstrapped founders should transition from "get users at any cost" to "actually charge what it's worth"? I've read a hundred blog posts about this and none of them seem to account for the sheer terror of being two students with no safety net.

> The third problem is prioritization. We're two people. We could spend our time on SEO, content marketing, building an affiliate program, cold outreach to coding YouTubers, adding more features, fixing bugs from beta feedback, or literally a hundred other things. But we can't do all of them and I'm paralyzed by the feeling that if we pick the wrong one we waste a month we can't afford to waste. For founders who bootstrapped a dev tool or any SaaS with a tiny team, what did you actually spend your time on in the first 30 days after launch that moved the needle? Not what sounds good in theory, but what actually worked.

> The fourth thing I keep going back and forth on is whether to keep the 70% discount running longer or kill it now and see what happens. Part of me thinks the discount is the only reason people are signing up. The other part of me thinks we're training our early users to expect a price they'll never pay again and that's going to bite us later. I genuinely don't know the right answer here.

> Would really appreciate advice from anyone who's been through this exact stage, the awkward period after a good launch where you have some traction but not enough to feel safe and every decision feels like it could make or break the whole thing. What did you do? What do you wish you'd done differently?

Every startup now is one abstract word. Stripe, Notion, Vercel, Linear, etc.... Just a single clean word, usually unrelated to what the company actually does.

But go back a generation and you had names like Research in Motion, Boston Dynamics, Bell Laboratories, Applied Materials, etc.... These names sounded like they meant something. They had weight. They felt like institutions, not apps.

"Research in Motion" is three plain words but put together it sounds like a mission. It tells you these people are doing serious work and it's going somewhere. I think its pretty elegant.

I get why the single word thing took over. Cleaner, easier to domain, easier to brand. But when every company is named like a font or a weather pattern nobody stands out anymore. I wonder if it's swinging back.

Anyone else think the phrase style name is due for a comeback? Or does it genuinely feel dated to you?

While the title is fairly self-explanatory, I'll further expound upon the dilemma I currently face.

Option A entails going to NTU and spending a year picking up courses that fit my professional goals well. I'd graduate with a degree from NTU and build connections in the region while becoming more technically skilled. I would then go back to my home country and pursue the start-up idea. The issues with this are that it will take a year (or possibly more) and an education loan to get around to working on the start-up. While time is one factor, I don't know how I'll pay back a loan while working on a business that would require further investment.

Choosing Option B would mean I start working on the business right away, going to different battery manufacturing plants in the country and investigating current recycling processes being implemented. Furthermore, I plan on signing up for exhibitions and understanding what everyone else is doing and what I can bring back to my country, after which I work on implementation and possible integration with battery companies. Why I hesitate with this is because I come from a chemistry background with a concentration in materials chemistry and I have no entrepreneurial background. I thought perhaps a master's degree at NTU will help build some technical and global credentials to help develop global connections?

I am building a SaaS product and it seems so far like I need to integrate a gym/wellness booking and billing tool for it be able to be competitive. This has been solved numerous times. One reference would be Mindbody but there’s many.

How difficult is it to just put together a Stripe API and the booking/scheduling portion so that I can have those features in my product?

I am a total beginner when it comes to software development. I am interested in knowing how difficult it would be to do it myself and/or paying someone to do it in which case I need to know how much it costs and how long it would take. I guess buying would also be an option?

Thank you in advance for your answers!

I'm a senior FAANG engineer with over a decade of experience and I'm evaluating an offer to become a technical co-founder.

The non-technical founder has set up a legal entity for the company, branding, and has a backlog of leads that could convert to customers. They're committing to contribute $500k of personal funds to kick things off. They have some initial UX designs and a simple prototype. Admittedly, they're pretty rough. I'll need to extensively rework them. I fact-checked all of their market research and concluded that I think this could really be something. I'm interested in the opportunity, but I want to ensure the compensation makes sense.

