STAGES OF STARTUP DEVELOPMENT

There is no one-size-fits-all approach to categorizing startup phases. As a result, you may come across a lot of contradictory information and definitions from various sources and entrepreneurs. The reason for this is because stages of a startup business are as dynamic as startups themselves, and they can be complicated and interconnected to some extent. As a result, it’s difficult to draw a distinct line between one stage ending and the beginning of another. 

PRE-STARTUP STAGE 

The first stage is a pre-startup stage, it as a stage for your preparation to build a startup. This stage is also important because many things in the startup and scaleup stage will depend exactly on the pre-startup stage. For example, the mistakes that will be made during this stage will impact the results you will achieve in the startup stage. 

You have an idea for a scalable, innovative product or a service with a clear concept & milestones on how to get there.  

In the pre-startup stage, you are building your next big thing and the business model. Please note that at this stage the business model will be built on preliminary data, which means that it needs to be validated and adjusted in the next stages. This business model will need to support you in delivering that big thing and not delivering to anyone but your ideal customers. They are the most important persons at your pre-startup stage. 

Think about this stage as a production process that starts processing and producing three types of products/outputs – products or services, business model, and customers for that products and services. But one important thing is that you will need to change your business processes several times. These changes are called pivoting in the pre-startup stage. You will pivot until you become able to produce the outputs you and your future customers want. 

This pre-startup stage is more related to planning, designing, experimenting, and changing. That is your job as a potential entrepreneur. 

STARTUP STAGE 

So, you have developed your products and services, you have developed the most sustainable business model in the world. You have developed an MVP and signed shareholder agreement between founders. Now you are ready for investments and to accelerate your business with the help of angel investors, accelerators and investment funds. Ecosystem partners in this phase will also get you prepared for market validation and scaling. 

The question is, what are you doing at this stage? Now, you start building your company because you are sure that you have the highest possible business potential energy. What does it mean? 

• Simply, you are connecting the dots designed at your business model making all resources available 
• You are building and increasing your customer base 
• Also, you continue with experimenting, testing and changing your business model, products or services, and customers 
• You start building systems that will support normal functioning of the business model

According to CB Insights, the main reason for the death of a startup is slow growth, when the company cannot enter a new round. The second reason is the lack of demand for the product on the market. To avoid failure, the team needs to understand what interests the investor at each stage of startup development.  

Startup stage usually divided into two stages: pre-seed and seed. 

Pre-seed | A startup is only developing a business model and looking for its own product. The goal is to define a value proposition, to find an actual problem that a startup solves. There are already first customers and sales. The first investors are often people from the 3F circle: friends, family, founder. Investment risks at this stage are the highest, but also the possible profitability. Investment volume: $100-200 thousand. 

Seed | The startup brings the product in line with the requirements of the market (product-market fit). At the same time, it is important to find a market with a sufficient number of potential customers. At this stage, repeat sales appear, channels of interaction with customers are developed, the business model is almost defined. It is important that customers understand the value of the product and want to stay with the product. Investment volume: $1-5 million. 

SCALEUP STAGE 

To qualify as a scale-up, the company must meet certain criteria that have become the norm. The first of these criteria is the annual growth. A scale-up must register a team growth of more than 20% per year, with at least 10 employees on permanent contracts. In terms of turnover, a scale-up is expected to generate between $1 million and $3 million. It must also have already raised at least $1 million. Once it has reached these milestones, it is no longer in the startup phase or in a situation of extreme uncertainty. 

Simply put, a scale-up is nothing other than a successful startup. Since it will not remain a startup indefinitely, a young company’s prospects are limited. A startup will either: 

• Go bankrupt 
• Complete an exit and/or merge with a large group or a scale-up 
• Become a scale-up 

Note: Exit is the point when your venture is acquired by another venture, or, your venture is publicly listed. 

In this stage your product or service is showing a clear and measurable user growth and you have already attracted significant funding. Move into establishing phase you need to go global. Use the help of partners to do that. 

At this stage, the startup has already received initial investments and is ready for rounds A and B. The startup has found a working business model, its viability confirms the presence of sales; the possibility of scaling the business is being tested. The risks of losses for venture investors are reduced, since there are clear sales channels, a product, customers – the efficiency of the business has been proven. Therefore, many investors and business angels prefer to invest in startups at this stage. Minus for investors: competition is higher, and possible profitability is lower. Investment volume: $10-30 million. 

