The taste for a challenge, the thirst for independence, the desire to undertake, and the desire to break away from traditional work codes: this is in particular, what stimulates more and more young entrepreneurs who are embarking on the startup adventure. Intelvue will tell you everything you need to know about starting a startup in 2020.
1. What is a Startup?
A start-up, or “young shoot” in English, is a young company that starts with growth prospects and high development potential, which requires a serious investment to finance this growth rapidly and exponentially.
Acting in an emerging or unstable market, it does not have a fixed economic model. It is, therefore, by definition, a temporary state: if it cannot find its business model, it will fail. On the contrary, if it finds a sustainable economic model, it will develop to transform itself into a company in the more conventional sense of the term.
In short, a start-up is a young company whose product and target are not yet fully defined. Creating a startup requires a form of flexibility and adaptability, which must be reflected, as we will see them, even in the articles of association of the company.
2. How to find a business idea for your startup?
The longevity and success of a business are not only measured by the developing strategy and the investments, but also by the idea, the project, and who wishes to carry the business. It is thus necessary to find a vision for the creation of its business. Here’s how you can find a business idea for your startup:
1. Find an idea: listen to market needs
The startup is, in essence, the development of an innovation. It generally responds to a new emerging or non-existent need (some startups have created a demand that did not exist before) and which has not yet found an answer or an alternative.
Thus, it is a question of finding a need, a sector not yet exploited and which asks only to be. For this, it is essential, even necessary, to do a market study. A good idea will most often find an audience. It will allow you to assess the potential of your project quickly.
Examining the promising trends of the moment is also a way to find a good idea for a project.
2. Find an idea: improve the existing
In the absence of innovative ideas, you can also copy other existing ideas and projects that are still in their infancy to set up your startup. For example, “uber-eats” entered the home delivery market late without revolutionizing the idea. They only made the successful bet of a more efficient implementation of the project (better financing, efficient business model, intuitive UX design, etc.).
Therefore, the idea can be seen as an accessory. What matters is its implementation, focusing mainly on funding, a competent team, effective management of the workflow, etc.
Note: Copying an idea is not legally wrong. It is a free competition essential for the normal functioning of the market economy. On the other hand, be careful not to commit acts of unfair competition by committing acts of economic interference or debauchery. Likewise, remain vigilant against counterfeiting actions for the unauthorized use (or exploitation) of a trademark, patent, copyright, or designs.
Above all, to start well, you need reliable articles of association defining a social form adapted to your startup project.
3. How To Form a team For a start-up?
To set up a viable startup project, it is necessary to build a united and competent team that will help you to achieve all business goals and purposes within a time constraint. You have to spend quality time on forming a team for your startup; it’s a very crucial part of starting a startup in 2020. If you are failed in this step of starting a startup then you are failed in all steps of starting a startup.
Find associates to create a startup
The founding partners often have complementary profiles that allow them to pool their skills to develop a substantial project. To find your associates, several networks are considered: systems of former BDE students, incubators, your entourage, or even job sites.
Recruiting the team is then very important: everyone must integrate into a tribe with a strong corporate culture, guided by a spirit of adaptability and flexibility specific to the startup. At the start of the project, the lack of human resources meant that the founders had to perform tasks outside their skills scoop. Therefore, it is essential to develop a culture that encourages going out of the comfort zone, resilience to failure, and surpassing oneself.
It is also essential to discuss the fair distribution of capital between the founding partners of the startup. If, in principle, in traditional companies, the share capital consists of contributions in cash and in-kind, the distribution is made in due proportion to each. However, in startups, contributions to startups are essentially human: the founders who volunteer their work beyond simple financial assistance.
It is often incredibly challenging to determine each person’s contribution and involvement in the entrepreneurial project since this data is difficult to quantify.