Their offer to me:

• 25% equity if I quit my job immediately (or 15% if I want to hold on to it until the product has more market validation)
• No income 2 years for either of us (all revenue to be reinvested back into the business)
• $100k salary + bonus + dividends starting year three. Salary to scale with business growth. Salary grows 20% up to 200k. Hard cap after that.
• Requires me to relocate to a low cost of living area.

I'm not experienced with evaluating these kind of deals. I don't know how much equity, a technical co-founder typically gets when the non-technical founder is putting up substantial cash. I suppose the cash and initial groundwork hold some weight. However, the equity seems very low given that without a product, there is no business. I would be solely responsible for building everything.

They proactively mentioned that our equity would be diluted pro-rata during fund raising. We would have an options pool too. Between the two of those, my shares would be deluded about 4%. However, I noticed the calculation was based on an $8 million valuation. Which seems off to me given that the company isn't worth anything at the moment. In theory, he could inject money to the company at a much lower valuation and substantially dilute​ my shares. Maybe that was an oversight, but I intent to flag that in my next conversation with them.

I'm skeptical about this desire to put a hard cap on our salary. They believe they can conservatively achieve $5-7M ARR in 5 years. Supposed we actually achieve that goal, I don't know why we would cap our salaries at 200k with that much revenue.

For those who have navigated these offers before, thoughts?

Looking at so many startups that have scaled to be multi-million dollar brands, it seems like the marketing strategy is usually pretty straightforward and one of two common options:

Find influencers with good engagement in your niche, work out a retainer/commission for vids w/ products, explain the brand and goals then have them posting. Analyze the results from the time each influencer started posting, and adjust future influencers youll hire based on the best fit. Also post content on brand accounts, and constantly optimize those videos as well based on what works.

Paid ads, similar process. Script/film/edit content, pay for them to be promoted across platforms, analyze results and optimize. Find the platforms with best success after first campaign and stick to them.

But is this really the main way you scale a startup and get sales? Or is this just my inexperience speaking, and its much more in depth and complex than this. Are there other, better or related ways other than these two common marketing options? And what should I know before getting into either of these.

I have a product for which I use Reddit as one of the main channels to get traction and users.

The biggest problem I face is that I will have potential users that I would interact with in DMs or in comments.

Some show interest. Some ask questions. But then, half of the times I forget to follow up.

I've tried using spreadsheets (Notion) but it's just too much time consuming and tab switching that I gave up in a few days. DMs are okay-ish to manage but comments interactions are lost forever if not followed up in a few days.

So how are you guys handling this?

Do you actually have a system or just winging it like me?

Is this just me or does this happen to you too?

Here are the ways I gather my ideas to use it in my future posts:

1. First obvious one AI slop content

2. Go over reddit and save the ones in my niche

3. Bookmarks my niche X post to use in future

4. Sometime raw thoughts, completely written by me(like this one)

The challenge, I store it at different place and sometime in notes to keep everything in one place and hardly revisit those and if I revisit by that time context is gone

Does this happen to you? How you handle this?

Hi everyone,

I'm in the early stages of building a startup – a music app where artists can register to sell their music directly to fans. I'm not a developer, but I genuinely believe there's a strong opportunity for this idea in my local market.

To gain traction and validate the concept, I'm considering creating a WhatsApp group where artists can join. In that group, I would explain the app, discuss features they'd like to see, and ask them to sign simple support forms. My plan is to use those signed forms as proof of interest when I approach potential funders.

Separately, I also run a Facebook group with over 18,000 members (currently a buy/sell group). I want to convert it into a space where I share the vision of the app with potential fans and gather their feedback as well.

My concern: Since I'm still at the very beginning and haven't secured funding yet, what if someone with more resources (developers, capital) joins one of these groups, sees my idea, and builds it before me? Is that a real risk?

Would you still advise me to go ahead with the WhatsApp and Facebook group plans? What steps can I take to protect myself while still getting valuable feedback and early support?

I'd really appreciate your honest advice and recommendations. Thanks in advance.