A successful company is a trip from conception to expansion, and you should be aware of the route you’ll take. Even so, it’s the execution that counts. There are a few things to think about during each stage of a starting firm in order to nail it: 

1. Investigate scaling capacities 

Scaling occurs once you have a solid MVP, but it doesn’t imply you should disregard it before then. Keep in mind that if you want to scale up in the future, you’ll require investments when designing features and trying to discover a product-market fit. Half of success is catering to that at each stage of development. 

2. Make sure you have a business plan 

As your startup idea develops, this will be refined and improved. Approach your company plan in the early phases in the same way you approached scaling, so you can present your idea to investors, potential partners, and anybody else who is interested whenever they ask about it. 

3. Everything that can be documented should be documented 

Attempt to document everything related to your startup in writing, from the most basic description of your business idea to recruiting and scaling. This will save you time in the future while also developing and growing your business. 

MORE RESOURCES

1. Startup.Estonia platform (EN)
2. Stages of startup development through the eyes of investors (RU)
3. What’s the difference between a startup, a scale-up, and a tech company? By Julie Durban (EN)

HOW TO FIND AN IDEA AND VALIDATE IT

The world is full of ambitious entrepreneurs who believe they have what it takes to start and grow a startup. A startup can be launched by anyone, but not everyone will prosper. Countless prospective founders have a great business idea but lack the necessary skills or attributes to help make it happen. Others possess entrepreneurial skills and abilities but lack a viable business plan. Even people with a great idea and a strong set of skills may struggle to get their idea off the ground if they lack financing. All these elements are required for a successful startup. The good news is that successful entrepreneurs are made, not born. Anyone may succeed as a business owner with the correct training approach and willing to grow. 

1. OBSERVATION 

The main difference between startup and any other business is the uniqueness and society need. It takes time and effort to come up with a successful startup idea. It necessitates that a young entrepreneur actively seeks information about an industry or problem, analyzes the information obtained, ruminates for a long time to develop a novel perspective on the problems identified, engages with others to discover the flaws and merits of thinking, and then takes a commercial perspective to develop a profitable business model for the product or service developed. 

There are some steps which might be taken to generate an idea for startup: 

• Start with the problems. Every time when a person faces the issue which is supposed to be impossible to resolve – this is an opportunity to find a way how to improve someone’s life. When this problem is a direct concern of a future founder, it is significantly easier to find the right solution as the motivation and involvement are interconnected with a business goal. Ideally, if a founder has previously faced the issues raised, it is easier for this person to find new and important insights to resolve them. Moreover, a good point will be to write down all the ideas and solutions, which the young entrepreneur could come up with. 
• Specify target audience. The market size is extremely high, and billions of people are involved in sales-purchase relations worldwide. One of the steps to validate startup idea is to clearly identify what is the portrait of a potential customer. To facilitate the portrait of the customer, it is needed to identify whether the problem which is going to be resolved is one the absolute priority of these people. Despite the numerous problems of any target audience, people are used to focus on top 3 of the challenges they have. The appropriate customer group should be chosen considering the priority of the problem, which the founder is going to resolve by its startup. 
• Simplify starting point. When the audience is identified, a founder should think over the preliminary steps for the startup idea implementation. Best case scenario is that a founder might test its idea using only existing resources without any investments. Hence, a founder had better be very communicative or possess advanced analytical skills. Perhaps, it is possible to make a micro-version of a product or service which is expected to be a heart of startup. Alternatively, a founder might carry out micro-questionnaire among its acquaintances, on online-forums, or in other public communities, and make sure whether people really need a solution to the identified problem. What is more, an additional advantage will be a perception of how many resources people are ready to spend on the solution.  

2. EVALUATION 

When the idea is observed and a founder is sure that the solution is relevant to the specified target audience, it is time to think wider and realize obstacles to be faced during the next steps. Evaluation of an idea might help founder to predict the actual customer interest, considering existing opportunities, skills, and experience of founder itself. First, startup idea should be useful and relevant. Secondly, the focus should be on the reality of the idea implementation. It includes understanding the market, awareness of financial and human resources which might be attracted and personal interest in the resolution of the issue. Thirdly, existence of similar ideas should be checked. A startup should not enter the market which is overloaded with different startup companies aimed at overcoming the identical problem. 

