Most founders will encounter a circle of prerequisites in bringing their idea to fruition. Ventures require customers; customers require a competitive offering; a competitive offering requires talent and infrastructure; talent and infrastructure require money; money requires investors; investors require confidence; confidence requires customers. Thus, a slightly more complicated version of the age old question- which came first, the chicken or the egg.
In the case of a startup, the answer is the planning of the entrepreneur, or in the allegory language of chickens and eggs, the farmer. Without the plans of the founder (or founding team), nothing happens. And the better the plans, the more likely the required elements all come together, and bear up under the weight of the certain obstacles to be encountered.
For many entrepreneurs, the simple answer for where to start is money, which is why it is usually the most difficult place to start. Investors- whether it be sophisticated investors, family and friends, or the principals of the company- need to have confidence- actually, quite a bit of confidence- in the ability of the venture to return the money and some profit, and start far behind the founder in this regard. This confidence requires a belief in customers, a belief in execution, and a belief in competitiveness. An idea may be good or it may be mediocre, but it's success will depend on customers, execution, and the ability of the leadership team to deal with competition.
Business plans have the ability to generate confidence when they're well thought through. Jeff Bezos has said Amazon's approach is to think up everything that could possibly go wrong- and then figure out how to address, one by one, each potential problem. This careful approach to every detail is required for startup success. A pro forma financial projection should include all the assumptions used to arrive at the numbers, and the entrepreneur needs to have the answers for how they arrived at those assumptions.
This is one of the reasons that investors generally look at the team behind a startup first and foremost. Experienced and capable teams are more likely to know true costs, see potential problems, and have experience anticipating and dealing with competition. Startup business plans must communicate confidence, with provable details.
So the focus for any new venture must be proving out the business model. Prototypes need to be created, customers need to be engaged, data needs to be gathered, and the business model validated before investors can be expected to join. Savings accounts and generous and capable relatives, who are making more a gift than an investment, can be very helpful at the prototype stage, and the ability to wisely spend time and money on creating provable prototype products or services is paramount. This is generally the entire focus of incubators such as Y-combinator, TechStars, and Chicago's TechNexus, Excelerate Labs, 1871, Lightbank, Chicago Fashion Incubator, and others.
Once the prototypes are created, users engaged, and data gathered, the assumptions of the business model can start being validated. Hopefully, the math works out at some point, and the company can win the additional investment needed to get the venture launched. At this point, the entrepreneur must pay careful attention to what is happening- not what was planned on happening. Most successful companies fail numerous times before they succeed (there's a reason for the term "funding round"), with at least one pivot- no different than the farmer who has to respond to the drought, wolves, etc.- and it is the role of the startup leader to steer the venture through the obstacles that will present themselves.
Bob Galvin, former Motorola CEO and son of founder Paul Galvin, was always quick to credit founders for the success of the American economy. He counted founders as a special breed to be honored, not only for their vision but also their courage. The courage to take ownership of challenges, to lead teams in confronting problems, and to be honest and grounded in reality at every stage while at the same time selling the vision of success that birthed the startup venture are the real prerequisites to startup success; the chickens and eggs will follow.
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