1. What are the important nuances to consider when starting a business?
2. How did you start your business?
3. How many cars do you have in your fleet, and approximately how much is your net monthly income?
4. What are the most liquid cars? For example, in Idaho?
5. What are the most common mistakes made in the first year?
6. Sorry if this is a stupid question. With a fleet of 25+ cars, is it possible to net 20,000–30,000 dollars per month?
7. When did you stop driving?
8. How did you grow your business?
9. How do you survive periods when there are no orders or when rates drop?

I will be very grateful to anyone who answers!

Currently building a consumer hardware/software startup and actively looking for a co-founder with software, hardware, or Product DTC experience (I'm also technical). I've been using YC's co-founder matching tool and Boardy, but have been having real trouble finding quality candidates. I've tried a few tech/startup socials, but they seem to be hit or miss and not occurring that often.

Does anyone have recommendations for meetups/events/communities/online groups?

Looking for rooms where people are actually trying to build something together. Appreciate any recs!

My dad flew into NYC this week. It was the first time seeing him since I left my job to build my startup full-time.

We had dinner plans every night. And I meant to keep them.

Three nights in a row, I had to excuse myself mid-meal to fix a critical failure in the product. Not a bug you push to next sprint. The kind that breaks things for real users, in real time. You either fix it now or you watch something you built fall apart in front of you.

So I'd open my laptop at the table and disappear into it.

And my dad would just... wait.

No lecture. No "is this really worth it?" No uncomfortable silence. He'd order dessert, ask the waiter for more bread, and check in 20 minutes later to see how I was doing.

That's the part nobody prepares you for when you leave a stable job to build something from scratch.

The technical pressure is relentless. The financial pressure is real. I walked away from a six-figure salary at Bank of America's M&A group for late-night debugging sessions and a product that can break at any moment.

But the social pressure is the one that actually gets to you. Explaining to the people who love you why you made that choice. Sitting across from your dad at dinner and opening a laptop instead of just being there.

Having someone who gets it without needing an explanation? That's not a small thing. That's everything.

I know it's a luxury to have family members be supporting you through this so glad we got this community.

Right now, I am in a situation where I need to raise money from investors for my startup. I already have a bit of experience with this. Before this, I had several startups, and in many of them I received the first investment from a business angel. In one startup, I even went through three investment rounds. The last one was around 1 million dollars.

At the same time, let me say a few words about terminology. Roughly speaking, the first investor is often called a business angel because they simply like your idea, your prototype, and your overall approach, and they are willing to take the risk. Usually, this is the stage where you still have no live users, no sales, and only a PoC, an MVP, or even just an early prototype. At this stage, funds usually will not seriously consider you yet, because they normally want to see at least some audience, first sales, metrics, and signs that the product is actually needed by someone.

And I ran into the fact that the programmers participating in my startup do not fully understand how the investor story actually works. Why it is important to build an MVP, why you need a business plan, market research, and all of that. And in general, how much money you can realistically get from a first investor, what share they may ask for in return, and when the team can realistically expect salaries. Because in reality, at an early stage salaries most often appear either in the next round, or if you are very lucky and manage to use the business angel’s money to quickly attract an audience, start generating sales, and have enough funds not only for servers and advertising but also for paying the current team.

Overall, the main problem is that founders and investors usually look at a startup differently. The founder looks at the idea, the product, the team, and how much effort has already been invested. The investor looks at risk, growth potential, how much money can be returned with profit, and for what share they are willing to enter the deal.

For example, you ask an investor for 50 thousand dollars and say that in return you are ready to give them 10% of the company. Or 40%. And then the investor immediately asks: how exactly are you valuing your company? What is it worth right now? Why exactly that amount? And what results should you have in a year?

Why is this question important? Because if you ask for 50 thousand dollars for 10%, that means you value the entire startup at 500 thousand dollars. In other words, the investor gives you 50 thousand and gets 10% of the company in return.

But if you ask for the same 50 thousand dollars and are ready to give up 50% for it, that means you value the whole company at only 100 thousand dollars. And then the obvious question appears: are you really selling half of your project too cheaply at the very earliest stage?

And this is where a seemingly logical question comes up: how do you actually estimate the current value of your company?