There are possible actions which might be undertaken to evaluate and validate your startup idea: 

• Reveal the competitors. Hundreds of startups are launched every day so that the competition is extremely strong. A founder should consider the uniqueness of the idea. The best way to get a perception of the existing competition in a particular area is to look through the large companies which are somehow related to the idea. It is possible to basically surf the internet and understand which solutions are currently proposed. It might happen that the solution has been already invented but still is not widely used and people slightly know about it. Nevertheless, it might occur that the problem has been already solved for most people in some region, for example, and it is needed to evaluate whether it is rational to work on it further.  

• Research the market. If a founder is a true expert in a concrete market, there should be less doubts on identifying whether it is realistic to go particularly there. Hence, a founder should always consider a market size, because if the market is small and has prospects to be popular in future – the success chance might be even higher. Obviously, it is not a common case. People tend to understand what the market entrance barriers are and make sure that they are possible to be overcome. From the very beginning, a founder should understand the market environment of the startup product or service.   
• Follow modern trends. Every time when absolutely new technology, product or service succeeds, that is an opportunity to start working within that industry. Moreover, it might relate to not only the good or service. There are also opportunities to bring any existing idea in different region, or to a different customer. To be up-to-dated, a founder should be informationally aware about the current business vectors and relevant opportunities. For example, high-tech ideas are currently on the focus of startup community and there are many successful startups in the industry. Despite this industry is oversaturated, there are still niches which are not occupied. As long as the industry is developing, the number of opportunities is increasing.  
• Consider emergency losses. If all the factors are attractive to launch a startup, a founder should think over the potential fails and downtimes. Usually, such occasions require additional resource waste so a founder should be pursued whether the idea worth spending time and resources. Without strong belief in idea, it is almost impossible to bring it to success.  

MORE RESOURCES

1. How to get startup idea (EN)
2. How to Test & Validate Your Startup Idea or Product Without Spending a Single Dollar (EN)
3. So You Want to Be an Entrepreneur: How to Get Started (EN)
4. How to Generate Startup Ideas (EN)

HOW TO PROVE THE MARKET NEED

Validating a market need is one of the most important things a startup can do before sliding down the long startup roller coaster ride. There are no simple rules for what factors work to prove a market. Like so many things with business planning, it’s going to be different for every business. 

Here are a few ways to validate your market need early on: 

• Competitive analysis: Investigate other companies and competitors, learn about their positioning, offering, pricing, target audiences. See what they are doing well and what they can improve on. Are there many small players or a handful of large players? This is important on several fronts, including attractiveness to investors, exit potential and more. If you feel you have no competition, think again, you may be looking through a narrow window. Your competition may be other solutions to the same problem, using other or no tech. Competition can also be similar technologies solving other use cases today. Knowing your competition will help you benchmark your product against theirs, making sure you are not building a sub-par product, rather a much better one. 

• Market research: What is the size of the market, how fragmented is it, what is the annual growth in this market that would indicate a growing need? What are the trends that may indicate future needs? COVID is an example of an event that will define new industry trends moving forward. These trends will help you understand the market today and also a few years from now. 
• Surveys: Talk with as many potential customers as possible and ask them about their current needs, what they feel is missing in the market, in terms of user experience, spec, pricing features and more. You can also give a glimpse of your product and ask what they feel about your potential solution, what is their willingness to pay. Some startups also create a website that shows a mockup of the future product and offer pre-registration for early birds, this helps to verify there is a need in the market. 
• MVPs: Create a minimal viable product with limited resources that will showcase the basic capabilities of the product, this should be enough to show the product to potential customers and get initial feedback. 
• Design Partners: Work with a potential customer who will help build the spec based on their specific requirements, under the assumption that there will be other customers who would have similar requirements. This approach will help build a useful and practical product, based on real market requirements, rather than a product you think customers will use. 
• Demonstrate sales: The key question here is whether people will buy what you are selling. There is nothing better than actual sales. No market research is more credible than initial sales. It is persuasive to state that you can sell this many units in this much time to that many buyers. 

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Case: how to understand if it is possible to sell the stars and the Moon 

The client planned to launch services for registering stars and selling plots on the moon. We collect a list of competitors and prices. On average, a star will cost $65. Plots are cheaper – $45. Using Similarweb, we find out site traffic and multiply it by the average conversion in the Gifts category (4.9%). We calculate the number of orders and turnover. For stars, an alternative model was invented to confirm the calculations. Some of the services on the site host a register of stars. Part of the purchase of a star issues an ordinal ID. The number of clients is determined by enumeration. The models agreed with a deviation of 10%. 

