Otterwize

What You Otter Know About Personal Finance

Starting a Startup

Starting a startup is a risky proposition, but it is also quite a liberating thing to do.

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Are you thinking about starting a startup? You can do it! There may be snakes in the garden and temptations behind every tree, but if you work hard, think hard, work hard (yes, that was intentional), plan well, keep your eyes focused, and get lucky (market timing? external factors beyond your control?), you will/may/should find that the experience will be well worth it. Here are some things to consider before (and after) you take the plunge.

Is this the right time?

  • Are you ready for the commitment in time, money, energy, and sweat?
  • Are you ready to work harder than you probably have at any other job? This includes weekends and evenings to do whatever it takes.
  • Can you handle the risk and the insecurity? (financially, emotionally, and otherwise)
  • Are you determined and committed to this idea?
  • On a more practical level, do you have a way to support yourself and pay your bills while you work to build your business? (without severely depleting your funds, including your emergency fund)
    • If no, can you keep your “day job” or find a side hustle to bring in income while you work on your own business after hours?
  • Are you so driven by this idea that you just have to do it?

What is your business model?

  • What is the need (or pain point) that your business seeks to address?
  • What is your mission?
  • How will your business accomplish this mission?
  • How will you monetize your business?
  • What are the anticipated sources of revenue?
    • You will need to create realistic projections of revenue and expenses.
  • How long do you think it will take to start seeing revenue?
  • Who is your target audience/user/buyer?
    • Some people suggest that you create an avatar. This is a detailed description of your ideal customer or user; it represents the person (or entity) you are consistently trying to convert to your product or service.
  • How will you help your target audience? What’s in it for them? Why should they use your product or service?
  • Can you articulate your entire business in a one-sentence “elevator pitch?”
  • Have you written your business plan? You can find information about different ways to create a business plan here.

What about funding and other issues?

  • In the beginning, will you be self-funding? Seeking funding from friends and family (otherwise known as the 3 Fs: friends, family, and fools)?
  • Do you have enough of a financial runway to survive until the anticipated revenue comes in?
  • Do you anticipate seeking outside funding now or down the road? Small-business loan? Angel investors? Venture capital funding later on?
  • Have you spoken with an attorney to advise you on a formation and any other issues you may want to address now (such as LLC (Limited Liability Company) vs. C-Corporation or some other entity)?
    • Some high-growth startups incorporate as a Delaware C-Corporation. Ask your attorney to discuss the pros and cons of incorporating as an LLC vs. a C-Corp (or some other entity) and whether incorporating in Delaware vs. your own state would be advisable in your particular case.
    • If you decide to incorporate as a Delaware C-Corporation, you might want to check out Gust Launch, a platform that handles the incorporation process and also provides other tools and perks to help you run your company. (Full disclosure: Otterwize used Gust Launch, and the CEO and Founder of Gust Launch was Janet’s classmate.

Have you researched your competition?

  • Do you know who your competitors are?
  • Why are you better? What makes you different? What is your secret sauce?
  • Are you disrupting an existing industry or way of doing things?
    • What are the current pain points in this industry?
    • How will your solution reduce the friction or pain points? How will you make things better or easier for the ultimate user?
    • Is your solution cost-effective? Practical? Efficient? Realistic?

What about company name?

  • Have you found a good name for your company that is easy to remember, easy to spell, and not confusingly similar to other names in your industry? Does it represent your brand well?
    • Have you at the very least done a Google search to see if anyone else is using that name or a similar name? (Your attorney—yes, you should have one for this—will do a much more thorough and comprehensive search before you file for trademark protection.)
    • You can also check TESS (“Trademark Electronic Search System”), the U.S. Patent and Trademark Office’s (“USPTO”) online trademark search engine, which you can find here.
  • Is the URL for your name available or taken by some other company? (With the suffix “.com”? What about other suffixes? You may want to reserve a few of these suffixes for the name you like, if available.)
    • You can check on domain name availability and purchase the domain name (if available) at a site like GoDaddy.
    • Buying a domain name and trademarking a name are two completely different things. (See trademarking below.)
  • Have you looked to see if the name is available and reservable at the state level? (in the state in which you may wish to incorporate) See, e.g., Name Reservation in Delaware here.
  • Have you checked that the name you want is also available on the major social media platforms?
  • Have you filed for trademark protection for your company name?
    • Ideally, you should hire a trademark attorney to handle this function.
      • Filing for trademark protection is not just a matter of filling out a form with the USPTO. There are many important issues that would be best addressed and handled by an experienced trademark attorney.
      • If you try to do function this yourself, you could end up with problems down the road that are much more costly than the cost of hiring an attorney at the outset.
    • If you don’t have a trademark attorney, the next-best option would be to use a service like LegalZoom, preferably with help from their network of attorneys.

Have you created a social presence for your company?

  • When you have settled on a name, it’s a good idea to reserve that name on the main social media sites that you might anticipate using (assuming those names are available).
  • You should also think about starting to post to those sites so that you establish a social presence even before launch.

Other resources