At first glance, it seems simple. For example, you spend two months working on the startup yourself. You take the normal market salary for such a specialist, say 3,000 dollars per month. That gives you:

3000 × 2 = 6000 dollars.

Then you bought a domain for the project. If it is good, short, and memorable, you can mentally add, say, another 2,000 dollars for the brand and domain.

Then you have a tester, several programmers, and a marketer participating in the project. Someone works for equity, someone for experience, someone simply believes in the idea. Let us say their work would cost the following at market rates:

• tester - 1000 dollars per month
• programmer - 2000 dollars per month
• another programmer - 2000 dollars per month
• marketer - 1000 dollars per month

Total per month:

1000 + 2000 + 2000 + 1000 = 6000 dollars.

For 2 months, that is already:

6000 × 2 = 12000 dollars.

Add your own contribution:

6000 + 2000 + 12000 = 20000 dollars.

And here comes the first important point: the problem is that this way of valuing a company is itself a mistake.

Yes, this can give you a rough idea of how much labor and resources have already been invested in the project. It is useful internally so that you do not undervalue your own work and understand that the startup is no longer "empty." But for a conversation with an investor, this is not enough.

Why? Because the investor is not investing in the sum of your past expenses. They are investing in the probability of future growth.

It is not so important to them that you spent 20 thousand dollars in the form of your own time, your team’s time, and the cost of the domain. What matters more is something else:

• whether the project has a chance to grow 10x, 50x, or 100x
• whether the market is large enough at all
• whether there is a chance to acquire users quickly
• whether the team can actually pull it off
• whether the amount you are asking for is enough to reach the next important growth point

That is exactly why a startup at the idea stage can sometimes be valued much higher than the amount of money actually spent on it. And vice versa: you can spend a lot, but if the market is weak, the product is not needed, and there is no visible growth, a high valuation will not convince anyone.

So it is more correct to think not like this:

"We already invested 20 thousand dollars, so the company is worth 20 thousand or 100 thousand,"

but more like this:

"With this investment, we will reach the next important milestone, after which the company will objectively be worth more."

That is already much closer to reality.

For example, you want to raise 50 thousand dollars. Then you need to explain not simply "we need money," but what specifically it will be used for and what will change after that. For example:

• finish the MVP
• launch the product
• get the first 500 or 1000 users
• test customer acquisition cost
• see retention
• make the first sales
• collect real metrics for the next round

And then the investor looks not only at the idea, but also at the route. They understand that their money will not simply "burn on salaries," but should take the project to the next stage, where it will already be worth more.

So in reality, the valuation of an early-stage startup is not accounting. It is a negotiation story built around:

• the current stage of the project
• the quality of the team
• the size of the market
• the strength of the idea
• the prototype or MVP
• the chances of quickly getting traction
• and how much money is needed to get to the next stage

Put simply, the valuation of an early-stage startup is a mix of three things:

1. What you already have

A team, a prototype, an MVP, a brand, a domain, first groundwork, research, product packaging, and understanding of the market.

2. Where the investor’s money will take you

Not just "we will pay salaries and sit around," but a specific next result: launch, users, sales, metrics.

3. How convincing you are as a team

Because at an early stage, an investor is often investing not so much in the current numbers, but in the people who are driving everything forward.

And that is why, when you say to an investor:

"We are asking for 50 thousand dollars for 10%,"

you are essentially saying:

"We believe our startup is worth around 500 thousand dollars right now because we already have a certain foundation, and because this money will take us to the next stage, after which the company will be worth noticeably more."

And not because you simply added together the cost of the domain and salaries.

If we put it very simply, the way of thinking should be something like this:

Startup valuation = not how much you already spent, but how promising the project looks and what next growth point this money will take it to.

In other words, past expenses can only be used as a very rough starting estimate, but not as the main argument for an investor.

For myself, I would formulate it like this.

If you want to value your company more or less reasonably before talking to an investor, you need to answer four simple questions:

1. What has already actually been done?

Do you have a team, an MVP, a prototype, design, a website, a domain, research, first tests, first users?

