Ultimate Guide: How Youth can Create a Startup
This is a crash course in startups for teens. This is a great handbook that will give you the fundamentals that can be applied to a multitude of businesses, product or service.
Make sure to check back often too! This will be updated.
Table Of Contents
- What is Entrepreneurship?
- Startup Ideation
- Customer Validation
- Unique Value Proposition
- Marketing
- Financials
What is Entrepreneurship?
Here’s the stereotypical startup story: 2 college students who received a stroke of insight, dropped out of college, and are working in their garage full-time. Then, all of a sudden, their startup gains massive traction and soon, they’re millionaires.
That’s how we want it to go right? Overnight success? But, in reality, startup creation is a grueling process. In fact, 9 in 10 of startups fail! That’s a frightening statistic. Many times, media exaggerates how easy it is to create a startup when in reality, it can be one of the most challenging tasks you’ll ever meet. There are so many factors when it comes to a startup that really makes it a trial and error process, unlike most jobs. If you’re a doctor, you go to medical school, residency, then your job. There’s a clear path. Although I am not trying to underestimate doctors in any way, I’m just trying to show the comparison between the two different professions.
However, startups can be incredibly rewarding for a multitude of reasons:
1) They have high impact and potential. There’s no limits to how many people can buy your product or how many lives you can improve. You can raise $500 in pre-seed funding or $500,000 in seed funding!
2) As a teenager, the startup world may be easier to enter. Industries such as the medicine and engineering require you to go through years of school. You can actually build a startup at whatever age you want! In fact, I feel that you will receive more opportunities to build a startup at a younger age. I personally found that it was much easier to approach people for advice on my startup because I was young, which made me seem more genuine and actually interested in entrepreneurship. I’m currently being mentored by really amazing people, such as the Food Program Manager at Google, Restaurant Partnerships Lead at Square, and a UC Berkeley Haas professor for my restaurant software start-up. Sure, you won’t be able to enter some incubators for adults (although I have linked some youth incubators below), but it’s so much more accessible for you to break into the industry.
3) Because start-ups are more trial and error, you will personally develop traits that can be applied to any profession. You will learn to persevere when you think you have reached your potential and develop grit. You will learn how to prioritize and sacrifice the right things. You will learn how to negotiate with people to get what you want. These are all essential life skills that can be taught all in one process. Startups really require you to meet as many people as possible and leverage your skills. You will be forced to go out of your comfort zone and grow as an individual.
4) You can combine any of your personal interests into your startup. Good at graphic design? You can design logos for businesses? Love biology? You can pursue a gene editing startup that focuses on CRISPR.
And of course, please don’t do it for the money. Super cliche, but there’s a reason why it is cliche. You’re not going to survive. You’re better off doing something you actually want to do. Maybe you’ll last a couple years but once it gets really rough, you’re going to suffer. Startups are not for everyone, and that’s ok.
Alright, now lets get down to business!
A startup is a usually a business that attempts to achieve high growth with very minimal resources. It’s a complete myth that it happens very quickly. For instance, did you know AirBnB was first started in 2008? It takes immense time and dedication to grow your idea.
Young Entrepreneurs Around the World
These youth entrepreneurs are living proof that you can achieve much even if you are young.
→ Saroush Ghodsi and Stefan Stokic called YCombinator entrepreneur
→ High school sophomores
→ Created Slik, an enterprise software system that allows salespeople to more effectively generate leads
→ Moved to Silicon Valley to work with knowledgeable investors and mentors
Startup Ideation
People focus too much on the solution and need to focus more on the problem. The idea has to be customer centric. Who cares if it’s innovative? If it doesn’t solve a customer pain point, no one will buy it.
Example:
Sweater that color changed according to your moods
–> Innovative, but beneficial to the customer? Not so much.
In fact, the founder of Y-Combinator describes startup creation as:
“The verb you want to be using with respect to startup ideas is not ‘think up’ but ‘notice.’ At YC we call ideas that grow naturally out of the founders’ own experiences ‘organic’ startup ideas. The most successful startups almost all begin this way.”
Now that we know that startup creation has to start with a problem you notice, what are some examples of problems?
How to notice problems
-Go through each event that happened in your day, miniscule or large. Were there any inconveniences? (don’t necessarily think of the smallest inconveniences. If they’re too small and tolerable, people won’t pay for them)
-Is there anything in the status quo that is a bit boring? That has a lot of potential and can be more innovative?
