The friends might have liked to have more money in this first phase,
but being slightly underfunded teaches them an important lesson.
For a startup, cheapness is power. The lower your costs, the more
options you have—not just at this stage, but at every point till
you're profitable. When you have a high "burn rate," you're always
under time pressure, which means (a) you don't have time for your
ideas to evolve, and (b) you're often forced to take deals you don't
like.
Every startup's rule should be: spend little, and work fast.
After ten weeks' work the three friends have built a prototype that gives one a taste of what their product will do. It's not what they originally set out to do—in the process of writing it, they had some new ideas. And it only does a fraction of what the finished product will do, but that fraction includes stuff that no one else has done before.
They've also written at least a skeleton business plan, addressing the five fundamental questions: what they're going to do, why users need it, how large the market is, how they'll make money, and who the competitors are and why this company is going to beat them. (That last has to be more specific than "they suck" or "we'll work really hard.")
If you have to choose between spending time on the demo or the business plan, spend most on the demo. Software is not only more convincing, but a better way to explore ideas.
Every startup's rule should be: spend little, and work fast.
After ten weeks' work the three friends have built a prototype that gives one a taste of what their product will do. It's not what they originally set out to do—in the process of writing it, they had some new ideas. And it only does a fraction of what the finished product will do, but that fraction includes stuff that no one else has done before.
They've also written at least a skeleton business plan, addressing the five fundamental questions: what they're going to do, why users need it, how large the market is, how they'll make money, and who the competitors are and why this company is going to beat them. (That last has to be more specific than "they suck" or "we'll work really hard.")
If you have to choose between spending time on the demo or the business plan, spend most on the demo. Software is not only more convincing, but a better way to explore ideas.
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