Mexicans, in general, are people that like to move forward and fast (business wise). Which in the world of entrepreneurship and startups is a quality, as long as we consider some factors that are essential to avoid future headaches.
The first factor to consider is: how will I monetize my idea? or how will my business model be carried out? Many times, entrepreneurs have a great idea, but when they question what will be their revenue stream, it could be a little complicated.
One of the advantages of living in an emerging country, such as Mexico, is that possibly many of the ideas that you can think of for your new venture, could already exist in other countries, therefore, you could take on some factors and apply them to your idea in order to get an improved product or service that can relate to your product market fit. It is not always necessary to invent something completely new, we could innovate and improve an existing product or service using better resources and technology.
One of the factors that can decide on the success or failure of your startup is the team of co-founders. From my point of view, the team is the most important element, even more, than the idea itself. The team is what will define the DNA of your startup, we must be very accurate in knowing who we are going to invite to the adventure of starting your own business.
In all startups, there are two types of partners or shareholders, the ones who will work in the everyday operation and the ones who invest their money or required capital for the company to start.
The recommendation is as follows: Regarding the partner or shareholder you are going to invite to be working with you in everyday operation, make sure that their skills and yours complement each other and that he/she is willing to give one hundred and ten percent of his/her skills and abilities. Entrepreneurship is not an easy task! Something that VC and investors look for is a co-founding team that is a multi-disciplinary.
Regarding the shareholders or partners that invest their money, it is important that you do not only look for investment for your startup, but also that the shareholder can contribute to your project and open doors that you as an entrepreneur can not open, either due to your lack of experience, know-how, contacts, etc. Make your goal for capital investment smart money, at least for your lead investor.
When you have defined your revenue stream and who will be your partners, it is time to define, what will be your source of funding?
Regardless of getting government funds, borrowing from a financial institution, applying for 0% loans of government funds or registering and winning international entrepreneurship contests where winners receive money, the most common source of funding among entrepreneurs is bootstrapping, which means starting your startup with your own funds, to later get investment from third parties in exchange for participation in your startup.
When we cannot afford to start with our own resources, the steps of investment or financing in exchange for participation in your startup usually are the following:
- Friends and family: in this financing stage, your family and friends like your project and decide to invest. Average ticket 500,000 MXN.
- Seed Capital: in this stage of financing, you are looking for smart money investors, boutique investment funds and family offices to validate your sales model even further and increase it. Average ticket 1,000,000 MXN.
- Series A: the main investors are Venture Capital Funds VC, the company is expected to grow in terms of both its labor and corporate governance structure, the startup already has substantial traction. Average ticket of 5,000,000 MXN.
- Series B, C, D…: the exponential growth of the startup is sought, with the purpose of listing on the stock market or looking for an exit by a larger company. Average ticket over 10,000,000 MXN.
These are the basic stages of the life of a startup, as an entrepreneur and lawyer I recommend that all stages are supported with the necessary legal documentation, to protect the rights of the founders, as well as to offer certainty to the future investors.