Who we are

Actions[edit]

Startups typically begin by a founder (solo-founder) or co-founders who have a way to solve a problem. The founder of a startup will begin market validation by problem interview, solution interview, and building a minimum viable product (MVP), i.e. a prototype, to develop and validate their business models. The startup process can take a long period of time (by some estimates, three years or longer), and hence sustaining effort is required. Over the long term, sustaining effort is especially challenging because of the high failure rates and uncertain outcomes.[6] Having a business plan in place outlines what to do and how to plan and achieve an idea in the future. Typically, these plans outline the first 3 to 5 years of your business strategy. [7]

ecause of the lack of information, high uncertainty, the need to make decisions quickly, founders of

Models behind startups presenting as ventures are usually associated with design science. Design science uses design principles considered to be a coherent set of normative ideas and propositions to design and construct the company’s backbone.[8] For example, one of the initial design principles is “affordable loss”.[9]

Design principles[edit]

Heuristics and biases in startup actions[edit]

Because of the lack of information, high uncertainty, the need to make decisions quickly, founders of startups use many heuristics and exhibit biases in their startup actions. Biases and heuristics are parts of our cognitive toolboxes in the decision-making process. They help us decide quickly as possible under uncertainty but sometimes become erroneous and fallacious.[10]

Entrepreneurs often become overconfident about their startups and their influence on an outcome (case of the illusion of control). Entrepreneurs tend to believe they have more degree of control over events, discounting the role of luck. Below are some of the most critical decision biases of entrepreneurs to start up a new business.[10]

  1. Overconfidence: Perceive a subjective certainty higher than the objective accuracy.
  2. Illusion of control: Overemphasize how much skills, instead of chance, improve performance.
  3. The law of small numbers: Reach conclusions about a larger population using a limited sample.
  4. Availability bias: Make judgments about the probability of events based on how easy it is to think of examples.
  5. Escalation of commitment: Persist unduly with unsuccessful initiatives or courses of action.

Startups use several action principles to generate evidence as quickly as possible to reduce the downside effect of decision biases such as an escalation of commitment, overconfidence, and the illusion of control.

Mentoring[edit]

Many entrepreneurs seek feedback from mentors in creating their startups. Mentors guide founders and impart entrepreneurial skills and may increase the self-efficacy of nascent entrepreneurs.[11] Mentoring offers direction for entrepreneurs to enhance their knowledge of how to sustain their assets relating to their status and identity and strengthen their real-time skills.[12]

Principles[edit]

There are many principles in creating a startup. Some of the principles are listed below.

Lean startup[edit]

Lean startup is a clear set of principles to create and design startups under limited resources and tremendous uncertainty to build their ventures more flexibly and at a lower cost. It is based on the idea that entrepreneurs can make their implicit assumptions about how their venture works explicit and empirically testing it.[13] The empirical test is to de/validate these assumptions and to get an engaged understanding of the business model of the new ventures, and in doing so, the new ventures are created iteratively in a build–measure–learn loop. Hence, lean startup is a set of principles for entrepreneurial learning and business model design. More precisely, it is a set of design principles aimed for iteratively experiential learning under uncertainty in an engaged empirical manner. Typically, lean startup focuses on a few lean principles:

Market validation[edit]

A key principle of startup is to validate the market need before providing a customer-centric product or service to avoid business ideas with weak demand.[14] Market validation can be done in a number of ways, including surveys, cold calling, email responses, word of mouth or through sample research.[15]

Design thinking[edit]

Design thinking is used to understand the customers’ need in an engaged manner. Design thinking and customer development can be biased because they do not remove the risk of bias because the same biases will manifest themselves in the sources of information, the type of information sought, and the interpretation of that information.[16] Encouraging people to “consider the opposite” of whatever decision they are about to make tends to reduce biases such as overconfidence, the hindsight bias, and anchoring (Larrick, 2004; Mussweiler, Strack, & Pfeiffer, 2000).

Decision-making under uncertainty[edit]

In startups, many decisions are made under uncertainty,[4] and hence a key principle for startups is to be agile and flexible. Founders can embed options to design startups in flexible manners, so that the startups can change easily in future.

Uncertainty can vary within-person (I feel more uncertain this year than last year) and between-person (he feels more uncertain than she does). A study found that when entrepreneurs feel more uncertain, they identify more opportunities (within-person difference), but entrepreneurs who perceive more uncertainties than others do not identify more opportunities than others do (no between-person difference).[4]

Partnering[edit]

Startups may form partnerships with other firms to enable their business model to operate.[17] To become attractive to other businesses, startups need to align their internal features, such as management style and products with the market situation. In their 2013 study, Kask and Linton develop two ideal profiles, or also known as configurations or archetypes, for startups that are commercializing inventions. The inheritor profile calls for a management style that is not too entrepreneurial (more conservative) and the startup should have an incremental invention (building on a previous standard). This profile is set out to be more successful (in finding a business partner) in a market that has a dominant design (a clear standard is applied in this market). In contrast to this profile is the originator which has a management style that is highly entrepreneurial and in which a radical invention or a disruptive innovation (totally new standard) is being developed. This profile is set out to be more successful (in finding a business partner) in a market that does not have a dominant design (established standard). New startups should align themselves to one of the profiles when commercializing an invention to be able to find and be attractive to a business partner. By finding a business partner, a startup has greater chances of becoming successful.[18]

Startups usually need many different partners to realize their business idea. The commercialization process is often a bumpy road with iterations and new insights during the process. Hasche and Linton (2018)[19] argue that startups can learn from their relationships with other firms, and even if the relationship ends, the startup will have gained valuable knowledge about how it should move on going forward. When a relationship is failing for a startup it needs to make changes. Three types of changes can be identified according to Hasche and Linton (2018):[19]