Give Your Startup A Shot: 7 Things To Do Before Exiting “Stealth Mode”
So, you’re considering launching your very own startup. You think you have what it takes to make it work, but you also know you have a lot of work ahead of you before revenue starts rolling in.
You’re not alone in taking the plunge — or in recognizing the challenges involved. Of the hundreds of thousands of Americans who start their own businesses every year, only a small fraction succeed. Many of them don’t even make it out of “stealth mode,” that early period during which startups fly under the radar and don’t actively market themselves outside of a small group of trusted advisors, investors, and early customers.
Serial entrepreneurs and investors like Reid Hoffman and Sky Dayton know how important it is to use a startup’s stealth period to increase its chances of longer-term success. Here are seven lessons they offer for less experienced founders looking for guidance in an uncertain environment for pre-revenue companies.
1. Develop a Strong Business Plan.
Have you ever written a business plan? If not, start with this guide from the U.S. Small Business Administration. It contains useful advice like:
- Choosing the correct format for your business plan so that it’s easy for potential investors to understand
- Understanding how to structure your business plan for maximum impact
- Tailoring your business plan to your audience, which can vary at different times
Hiring a business advisor at this early stage might not seem like a great investment, but it could help you put your best foot forward as you seek funding and early hires for your new enterprise.
2. Stress-Test Your Value Proposition.
You believe your business solves a particular problem better than any of its competitors. That’s its value proposition, and you wouldn’t be going through all this trouble if you believed it wasn’t worth much.
Unfortunately, belief isn’t always enough in business. You need to look at your value proposition through different eyes, not only your own. You also need to be willing to challenge its assumptions and apply it across a range of different market conditions. After all, the future isn’t certain to look like the present (and it probably won’t).
3. Line Up Investors or Other Sources of Funding.
The best time to start having conversations with potential investors in your startup was yesterday — or anytime before you officially launched the enterprise.
The next best time is today. Right now.
These conversations are important because many of them, maybe most, won’t go anywhere. You might have to speak with 20 “interested” backers before one of them commits to supporting you financially. Your odds might be a bit better with close friends and family, but you probably don’t have enough friends and family in a position to put up large amounts of capital to rely on them alone.
4. Assemble a Core Team.
It’s also important to begin hiring early. Start by learning what you should look for in an early employee, beyond any specific qualifications you know each role will demand. Remember, you’re hiring people who you hope will be able to grow with your company and eventually take on responsibilities far greater than what you expect from them now. You need to feel great about how they’ll fit into the organization you’re building, and about working with them directly during the pre-revenue period.
5. Introduce Your Idea to a “Small But Smart” Group of External Stakeholders.
This is a crucial, and sometimes painful, step in any startup’s development. It should come after the initial stress-testing of your value proposition but before you exit stealth mode. That way, you can take the external stakeholders’ feedback into consideration and make any necessary adjustments to your product, business plan, governing structure, or anything else.
You might hear things you don’t really want to hear during this process. Try not to take harsh feedback personally, but instead shake it off and remember that the people giving it to you have your best interests at heart
6. Test the Market, Carefully.
You can begin targeted market-testing during stealth mode, but it’s important not to get too big, too fast. You may also need to take steps to protect your company from a legal perspective, such as by requiring early customers to sign nondisclosure agreements.
7. Make a “Go/No-Go” Decision.
At some point, you’ll have done everything you can do to prepare your company to exit stealth mode. Now, it’s time for a final “go or no-go” decision. If you’re encouraged by the feedback and findings you’ve acquired to date that your idea can go the distance, this is your moment to press ahead. If you believe there’s still too much work to do, or the idea is not what you thought it would be, it’s time to reassess — and possibly to back out.
Get Ready for Your Close-Up
Planning for your startup’s exit from “stealth mode” is a lot like planning a big party. You have to do many, many things — more than you realize, maybe — to ensure it goes smoothly. But if you’re successful, you’ll create something that everyone involved remembers fondly for years to come.
The stakes are higher when we’re talking about a company you’ve poured your heart and soul (and probably your own money) into for months or even years. The upside is greater as well, since a successful startup could set you and your fellow founders on a course toward financial independence and add lasting value to the world.
To increase your chances of success, focus on what you can control. Each of the items on this checklist falls into that category, from developing and stress-testing your business plan to assembling a strong team of early employees, investors, and advisors.
Nothing you do will guarantee a favorable outcome. Even the most promising startups can fail. If yours suffers the same fate, remember this one final piece of advice: The most important thing you can do after a setback is dust yourself off, learn from the experience, and try again.