I Took a Course on How to Build a Startup. Here’s What I Learned.
My name is Andy and I’m in Integrated Engineering at UBC, with a major in Computer Engineering and a minor in Electrical Engineering. I took New Venture Design (NVD), also known as APSC 486, in place of my capstone course for my degree, where I learned how to build a startup. I’ve learned a ton over these past 8 months, and also made mistakes as well. This post is a summary of all the key lessons I’ve gotten from this course.
My Key Takeaways
- Fall in love with the problem, not the solution
- Diversity and transparency are key for a team
- Discover, don’t sell
- Define and target your audience
- A prototype is not your product. It’s a way to convey it.
- Take advantage of student competitions and pitches!
- The business side in 3 words: finances, market size, and competition
- Believe in yourself and your idea.
It all starts with the team and the problem.
Fall in love with the problem, not the solution
This is the first thing they teach you in NVD. Quite often, we come up with ideas, but we don’t stop to ask what problem for that idea is. Ideas are also limited in the sense that if it doesn’t work out, you have to come up with a new one. With a problem, you can generate an infinite amount of ideas (or solutions) for it. Focus on the problem, not the idea.
Diversity and transparency are key for a team
In the beginning of NVD, we had to reach out to everyone in our section and talk to them 1 on 1 to decide who we’d want on our team. We had to form teams ourselves, and something that was mentioned over and over again is to look for diverse skill sets. For example: don’t just have software engineers on your team (a mistake I almost made), even if you think you’re building an app. Just make sure everyone has similar interests (which goes back to the “problem”, not the “idea”). In terms of team culture, I really prioritized transparency. Your team will undoubtedly go through ups and downs in this course, and having the ability to ask for help, or to voice your opinion, is so so so important for any team.
Validate, validate, validate, with customer discovery
Discover, don’t sell
Customer discovery is very simple at its core: talk to people about their problems. It’s very easy to go up to someone and get them to buy into your idea, but that’s not the point of discovery — the point is to listen to the problems of others, and validate whether or not the problem you’ve set out to solve is accurate. Stay positive, open-minded, and listen to critical feedback. A good question to ask yourself is: how can I make this work?
Here’s an example. Let’s say your problem space is reducing microplastics pollution, and a solution you’ve developed is a filter for laundry machines (since a large amount of microplastics come from detergent). You want to install them at UBC residences. This was an in-class prompt, and at first I thought this wasn’t going to work because who would pay for something like this? Universities may be resistant to change, and students are already weighed down by residence and tuition fees. But after listening to others suggest solutions, I tried approaching this with a “how can we make this work” perspective, and a few key points that were brought up is that UBC has several environmental initiatives (and funding for it), and there are research opportunities for something like this. That exercise really taught me the importance of keeping an open mind, and thinking positively.
Define and target your audience
Our NVD team made a mistake at the beginning of customer discovery: we did not define our target audience in enough detail. Our idea was BobaBot, an at-home bubble tea machine, and we were targeting bubble tea drinkers. But what age are they? How often do they get bubble tea? What are their habits now that the pandemic has hit?
Because of this, when we collected data, it was mixed. We interviewed people that drank bubble tea post-pandemic but stopped after, vice versa, and people who drink it once a month (which is not often at all!). A lot of problems can arise from interviewing customers that aren’t your target demographic. If I were to re-do NVD, I would spend way more time with my team in this area, and then target that customer segment. Define this well, and you’ll thank yourself in the future for doing so.
Another point I will add here is that discovery is really broken up into 2 parts: qualitative (where you “get out of the building” and talk to customers, 1 on 1) and quantitative (where methods such as surveys are used). This wasn’t mentioned in NVD, but this 2 step process is essential since you cannot create a survey without knowing what questions to ask from your qualitative discovery. This is important since you can get more insight with 1 on 1 meetings but these are not scalable (and that’s where surveys come in).
Build and iterate your prototype quickly.
A prototype is not your product. It’s a way to convey it.
