How to Build a Tech Startup with Zero Tech Experience

How to Build a Tech Startup with Zero Tech Experience 1152 768 James Knight

Here’s a myth buster: tech startups are rarely tech companies.

After working with tech startups for over ten years, I’ve learned most don’t have tech founders or tech executives on day 1 or day even 180. 

If you want to start a tech company, your non-technical background has nothing to do with it.

Believe it or not, tech startups are no longer about building tech from scratch. 

As a non-technical founder, you can leverage tech adjacent, tech advisors, open AIs and APIs, or take the tech off the shelf to bring your idea to life much faster—without diluting your equity against a full-time tech executive. 

It’s all about saving costs and executing things faster: A basic mantra for startup success.

Starting a tech startup with no tech experience isn’t a made-up story. Be sure to read to the end for a recent real-life success story.

Table of Contents:

You Don’t Need Tech Experience For a Tech Startup

OK, you might not be the type to code your way to building a million-dollar tech startup. But you’re not the only one.

A 2014 study conducted in NYC by Endeavor revealed— ⅔ of tech startups are launched by founders without computer science or STEM-related backgrounds.

The significant stakes in the startup environment, whether you are a founder with tech experience or not, are big.

Every startup must turn into a profitable one or be acquired before it burns out.

A startup must address an inefficiency or issue that currently exists. This could be why effective leadership involves a blend of technical and business skills, which can come from a small group (Jobs and Wozniak) or a single person (Bezos).

“I’m not a tech guy. I’m looking at the technology with the eyes of my customers, normal people’s eyes.” – Jack Ma, Co-founder of Alibaba Group

Many tech companies without tech-savvy founders or Stanford graduates have managed to run massive tech giants.

Melody McCloskey, who founded StyleSeat; Michael Dell, the visionary behind Dell; Sean Rad, one of the co-founders of Tinder; and Steve Jobs, who founded Apple, built amazing tech products without former tech education. 

You can, too.

In this article, I will show you how to start a tech startup as a non-technical founder.

You Don’t Need a CTO to Start a Tech Startup

You’re building a tech startup, so you should be ready to invest heavily in tech, right? Bringing in a Chief Technical Officer (CTO) surely makes sense.

However, you must determine if you have the scale for a CTO to manage. Will you enjoy driving an additional role when your CTO has little to do in your early-stage startup?

But, if you are working with the right developers, freelancers, or the right kind of agency— who will not use your naivete and lack of experience or lies and obfuscates— you can make it happen. 

Side note: Even if you’re using tech adjacent, open sources and APIs to build yourself a tech product. You will need massive help in customization and implementation. That costs money and time. 

Here’s the caveat: Even with a technical co-founder, you’ll likely need technical execution support. The person you want to be in your long-term tech executive seat might not be the same person who can scrap together a bunch of different technologies at day zero. 

For the execution, you will require full-time hires, contractors, freelancers, or an agency. This can be tricky and time-consuming. Here is some help.

Hiring Developers and Freelancers For a Tech Startup

Finding the right tech support as a non-technical founder can be challenging. Here are a few ways to make it easier for your tech startup.

Use Trusted Sites To Find Talent

You can find talented developers online using trusted sites like Upwork, Linkedin, and Fiverr. Take the time to read reviews, check ratings, and verify the credentials of candidates.

Communicate Your Project Needs

Outline the scope of your project needs to potential talent. Explain the goals, deliverables, timeline, and necessary technologies or skills. It’s good to know about your desired tech here—more on this as you read on.

Request Proof of Work and Expertise

Always ask candidates for more information about their previous experience as a programmer—and request samples of their work, such as code snippets, project documentation, or links to previous projects they’ve contributed to. 

Set a Clear Budget

Agree on a project budget or hourly rate before the job begins. It sets clear expectations, reduces potential misunderstandings, and helps in budget management and legal protection.  

A Non-Tech Background is a Good Thing

Success often asks for a non-linear route. Many blame Complexity Theory for the success of many startups. 

This might explain why Airbnb didn’t originate from seasoned hotel professionals—and why not all tech companies are founded by computer scientists. 

Instead, they usually have fresh (newbie) perceptiveness. Let’s look at some examples.


In October 2007, Airbnb was started by Brian Chesky and Joe Gebbia. Both were graduates in industrial and graphic design. They initiated Airbnb by placing an air mattress in their living room and changing it into an impromptu bed and breakfast.

The third co-founder, Nathan, a tech guy, joined in February 2008. 