Poor Distribution of Social Capital
However, a low social capital distribution that does not reflect everyone’s involvement could later turn out to be a conflict source. To remedy this situation, several statutory mechanisms can be imagined:
Change the distribution of share capital with the issuance of share subscription warrants in return for the work performed free of charge by the founders (opting for variable capital may prove particularly advantageous for implementing this system). For example, it is possible to set up a timesheet where each founder indicates his hours worked.
- At the end of the month, shares are issued to benefit those who have worked harder than others as compensation. It is possible to consider a measurement basis other than time, such as signed quotes, services provided for the company … To set up a system, it is highly recommended that you contact a legal professional.
- From the outset, consider contributions to industry (contributions of know-how). However, this type of assistance raises the question of their valuation without thinking about the numerous legal restrictions resulting from it (non-transferability of shares resulting from industry contributions, maximum quota in the share capital to be respected, etc.).
Once again, it is strongly recommended that you be accompanied by a contribution auditor and a legal professional to define their application terms.
The importance of the shareholders’ agreement for a startup
When the company is created, relations between the founders, and possibly with the other partners, are healthy and peaceful. Individual partners may also be present among the associates.
The shareholders’ agreement is a legal document that supplements the articles of association. It is, therefore, extra-statutory. Its main characteristic is to frame the relations between the signatory partners. This document makes it possible, in particular, to specify the entry and exit conditions for associates.
It is necessary to prepare and ask the right questions before drafting your shareholders’ agreement because it is its content. Therefore, the present clauses that will guarantee each signatory’s rights. The most important clauses are those relating to the right to vote, the reinforced majority, the right to information, the control of transfers, their termination, and the Drag Along with clause, the voting clause, or the preemption clause.
With a partners’ agreement, you thus anticipate each possible future conflict that could emerge. The shareholders’ agreement is, therefore, significant protection.
Also, the advantage of the shareholders’ agreement is that it exclusively commits the signatories. Thus, it is possible to provide a pact for each type of shareholder: a shareholder pact for the founders who will, for example, provide for a joint exit clause (to allow the founders to leave the company simultaneously) and a deal for the founders—investors with different rules.
The drafting of a shareholders’ agreement should, therefore, in no way be botched. It is advisable to surround yourself with a professional who can write it, adapting it entirely to your needs and situation and thus avoiding using free models, which would prove to be obsolete in the long term.
I am mentioning some points to keep remember when you are forming a team for a startup:
- Bring yourself first to start the process.
- Hire those candidates who can initiate anything fearlessly.
- Hire those who can initiate a good communication with the clients.
- Put some money for proper recruitment process otherwise saving a couple of bucks can make you millionaire from billionaire.
- Don’t kill the creativity of your team members by injecting traditional business culture.
So, we are done with the building of a team for your startup. Now, we are going to discuss how to finance your startup in early stages.
4. How to finance the development of your startup?
When creating your start-up, you will have to face a certain number of expenses related to the creation of the company itself or to its operation (cost of salaries, rent of your workspace, and cost of a trademark registration at the INPI…).
In addition, to quickly enter a market and grow your customer pool, you will need resources to ensure funding for your marketing, product design…
Even if you’ve saved a lot of money to get started, you won’t always have the means to develop the way you want. This is why start-ups often call on external funding:
- Various innovation aids can be considered: grants, loans at advantageous costs (offered by the Bpi in particular) or even tax credits.
- You can also finance your project through fundraising or a loan between individuals. Since October 2014, there has in fact been a derogation from the banking monopoly for loans to businesses of less than 1 million euros.
- To give your business a boost, it is also interesting to call on a support structure or participate in start-up competitions. The winners of these competitions sometimes obtain interesting financial aid. It is in any case a good opportunity to meet other professionals and increase your visibility.
The hidden costs of startups
In fact, when creating a startup, you have to be aware of all the costs that the creation will generate, but you also have to anticipate a set of costs that seem hidden at the start of the creation, but which are necessary for the creation. The functioning of society. The quality of your commercial contracts reflects the health of your startup and will give your future customers confidence.
Do not hesitate to contact us with any questions.