What is a nascent-stage startup?
Every startup begins as the kernel of a business idea with no customers, no product and no funding. This unique, opportunity-filled stage offers benefits overlooked by many founders.
Mike Vladimer is the creator of Nascent Startups, a free newsletter and mentoring community to help founders of new startups. Over the past 20 years, Mike has started 10 startups and mentored 100 founders through UC Berkeley and Alchemist Accelerator. The word “nascent” means "beginning to exist or develop" in other words "only recently formed or started, but likely to grow larger quickly"
I’m passionate about this question: “You’ve got an idea for a tech startup. Now what?”
Every year, founders raise investment for thousands of startups. There are even more unfunded startups. Behind all of these startups are founders who are struggling to take their first steps. Personally, I’m amazed that so many people want this information, yet there’s no clear path.
In this post, I share my ideas on why it has been so hard to navigate your startup’s first steps and why you can now simplify. This is a big opportunity for founders.
When a founder creates a startup there are at least two stages:
A nascent-stage startup 🪺 that consists of the kernel of an idea, but no customers, no product and no funding
An early-stage startup 🐥 with initial customers, product and funding
The big idea is that startups without customers face different challenges than startups with customers. The founders I have mentored recognize this difference — like the difference between a bird and an egg. But this difference is not reflected in the most popular resources for founders, such as Y Combinator’s Startup School or The Lean Startup book, which address everything from idea to growth to exit. Where is the strategy just for startups without customers?
I believe this gap exists because in the past it was useful for founders to blur the lines between nascent stage and early stage. Now it’s not. Here’s why.
To build a startup, a founder needs at least five things:
A product that solves a problem
A market of customers with the problem
A team to run the business
A way to access customers
And funding to pay for all of this
The importance of these priorities has changed over time.
In the past, funding was the most important factor. 💸 Twenty years ago, a founder needed about $100,000 to buy servers and pay developers to write software. For example, in 2007, my friend needed a team of developers working for months to create payment software before launching his startup. Today, founders today can deploy that same software in minutes for less than a dollar ($1). Technology resources (compute, storage and networking) are now so affordable that an engineering budget of $100 today could pay for what cost $100,000 twenty years ago. This is why funding is no longer most important, at least in the first stages of creating a startup.
When funding was the most important factor, founders needed to pretend their nascent-stage startup was an early-stage startup. Founders used a strategy of fake it until you make it to get investment. After all, who would say to an investor, “I’m just starting. I’ve got the kernel of an idea for a business, but no product and no customers. Would you please give me funding?” 😂
Instead of pretending to be further along, founders can now treat their nascent startup as a project of exploration, approaching it with curiosity and hope. Embracing this change is the first step to taking advantage of the opportunities of nascent startups.
Today, founders need to prioritize searching for people in pain, meaning customer discovery. I believe there’s an opportunity to develop a specific, comprehensive strategy that addresses the question “You’ve got an idea for a tech startup. Now what?”. That’s why I’m building a community for founders and mentors focused nascent-stage startups. I hope you’ll join.
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