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It is important to understand that these are not universal methods, for each product or service you can use your own combination of approaches and tools. Remember that a detailed analysis of the market, customers and competitors is a mandatory part of your business planning, however proving your market goes beyond knowing it. This is for when you need to show your business to outsiders, whether that is for investors, a business plan contest, a bank, partners, potential partners. 

Think about sources. Brand names are credible. Third-party buyers, channel gatekeepers, and well-known experts are credible. When you can find an expert, a known market research brand, or a magazine going on record about growth in your market, or the need for what you’re selling, use that. Highlight it in summaries and presentations. 

Below is a list of useful sources and tools that may be useful for analysis: 

1. PitchBook is a database of companies, investors, service providers that contains investment statistics in a specific industry, search for companies and transactions in 220 industry subgroups and 50 verticals. 
2. Crunchbase is a database of investments in private and public companies. 
3. Similarweb is a free tool that shows traffic data for three months and limits it to five positions in traffic sources. Its paid version of Similarweb PRO displays traffic by month, traffic channels, audience loyalty, demographics, keywords. 
4. Sensor Tower is a platform for mobile app developers that compiles country rankings by downloads, demographics, active users, and customer retention rates. The free version only displays downloads and earnings for the last month. 
5. 52wmb – the service collects data on customs operations in 32 countries, analyzes import-export trends by product groups and ranks buyers and suppliers in a particular industry. 
6. Justia Patents is a database of the Justia legal platform, in which patents are divided into classes; the search is performed by the description of the invention, the patent owner or assignee. Available for free. 

MORE RESOURCES

1. How can a startup study the markets (RU)
2. Five ways to prove there is a real market need for your product (EN)

HOW TO BUILD A STRONG TEAM

At a time when a startup is developing a business model and product, the team plays a crucial role, because the expertise of the team members, professional experience and involvement in the common cause already do half the work. Frequently, team fails due to uncertain objectives without aiming at task accomplishing and any formal structure within. To generally understand how to gather the right people in a team, a founder should consider factors such as personal and experience similarity, the distinctiveness of interests and orientation on uncertainty reduction within the project. 

GATHER IDEAL TEAM MEMBERS 

Every founder faces the problem of gathering the right specialists, which will lead your idea to a success. The following steps are developed to provide advice to young entrepreneurs and prevent them from critical mistakes. 

• Select a co-founder if you need. This is a problem that all startup owners confront at some point. Although there is no one-size-fits-all solution, finding the appropriate talent for startup might be vital to its success. If a founder chooses to bring on a co-founder, it should keep in mind that they bring complimentary skill sets to the team and assist on staying focused and motivated. Furthermore, as there are few profitable startups created by a single person, investors are more willing to back a founding team over a lone entrepreneur. It is essential that the founding team has the appropriate chemistry because they are to spend a lot of time together hustling and conquering hurdles. In the corporate realm, a founder should think of cooperation as a marriage. 

• Identify the gap. A founder should clearly understand the skill sets required to meet company’s needs by identifying the voids in startup. When putting together a team, you should keep in mind that members must complement and learn from each other. Moreover, it would be a great step to define group properties – shape members’ behavior and help explain and predict individual behavior within the team as well as the performance of the team itself considering the project role of each person. 
• Start with acquaintances. Once a founder has discovered the need and opportunity for team formation, he or she may begin by attracting someone they already know. Networking is a fantastic way to find possible co-founders, team members and just masterminds. It is sometimes a good option to team up with someone you have previously worked with because you will be aware of each other’s work ethic and have mutual trust and respect. At this stage, it is significantly important to have a bright social experience as talents tend to be intractable, so pursuing and inspiration are on the high priority. 
• Share your idea. The startup team should share the same level of excitement, devotion, and enthusiasm for creating something revolutionary. Building a successful business requires years of work, therefore finding someone for your team who is engaged in your success as you is essential. Moreover, the team norms should be considered from the very beginning. Members should accept standards of behavior shared and express what they ought and ought not to do under certain circumstances, neglecting possible deviant workspace behavior. 
• Recruit team members. When it comes to startup requirements, be as explicit as possible to ensure that the best individuals are hired. Don’t be hesitant to express your preferences! During the interview process, ask questions to get a better understanding of the candidates’ backgrounds. Collect data on daily duties, unique scenarios, and their involvement in the development of a product or service. These responses will help you decide two things: whether they have the proper tools for your startup and whether they are a great fit for the company’s culture. 