Our idea was a bubble tea machine. However, we did not need to build the bubble tea machine in order to get the idea across. Instead, we created a 3D model (and later a render of it), so we could show users in order to get insight and feedback. Your prototype is not the completed version of your product, but rather a medium to explain your idea. During this phase it’s so essential to go with something quick so you can get feedback quickly and iterate as fast as possible. For example, for us we started with sketches of our machine and process, then moved onto a CAD model.
Pitch your idea.
Take advantage of student competitions and pitches!
As UBC students we have such an advantage because NVD professors and our UBC environment will give us information on competitions that we wouldn’t get otherwise. Join them, as they are low stakes (since you’re also competing with other students like you) and if you mess up here, it’s completely alright! Also, NVD literally teaches you everything you need to win (as proof, we won first place at Innovation Onboard).
Oh and also, competitions and pitches not only force you to come up with a slide deck, and a verbal pitch you’d practice over and over again, but it’s also a good way to get feedback from judges, and people outside of your team. As a bonus, it prepares you for other competitions and in class deliverables as well, since you can reuse your pitches, and improve upon them. Take advantage of these!
Get down to business.
The business side in 3 words: finances, market size, and competition
Finances
Who’s going to pay for your product? That’s how you’ll make money. There are a TON of aspects that go into finances, like financial projections, estimating salaries, lawyer fees, etc. but my biggest takeaways were the rules of thumb that were mentioned in class. These aren’t set in stone, but are meant to be guidelines:
- Advisors should be given 0.1%-1% (in terms of shares for your venture)
- Lawyers take up around $10k/year in fees (this does not account for any patenting)
- Estimated salaries are $5k/month (at least at the beginning, not including any external personnel)
- $50k is a typical ask to an investor for your first milestone
- Pre-seed amounts are at least $2 million (assuming at least 18 months of runway), so ask for this to investors!
Market Size
This is crucial because a small market size for your venture may not be worth pursuing, so it’s worth it to look into (or at least do a back-of-the-napkin type of calculation). We had an assignment where we had to come up with and pitch 3 business ideas, and we scrapped one of them entirely after looking at the market size. What you want is a TAM SAM SOM market estimation, and to look at your SOM (BobaBot’s is shown below).
Competition
Who out there is doing the same things you’re doing? What are you doing differently? What is your IP? Knowing who is out there gives you a comparable, which is extremely useful when it comes to evaluation. For example, for BobaBot we found Bobacino, and also used some of their numbers for our finances to get estimates. IP (intellectual property) is also something that competition judges, NVD professors, and investors will ask you about, and knowing how to search for relevant patents and define your IP strategy is a skill that’s taught in NVD that paid off in several of the competitions we participated in.
What’s going to stop you the most, is you.
Believe in yourself and your idea.
Throughout the course, our team and our idea (BobaBot) were met with several conflicting opinions. Some people thought it was the best idea in the world, and some thought the exact opposite. This is a lesson that I’ll always keep in mind: you have to believe in yourself, and your idea. Do customer discovery and participate in competitions to collect data, because the numbers don’t lie. If you’re not confident about your idea, figure out why and address that concern because at the end of the day, you’re going to limit yourself if you let the opposing opinions get to you. As an example, our team had our doubts about BobaBot because of this, then we won first place at Innovation Onboard. That’s a result, validation, and a number you can’t argue with.
A final note.
What’s the problem and who’s going to pay for it?
The answer to this is all you need to start a business.
I personally loved this course. It showed me that creating a startup is completely possible, and that anyone can do it. It’s not that hard, it just takes a lot of work. I still remember googling “How to start a business” during the summer before this course started, and remembered thinking about how difficult and impossible it would be. After all, 9/10 startups fail or whatever that statistic is, right? But the interesting thing is, you can change those odds depending on the work you put in, the level of validation, your team, and a billion other variables. It’s like grinding for a rare item in a video game: just because the odds are small, doesn’t mean you don’t give it a shot.
Finally, if you’re in Engineering and have any interest in business or entrepreneurship, I highly recommend you take this course! If you have any questions, feel free to reach out to me on LinkedIn, and if you want to check out BobaBot, you can do so here.
This was my first time writing an article on Medium, so feel free to leave any suggestions/constructive criticism below!