Here are some examples:
Apple: People were fine with large computers, but Apple had a vision to have every person work on a smaller computer on their desk
→ Problem faced by the customer: high schoolers unfamiliar with college atmosphere/vibe
Solution? Campus Select: A website which connects high school students in the college search process to current, compatible undergraduates at their desired schools through video chat.
→ Problem faced by the consumer: Playing table-top games is boring
Solution? Holographic Tabletop Gaming
The point: Think of crazy, out-of-this-world ideas that disrupt the industry.
Now that you have an idea that solves a problem, here are some criteria:
-Is the problem faced by others? Try googling key terms and see if other people face the problem and not just you. If it isn’t, scrap the idea. More on this in the Customer Validation section
-Is the market size large? (who are your target customers and is there a large enough population of them) If it isn’t, scrap the idea.
-Is the technology required to create the start-up available? If it is an app, do you have a plan on how you will receive funding (apps cost from $75,000-$200,000). Do a THOROUGH google search on this one. If it isn’t, scrap the idea.
Use the Blue Ocean Framework to develop your idea
What is it?
–> Proven methodology to make your idea stand out from your competitors
–> Focuses on creating your own unique market, rather than competing with similar businesses
Example: Cirque du Soleil, a circus company that quickly dominated above Ringley Bros.
-Instead of competing in the regular industry that used animals for shows and was a family-friendly environment, they changed it to not including animals and focusing more on intricate dances, storylines.
-This not only made them different from the competition but it also opened up the market at the same time to not just families but also coworkers (more profit!)
Customer Validation
This is probably the most important chapter in this entire handbook. It’s that crucial. Many people THINK they have a good idea. In reality, there is probably a 10% chance that your original idea is actually feasible. Every company has had to make pivots, or adjustments, to their idea. This is because you have no idea what is going on in your customer’s heads. You can’t mind read. That is why you have to spend a lot of time and resources to validate your idea. And let’s say you didn’t. You would probably spend hundreds of hours and many monetary resources designing it and manufacturing it, and then find out that your customer actually does not like your product. That’s why customer validation is so important. Even though it takes a lot of time, it’s much more worth it than to waste resources. So it’s good to set aside any pride and attachment, and just listen.
1) Find out who your customer is VERY SPECIFICALLY. “Teens living in the U.S.” is not going to cut it. Specify things such as what age range they are, where they live (urban, suburban, rural), what their jobs are, what hobbies they like, what TV shows they like, what brands they shop at, etc. If your idea is B2B (business to business), specify what things they sell, what type of sector do they belong to (for example, if you were marketing to restaurants are they fast casual or fine dining?), etc.
2) Create a survey (Google Form works great) to distribute to people. Make sure to keep it short (around 10-15 questions is max) and try to get them to be multiple choice, check boxes, or scale type questions so it’s more likely for them to finish. You can include 2-3 open-ended questions.
3) If it’s targeted towards students, hit up all of your friends and peers on social media. Ask your teacher to put the survey on Google Classroom and announce to the class to fill it out. Go to colleges and just straight up walk to people and ask them questions (in a friendly, non-confrontational manner though). And don’t worry, being nervous is completely normal. That’s what I felt like. But you have to talk to strangers sooner or later. There’s no way out of it. And, it’s just part of growing in your entrepreneurial journey. You have to be uncomfortable, or else you’re not really growing.
4) For B2B, go to the businesses and just schedule an appointment with them or walk in when they’re less busy, depending on the circumstances. For instance, I’m currently working on a software startup targeted towards restaurants. My friend and I talked to our family’s friends’ restaurants and just talked to them for hours about the restaurant industry. We gained INVALUABLE lessons through those sessions. And don’t be intimidated to talk to adults. They will be more inclined to help you because again, your age shows your authenticity. You can do it!
4) Create a professional LinkedIn profile and reach out to people in the same industry. Send messages to about 50 of them at least (the reason for this high number is because a VERY small percent will actually respond) and just ask “Hi ___, I’m a high schooler working on ___. I would love to have a 10 minute phone call with your to discuss___. Your expertise in ___ would greatly help develop our project. Than you for your consideration!”
5) LinkedIn has something called groups which is exactly what it sounds like! You can ask to join these private groups and post your survey there.