AVOID RUINING MISTAKES 

While a founder gathers a team, it is significantly important to precisely look for talented people who potentially will be involved in common task achieving. However, there are mistakes of many startup founders which might crucially impact on your success. 

• Precise focus on previous experience. Don’t bet only on the position on candidate’s resume and don’t assume that a potential team member knows everything. Your startup and their experience may not go hand in hand. 
• Avoid generalists. This is a member of the team who does not have a special skill. Those people are all over the place instead of providing a single purpose, which weakens your team. 
• Concentrate on the big picture. Making people understand what the final goal is and how it is going to be reached through all the sides is a powerful tool to make your startup develop faster. Members will not only understand their job in your startup, but they will also be more engaged and enthusiastic. 
• Respect each person. Respect for one another is crucial, but don’t make compromises. When something isn’t right, speak up and have a civil conversation about it. It will assist you in avoiding serious disagreements, misunderstandings, and even future divisions. 

• Consider communication. Startups are typically self-funded, and team members are dispersed across the globe. Communication is key, so reach to them daily, even if it is only for a few minutes. Strong communication within team will help you to build trust and tolerance among team members.  

Once an employee has been accepted into the team, you should conduct a post-hire assessment. This means having strategies for learning, promotion, and career development. It is constantly necessary to stimulate the growth of an employee, no matter how difficult it is at the initial stages. Support the idea of the project and promote it within team, always remind employees what the final goal is and give yourself completely to work to serve as an example for team members. Usually, founder performs a role of a motivator, and it is essential for acting as common organism. This will serve as an incentive for your team members. 

INVESTORS FOCUS 

Try to rationally evaluate your startup, look at it through the eyes of an investor. As it is noticed, at the pre-seed and seed stages partners pay attention to several significant factors. 

• Entrepreneurial experience. The experience of creating and closing startups is considered. 
• Flexibility and learning ability. The ability to adapt to a constantly changing environment and new realities. 
• Involvement and focus on the project. It is difficult to combine the startup development with other activities. Therefore, it is important for investors that the core of the team involved as much as possible materially and non-materially: team members invested their own money, left other projects, quit their old job, etc. 

The team is an extremely important factor, especially when it comes to funding in the early stages of a startup. Investors understand that the risks are high, the project has a difficult path ahead, there will be problems and it is very hard to find a business model the first time. Nevertheless, investors are still ready to invest in a strong team.  

You need maximum involvement: there is a very small chance that you will be able to simultaneously launch a successful startup and work. Assess your risks correctly and make positive environment within the team – still, the first time it may not work out. 

Additionally, investors separately evaluate the founder of a startup. It must be ambitious: for a startup to reach the desired level, the founder must see the scale of his idea and strive to create something global. He must have a company development plan for 5-8 years – this is how long it takes on average to sell or bring a startup to an IPO. To reach this, you need to strongly grow every single year. 

MORE RESOURCES

1. Establishing Your Startup Founding Team Credibility When Pitching to Investors (EN)
2. How to Build an All-Star Startup Team (EN)
3. 5 Steps for Building a Great Startup Team (EN)
4. How to Build a Team That Won’t Sink Your Startup (EN) 
5. Stages of startup development in the eyes of investors (RU)

HOW TO ATTRACT INVESTMENTS

No matter how great your product or business idea is, how lean you can operate, and how big you’ve grown already, more capital and financial leverage will almost inevitably be a necessity. Even the best funded and hyper-successful billion-dollar startups have been engaging in more fundraising rounds than ever before. So, finding and securing potential investors for your startup can be crucial for the success of your company. 

Before starting work on attracting investments, you need to decide which way the company will develop: venture or dividend. It depends on what type of investor is right for your business. 

For a venture investor, the main goal is to exit the project on time by selling the stake to the next venture or strategic investor. Or exit at the IPO stage of the company. This type of investor is interested in multiplying – two or three times, and preferably ten times – to increase the volume of their investments. 

