Let me preface this with the fact I am not a business student. I am a computer science student but I have a great interest in creating a startup. These questions have probably been asked before, so if you have a link to informed discussions, please link me.
I have many ideas for products and services which I do have the ability to create myself, even if it would take awhile. What is the best way to go from having these ideas to creating a business out of them?
Let's say the service is a website. I create it including a way to monetize it (advertising, selling items). Is the next step opening the site to the public, paying to market it, then see if it takes off or not?
Or, is the next step having a closed (non-public) website and try pitch it to people to see if they want to invest?
My next question is about investors. Venture capital. How do they make their money back? And do they often make a huge profit or is it small profits? The way I understand it is: VCs invest money in your business and then when you go public, they have a certain amount of shares. Or, if instead of going public, the company gets bought. In this case how much goes to the VC? Is this organised at their investing stage?
Thanks for any answers, tips or links!
This has been posted several times. I have written several articles on the subject, which I provided in answer to the other similar questions, and are copied below:Web Startup Success Guide by Bob Walsh (link is to a review I wrote a while back).
As a fellow computer scientist, I can relate to trying to learn a whole new field that's kind of apart from your formal training.
First, you need to gauge how much you are really into business. Do you find yourself buying Business Week magazine? Do you already have a couple books on business just because of curiosity? If so, then you may be that rare sub-breed of business-inclined technical people :-). If you are not all that business inclined - and it's perfectly ok not to be - then you would be better off looking for a co-founder that is.
The reason I say this is that, just like the computer science side, there is a whole new world that is rapidly changing on the business side. Especially if you are talking about startups, the business aspects (Generalizing a bit, I mean "everything that is not pure technology") are changing a lot and require lot's of study. The emergence of social media, the gravitation away from mass advertising to word of mouth through social networks and one on one interaction, and countless other things: All of that means that you cannot buy some book, learn the business side, and get back to programming. You need to "live it" just like you do computer science. The more you get into it, the more you realize you need to get into it. It doesn't really stop.
So my bottom line is: If you naturally like the non computer science aspects of startups and business, then by all means, read up and get good at it. Read this board. Find out which people you would like to follow on the web and in books (my single best recommendation, Seth Godin. There are many more). If you do not like business, I'd like to save you some time and frustration: Grow your network so you can find an eventual co-founder that does specialize in the business side of things, and will allow you to specialize in the technical aspects of your future startup.
First tell your friends and family about your idea and see if you get a positive response. BUT make sure you ask for an honest opinion and not a generic "it's sound great" just to make you happy. If you don't care to tell the world about the idea, then ask on the web.
Then you feel there's a need for your idea, try to build it yourself if it's not too time consuming to build. I built a successful web hosting company from A-Z while keeping my day job and I didn't take any money from anyone and started with very little.
You can start a fremium web service where you offer a free service plus a paid premium one or build a free service and wait till you get enough traffic to start charging advertisers.
As a software engineering student myself, I would strongly recommend you to read The Four Steps To the Epiphany by Steve Blank. This book is basically a step by step guide for building startups. It explains the Customer Development process which consists of finding a market and early customers for innovative products. If puts the emphasis on getting outside of the building and getting facts from customers rather than opinions. Before reading this book, I thought the only way to build a startup was by trial and error. Now I have a checklist of things to do, plus when and how to do them.