6) Another very good tactic is posting on Reddit in appropriate subreddits. I have gotten 30 survey responses from one post, no joke! People are very nice there 🙂
**Please don’t be afraid about people stealing your ideas through the surveys. There is very little chance they will actually have the time and effort to execute it and secondly, most startups die from suicide rather than competition.
After you receive your survey data, evaluate it very closely. Look for patterns. Once you find a pattern, that’s when you now you have a market. Dispose of any features that consumers say they don’t want.
The idea is to continuously iterate your product/service over and over again through trial and error and surveying. Improve your product after you get more customer feedback. Rinse and repeat. This is called the Lean Startup Method. You can read more about it here.
Unique Value Proposition
This answers the question: What makes you better than your competitors?
Aim for 2-3 WOW factors (not just small things but incredible, innovative ideas)that your competitors DON’T have
Example: Apple
1. Modern, sleep design that gives user a feeling of high status
2. Better camera
3. Focus on privacy (Face ID, fingerprint unlocking)
Try to sum up your UVP in one, catchy sentence. This will definitely take some time to brainstorm. But what you can do is ask your target market what they would like to see! You get to quicken the brainstorming process and also validate an idea at the same time! Just make sure more than 1 customer wants it, and more like 10 customers.
Marketing
Ahh… marketing. This is one of my favorites!
Marketing is essentially telling a story. You now have a product/service people love, now you need to communicate that value to your audience in the right channels.
There is no point in having an amazing idea if you can’t sell it.
Example: Advertising executive Gary Dahl
-Created “Pet Rock” product, which is literally just a box with a rock in it.
-Marketed like “live pets”
-But, he created custom cardboard boxes, completed with straw padding, breathing holes, and instructional guide
-He sold 1.5 million of these pet rocks!
Now here’s the secret to marketing. It’s 3 letters: STP.
Segmentation, Targeting, and Positioning is a 3 step plan to get you to market well.
Segmentation
Create several potential groups of customers.
List some characteristics of the customer, this can also help you develop features later on that help make your idea different!
What would they do? Where would they shop? What would they eat? What media would they consume (TV shows, YT channels, blogs, magazines…)? What are their hobbies? What other products do they generally like?
Example:
Product: Macbook (by Apple, legendary marketing company)
Customer Profile:
-working professionals, young student ~ 18-50 year olds
-Urban
-College education
-Follow news
Characteristics lead to features
-Fast-paced life → feature of portability, lightness (Macbook Air)
-Value status → aesthetics, brand image, (tech and Apple Store)
-Value Privacy (millennials more than others) → touch-ID, Face-ID
-Value Ease when working → intuitive software
-Value News → Apple News, subscription service
Targeting
Select which group would be most feasible to target, given your resources. Choose the easiest group to profit from first
Positioning
This is how you will position your idea to reach those people. These are called channels. Some examples of channels could be social media, TV ads, or magazines. How you can do this is with the 4 Ps:
-Product
-Place (where it will be sold)
-Price
Promotion
It definitely helps to come up with an original idea for marketing. Look around you and see how there are creative marketers. For instance, GrubHub first marketed by putting ads next to transit stations. So, when people were exiting the subway after a long day of work and were hungry, they would see a convenient poster that shows them how they can get quick dinner from home. Genius.
Financials
The number 1 reason startups fail is this: They run out of money. Managing assets is crucial.
These are all basic terms you should address in business plans.
Fixed Costs
Business expenses that DON’T depend on the amount of products produced and sold by a business.
Examples :
-Website/app cost, hiring web/app developers (try to outsource this, this takes a TON of money)
-Rent
-Employees’ salaries (including customer service)
-Utilities (lights, water for office)
Variable costs
Business expenses that DO depend on the amount of products produced and sold by a business.
Examples:
-Marketing (how many ads you’re putting out)
-Supplies to make your product
Unit Revenue
-Price your customer pays per unit you sell
Example:
-$1 for glass of lemonade
Unit Margin
-Unit Revenue – Unit Variable Cost
-$1 minus unit variable cost of 33 cents to make 1 lemonade = 67 cents.
Breakeven
It’s very rare for a startup to breakeven in its first year. Do not be sad if this happens.
-How many products you have to sell to exceed the cost it take for you to deliver that product
Example:
Fixed Costs: $200 (juicer) + $500 (stand) + $1000/week (labor) +$100 (business license) = $1800
Unit Margin: 67 cents per lemonade
1800/0.67 = 2700 glasses of lemonade to breakeven
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