The investor in this case is interested in the rapid growth of the estimated value of the company, and not its financial performance. Tesla, Uber, Facebook have shown such rapid growth in different periods of their history. 

A dividend investor is determined to bring the business to positive financial indicators (marginality, profitability) as quickly as possible and build a company that will steadily generate EBITDA and cash-flow. 

Why do you need an investor?

Before contacting an investor, you need to clearly formulate what you expect from him and what you want to offer him. To do this, you need to answer five questions: 

1. Why does an investor need your startup? What perspectives can you offer him? 
2. Why do you need an investor? What do you expect from him – money, competencies, connections, approaches to management? 
3. Who do you want to see as an investor – a business angel, a family office, a venture fund? 
4. What will be the financing scheme – sale of a share, convertible loan, loan, crowdfunding, equity investment? 
5. What is the value of your project for consumers? What user problems do you want to solve? 

After you have found the answers to these questions, prepared presentations and justified the project, you can start the process. It is necessary to form a funnel, in which there will be at least 50 (preferably up to 100) potential investors. If your goal is foreign markets, it is better to look for an investor abroad. Count on the fact that attracting investments can take a long time – several months or more. Therefore, it is important to understand your current finances and know the burn rate. 

Of course, the chances of receiving a random call from some super-sized venture capital firms are small. Especially, if you haven’t already attracted some well-connected investors. Thankfully, for today’s entrepreneurs, there are a lot of ways startups are getting noticed, found, and are connected with potential investors. 

Online Fundraising Platforms 

The past five years have given birth to countless online fundraising platforms. They have become highly popular with sophisticated and accredited individual investors, angels, and even banks and funds looking for new ways to deploy capital. 

The major platforms run from peer-to-peer lending sites which offer business loans to donation based, debt and equity crowdfunding portals: 

• GoFundMe | GoFundMe is a donation-based crowdfunding platform. It allows users to contribute funds for the medical, memorial, emergency, charities, education, and more societal reasons. Offers tools to track donations, manage teams, and market social causes through social networks. 

• Indiegogo | Rewards-based crowdfunding platform. It allows users to invest in creative works, technology, and community-driven projects. Users can avail rewards in the form of discounts, coupons, and more. Also, features an educational directory for assisting new users. 
• Kickstarter | Reward-based crowdfunding platform for creative projects. It allows users to fund projects in multiple sectors including art, dance, fashion, films, music, technology. It offers rewards and incentives to assist users in making investments. 
• SeedInvest Technology | SeedInvest Technology allows backers to get a cut of early-stage startups. The platform has more than 235 established companies in its track record. As a founder, you need to sign up for an account, fill out an application form, and go through a screening process. The last includes a due diligence check. 
• StartEngine | StartEngine is a platform that makes it possible for everyone to invest in early-stage startups in very different areas. You can explore the list on the website, pick the company of a few, and start investing — from biotech pioneers to travel startups and mobile apps. Each company’s profile includes valuation, price per share, number of investors, and other data that can impact the investors’ decisions. 

Accelerators 

Popular startup accelerator programs always have an open invitation for applications from serious entrepreneurs. If accepted, you’ll likely get a modest check to keep developing your work, as well as introductions to other investors, business advice and help in staging future fundraising rounds. Just make sure you know the terms and look for a good fit before you apply or accept the help. 

Find more information about startup accelerators based on successful exits here. 

Events 

Success in business and fundraising is all about visibility, getting noticed by the right investors, who you know, and who knows you. Attending events is a great way to achieve this. Try to find out who is attending the event ahead of time and schedule meetings to be productive. 

This can be pitch nights for presenting your own opportunity and meeting active investors who are there, engaging in coding marathons, or simply getting out to organized networking functions and industry trade shows. 

If you are operating an early stage company, you may want to consider attending any of the following events: 

• Slush 
• TechBBQ 

• Latitude59 
• TechCrunch Disrupt 
• SXSW 
• Collision 

To get ahead of the competition and take a more passive route, consider attending other events where your investors are likely to be. Think sporting events, charity fundraisers, film festival and yacht shows. 

In addition, it is worth attending conferences and events in the industry of a startup, where it is more likely to meet not only potential investors, but also acquire the partners and network necessary for the development of a startup. 

Social Media 

Social media can be your best friend as a lean startup or solo entrepreneur looking to test the market, gain traction, and attract investors. It makes it easy to be discovered, and is still one of the most cost-effective methods of reaching others. 