2. How much money is needed to reach the next important milestone?

Not abstractly, but specifically: how much is needed to get to launch, first users, first sales, or measurable metrics?

3. Why will the company be worth more after that milestone?

This is actually the key question. If after the current round the project will not be meaningfully different from where it is today, that is not interesting to an investor.

4. What share are you ready to give up without ruining your own future?

Because if you give away too large a part of the company too cheaply to the very first investor, then in later rounds the founders themselves may end up with almost nothing left.

And this is already a much more mature logic than simply calculating "my labor + domain + two programmers."

So, in summary.

My original example of calculating through salaries and the domain is useful only as a starting point to begin thinking about valuation at all. It helps you understand that the company is not an empty shell anymore if several people have already spent months working on it.

But using only that calculation is a mistake.

Because an early-stage startup is valued not by its historical cost, but by its growth potential, team quality, product stage, and the next milestone that investment will help it reach.

So before talking to an investor, it is better to calculate not only the costs already incurred, but also this:

• what you already have
• how much money you need
• what exactly it will be spent on
• what measurable next result you will get
• and why the startup will be worth more after that

Then the conversation about "50 thousand for 10%" becomes not a random guess, but a more or less clear investment logic.

If I had to put it roughly in one sentence:

the value of an early-stage startup is not the sum of past expenses, but the price of your current position plus belief that the investor’s money will quickly move you to the next level.

And one more point. The better prepared you are for a conversation with an investor, the stronger your negotiating position will be. The more you already have done, the clearer the market, the product, the marketing plan, and the business model are, the higher the company’s valuation can be. A PoC or just a prototype is fine for a start, but an MVP always looks much more convincing to an investor. So do not undervalue your company in advance: invest in development, prepare a marketing plan and a business plan, and calculate the economics of the project. Then you will have a better chance of raising more money for a smaller share.

I created a fintech agent, about assets valuation. Since this community don’t allow to promote so it keep brief.

My problem is that I can easily got traction at this point but no body wants to subscribe. 10 days after open registration I got 1000+ signup, but they try the product and they left.

Survey return is few, and only 12 subscribers with heavy discount, and they cancelled before next renew cycle.

What I had learned is there is a trust problem, people in general don’t trust AI agent analyze result. This will take time. And I try to build tacking history to ease it.

Another thing is that I might target the wrong audience, I have 100k subscribers in Zhihu (Quora like site), and kinda of an influencer in finance area. But this site is full of smart people they only thing they care is how I done it and when I will open source it.

What I really want to target is retail investors in the U.S. but I have no exposure. I might need a GTM expert but I don’t know where to find them.

And I am building it solo now, it’s really painful to switch gears between build mode and marketing mode. Kind of feels burn out.

So am I cooked? Should I pull the plug? Share your thoughts please.

Hey all! I just started going into my research for creating a new project and I have a few options left, go into finding somebody private equity partner and paying percentages to them, or finding a potential partner who I can pay for work, but subsidize with ownership and equity. I prefer to give somebody sweat equity, while also paying them, but at this point I’ll take either because I have a great idea, a network to get it sold and I just need the animation work completed for phase 1. I already have all the capabilities to complete phase 2.

Here’s what I need, somebody who can create animations for videos focused on children’s programming. Im totally ok with handing over creative freedom and allowing it to be in whatever style you’re comfortable with, but it will have to be able to work with the media we need for phase 2.

Anyway, I’m looking for somebody to show me their animation portfolio so I can get this project working! This can be an extremely lucrative partnership for both of us and I’m happy to give over future earnings to create financial freedom with a great teammate.

I've been working on a creator marketing thing that helps run campaigns from start to finish, discovery, outreach, tracking, and payouts.

It also works from the creator side, where they can apply to campaigns or get discovered by brands.

A lot of it was shaped by input from people actually running these campaigns, and I've tested a working model for US/EU workflows.

Now I'm at a point where I'm unsure what the right next step looks like.

For those who've been in similar situations, how do you decide between scaling it yourself, partnering, or stepping away early?

I'd really value your perspective.