Build a Community - Deepstash

Build a Community

  • Mojang: The masons behind Minecraft never raised any venture capital, employed just 50 people, and earned nearly a billion dollars in profit before selling to Microsoft. Minecraft grew by charging users a flat fee, resulting in a $2.5 billion dollar acquisition.
  • Craigslist: Craigslist parlayed an early launch in the first dot-com boom into a durable long-term advantage. Craigslist is the #17 most visited site in the US.

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MORE IDEAS FROM THEARTICLE

The easiest way to build a useful product is to automate some part of your daily workflow which ensures you’ve got proven demand for your product and a pre-existing funding source.

Successful examples:

  • MailChimp: built a tool that would streamline the process of email newsletters created.
  • Lynda: produced training films for her students. She spent the next two decades building a content library and tech assets.
  • PluralSight: Like Lynda.com, PluralSight offers remote software training. 

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  • Wayfair: The company is currently worth $6 billion dollars and because they suffered little dilution, the founders are worth a billion dollars each!
  • Zip Recruiter: “We started out with humble ambitions, to bootstrap a lifestyle business,” said Co-founder/CEO Ian Siegel in an interview with Alex Konrad from Forbes. Those ambitions were met and superseded.
  • Nerdwallet: The personal finance service that promises to help young people save money lived on a tight budget from the time it was founded in 2009 until it a raised $64M series A in 2015.

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Scratch Your Own Itch
  • Ipsy: Youtuber Michelle Phan leveraged her online celebrity — 8M+ YouTube subscribers — to turn it into a phenomenon. 
  • ShutterStock: Jon Oringer combined his set of skills and used 30,000 photos from his personal photo library to start a stock photo service.
  • Quizlet: it was founded by a precocious 15-year-old who wanted to ace his French final.
  • Skyscanner: The company started as a bespoke spreadsheet to help its founder find the best flight prices.

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  • ButcherBox has thrived, earning as much as a million dollars a week by skipping expensive ad channels and developing ongoing, capital-efficient relationships with influencers.
  • Cards Against Humanity: They’ve sustained their brand with a series of canny marketing stunts, selling cow poop, cutting up a Picasso, etc.
  • GoFundMe: Viral marketing is dismissed, rightfully, when it is tacked on to a business model, but it can be a powerful driver when properly integrated into a product. Paired with hyper-efficient Conversion Rate Optimization, it can be unbeatable. 

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Wayfair was profitable from its first month of operation and grew profitably for a decade until they ultimately raised a series A. the company is currently worth $6 billion dollars and because they suffered little dilution, the founders are worth a billion dollars each. Zip recruiter: “we started out with humble ambitions, to Bootstrap a lifestyle business,” said Co-Founder/Ceo Ian Siegel.

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Funding doesn’t always come millions of dollars at a time. Founders can scrape together money from grants, incubators, and angels, or even pre-sales.

  • CoolMiniOrNot: it started out as a website where geeks could show off their ability to paint Dungeons & Dragons figurines. 
  • The Wirecutter: Who says blogging doesn’t pay? Founded by a former Gizmodo editor, the Wirecutter promised more thorough and fair-minded reviews, and paired that with Amazon affiliate feed.

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Start With a Capital Efficient Product

Instead of trying to compete with a company like Apple, these scrappy startups filled the gap left by RadioShack and built multi-million dollar businesses worthy of emulation.

  • AdaFruit Industries: Limor Fried started her DIY electronics eCommerce empire as a student at MIT by assembling DIY kits comprised of off-the-shelf parts. 
  • SparkFun: Nathan Seidle started Sparkfun from his dorm room by selling electronics kits and oddball components to engineers who wanted to explore exotic new sensors and systems. 

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Solving an old problem with a new technology or UX layer can be enough to build a multi-billion dollar business.

  • Shopify: Shopify’s founders were searching for a shopping cart solution when they were setting up an eCommerce site for snowboarders. Unable to find one, they decided to scratch their own itch and built a bespoke solution on the then red-hot Ruby on Rails framework. 
  • Braintree Payments: Exchanging money online, without being fleeced by fraudsters, is one of the oldest problems on the web. 

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Venture capital has powered nearly every major tech company from Apple to Zappos. Just remember that you don’t need a penny to get started. You don’t need permission from funders to found and scale a startup. So the next time a VC tells you they “pass,” remember these three principles:

  • It’s possible to get a tech-enabled business off the ground with no capital.
  • It’s feasible to scale a tech business rapidly with very little capital.
  • It’s often in the founder’s best interest to limit the amount of capital they take.

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  • PaintNite: While their competitors relied on a slow, expensive franchise sales model, PaintNite paired art teachers with existing bars that wanted to sell wine on weekdays and created a business that did $30 million in revenue the year before it raised venture capital.
  • Tough Mudder: Track & field entrepreneur Will Dean turned $7,000 in savings into a company with over $100 million dollars in annual revenue. 

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  • SurveyMonkey was founded in the dot-com bubble of the 90s; it survived the dot-com crash and steadily grew into a nine-figure run rate, only raising $100 million 11 years after getting started.
  • Grasshopper is a phone networking company that had 150,000 customers, over $30 million in annual revenue, but no VC on the books, and was eventually acquired by Citrix.
  • GitHub took the pain out of version control and became a critical part of the tech ecosystem before raising capital.

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  • RXBar: When one of the entrepreneurs behind RXBar shared his ambitious business plan with his father, he told his founder son “You need to shut up and sell 1,000 bars.”
  • Scentsy: They sold candles at swap meets when they couldn’t afford to buy ads.
  • Spanx: Shark Tank judge Sara Blakely turned a $5,000 investment into an Oprah-approved approved garment that generates $400M in revenue annually. 
  • Grammarly: Spell checkers around for decades, but Grammarly made enough improvements that they could charge over 800 universities and hundreds of thousands of writers.

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Fundraising sources

Fundraising is both a science and an art. The method that a startup uses to raise money helps determine its financial situation and how much help and advice the startup receives along the way.

Startups may initially use personal or family funds to start the business, but crowdfunding has also grown in popularity. Still, venture capital funding is the dominant source and is at an all-time high in recent years; CB insights reports that U.S.-based venture capital investments totaled $130 billion in 2020.

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60% Were Not First-Time Founders
  1. Among the founders of billion-dollar startups, almost 60% were not first-time founders.
  2. In a randomly selected group of startups that had raised a minimum of $3 million in venture capital funding but didn’t reach unicorn status — the typical picture for a seed-funded startup — about 40% were not first-time founders.
  3. The statistic shows that repeat founders were more likely to start a billion-dollar company.
  4. This is not to discourage first-time founders. It is rather to encourage those with a failed or those with a small outcome in the first attempt to go at it again.

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Startups and Entrepreneurs: Wait Or Go Ahead?
  • The pandemic is causing heavy financial losses across industries — but that doesn’t mean entrepreneurs and startups need to hold back until the economy recovers.
  • It’s not all doom and gloom, and some companies have had the best weeks and months ever.
  • About $314 billion in early-stage VC funding is currently available. This is a time when one can get good resources at decent value.

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