You can take an inbound approach with your own posts and updates or take a more active approach with collaborations and leveraging sponsored posts or influencers. 

Direct messaging can be powerful too. If you can get the social profile handles of well-fitting investors, it might only take one great message to connect with the capital your startup needs. If you need VCs you can always go to Crunchbase, Dealflow and Dealroom and research for those investors that are actively investing in your industry.  

When it comes to social media, here are the most popular channels and how to use them: 

• LinkedIn for cold messages or to seek quality introductions to pass the social proof with guarded investors such as Venture Capital investors. LinkedIn Premium is totally worth for unlocking certain features.  
• Facebook for meaningful relationships after you have been able to meet with an investor once or twice. It is critical to build the relationship to generate trust.  
• Twitter for thoughtful conversations and engagement with relevant information shared by the investor 

Find more information on how to use social media to pitch investors here.

MORE RESOURCES

1. Five steps to money: how to find an investor for a startup (RU)
2. Seven Ways For Entrepreneurs To Find Investors And Raise Millions (EN)
3. How To Find Investors for Your Startup (EN)
4. Ten Startup Accelerators Based On Successful Exits (EN)
5. How To Use Social Media To Pitch Investors (EN) 

HOW TO ESTIMATE THE MARKET SIZE – TAM-SAM-SOM METHOD

One of the most common mistakes in developing a new product or service process is missing the stage of assessing the market. Sometimes a team gets so carried away with an idea that properly assessing the market goes by the wayside. This approach can lead to the fact that after several months of enthusiastic work on the product and its features, it turns out, for example, that the market is too narrow. In addition, these figures are especially important when you are going to look for investment for the project since it will be one of the first questions investors will ask you. That is why you have prepared for you a guide for a quick market assessment using the TAM-SAM-SOM method.

The market assessment itself is carried out in order to understand how much money is in the area of interest to us, and how much of this money a startup can potentially claim.

HOW TO MEASURE THE MARKET SIZE WITH TAM, SAM, AND SOM?

• TAM — Total Addressable Market | It aims to model how big is the universe you are targeting and serves to analyze how big the business opportunity is, or in other words, its total potential if the model later of business pivots. To calculate it in more or less known markets you can use the sum of the turnover of all its main competitors globally or go to existing studies where the volume of the market is indicated.

For example, if you want to estimate TAM for the organic cups for coffee, your TAM is everyone who drinks coffee in the whole world. In other words, it would be the total world coffee.

• SAM — Serviceable Available Market | The SAM gives an idea of the size of the market that you serve with the technology and business model today. It serves to assess the growth potential of the company under current conditions, that is, offering the services and products that you have defined.

Сontinuing with the previous example, the SAM for the organic cups for coffee startup is a coffee market limited to the region in which the startup plans to launch sales of its product in the short term. In other words, the geographic target of the product for the near future.

• SOM — Serviceable Obtainable Market | The SOM serves to assess the potential in the short/medium term that you can realistically obtain with the resources that you are going to invest in obtaining clients. In other words, it not only values the size of the current market but also the piece or percentage of the market that you can capture with the resources you have and current recruitment strategy.

For example, for organic cups startup the SOM is the potential share of the market in target region in short-term perspective.

The TAM-SAM-SOM method involves assessing the market in two ways: from top to bottom and from the bottom up. When you work top-down, you take open / known data about the market as a whole, and then cut off those parts of demand that are not relevant to the business. And when you work “bottom up”, you are guided only by knowledge about the project: product cost, conversions, etc. The most primitive way is to multiply the approximate price of the product by the total number of potential buyers. If you have several alleged sources of income, then they need to be summarized.

Another key aspect is knowing how the market is growing (that is positive for your startup) or decreasing (negative). Since the TAM SAM and SOM are not static variables but are evolving over time, an annualized analysis at 3 –5 years of how they will evolve should be considered.

Note: Estimation mistake is normal! It’s not even right to use the word “mistake”. It is generally better to say “assessment based on today’s knowledge of the market” or “assessment on a date”.

MORE RESOURCES

1. Assess the startup market in half an hour – the TAM-SAM-SOM method (RU)
2. How to Calculate Market Size Using TAM, SAM, and SOM (EN)
3. Interactive template for TAM-SAM-SOM market calculation in Miro (RU)