But by 2009, the weekly revenue of Airbnb shrank to $200. Investors typically seek companies exhibiting exponential hockey stick-type growth. And according to co-founder Joe Gebbia, the company had a horizontal drumstick graph. The company was definitely on the edge. 

One afternoon, the Airbnb team with Paul Graham, the co-founder of Y Combinator, searched into their site’s data to figure out why things were not working.

After hours of investigation, Gebbia noticed a common thread among the 40 listings: subpar photos. With this info, the three-person team flew to New York, observed all the customer listing properties, and upgraded amateur shots to captivating high-resolution images.

Just one week later, the results were in—improving the quality of the photos had doubled their weekly revenue to $400. 

This moment of realization and swift action marked a turning point in Airbnb’s journey toward becoming the global phenomenon it is today, with a $85.89B net worth.


Shipt’s Founder, Bill Smith, dropped out of school at 16. Smith spent his career as a serial entrepreneur running multiple businesses. In 2014, he started a financial technology company, where he got familiarised with the technical space. 

Later, he identified a gap in grocery shopping and, to validate the demand, sold 1,000 memberships before writing a single line of code. His varied experiences outside of tech allowed him to replicate another success story. 

Coffee Meets Bagel

Coffee Meets Bagel’s Founder, Arum Kang, started a dating platform as a non-technical founder. She initially faced challenges with freelance developers but eventually recruited a dedicated team.

She also highly insisted on keeping MVPs simple, without too many features— to keep the costs down and put extra focus on solving customers’ vital problems and market research.

All these founders had something more than just an idea. These founders understood that launching a tech company can be expensive. They prioritized a viable business, solid processes, and a strong team in place before committing resources.

These are just a few examples of how non-technical founders, too, can make a BIG difference. 

Learn How to Code Your way to a Tech Startup

Non-technical founders often learn how to code

I know it sounds like going back to school and starting over again. 

But, some non-technical founders have made this possible. They didn’t have a budget to hire a dev and give probably $100,000. But they had time, so they invested that.

An Example – Paperstack

Vadim Lidich, the founder of Paperstack, shared his previous startup’s story of how he learned to write code for his startup from scratch. 

First, he figured out a language for development. He started learning Javascript, which was known to be a multi-purpose programming language. 

The tech product he wanted to create was a platform that would link available office space with potential tenants, effectively eliminating the need for a middleman broker. 

To learn how to code, he used YouTube. He “borrowed” a server configuration from a JavaScript tutorial on YouTube, a signup form from a project on GitHub, and set a database schema from a developer’s walkthrough on Medium. 

His co-founder also joined in; they shared duties and worked together on the project. Both handled business activities during the day, including sales calls, emails, and fundraising, while working on a prototype at night.

They started assembling each code until their real estate marketplace was complete. They were shocked that the entire platform was functional.

This is a prime example of how learning to code is not impossible for non-tech entrepreneurs who seek to learn. 

Utilize Tech Podcasts

It’s not uncommon for non-technical founders to find themselves trying to learn about technology while also raising money, managing a team, and developing a product.

If you find yourself in a similar position, tech podcasts can help you learn about tech and how the world’s favorites were developed.

Check out these Top Tech Podcasts for non-technical founders.

Learn the Basics of Starting a Tech Startup 

Can writing code help drive sales and save you enough to do what you do best? Do you have the time and patience to master it?

There’s a chance you don’t. 

Alternatively, you can learn the basics to help you team up effectively with your newly hired developers or freelancers. 

Here are four proven ways to focus on what you do best.

(1) Build Network = Networth

Use every networking opportunity available to benefit your tech startup.

Share your ideas with the industry veterans at networking events or hold interactions with current customers. Do not hesitate to ask for honest feedback and record their insights. 

This unbiased advice can help you and your development partner bring your ideal tech product to life. 

(2) Know your sh*t

No one knows your market better than you.

Help your development team by researching and adding a unique feature to your service or product. No one will do this for you; you have to do this. 

(3) Make it visible

Draw it on the board – scribble down everything.

You can demonstrate a wireframe to make it visual for your developer, where you need that widget, what type of design you seek, and the final layout you’re looking forward to.

Having a layout of what the product should look like helps keep the tech and non-tech teams on the same page.

No Nerds CEO James Knight conducting a roadmap workshop
Here I am doing this for Death Row Records this past year.

(4) Learn from others and let them know

You never know; competitors can save you big time.

It is the cheapest way to avoid mistakes. It always makes sense to focus on failure stories compared to success stories; this is how to learn what to avoid and increase the chances of a successful business future. 

To learn about international business failures, check out websites like (The name makes sense)

Internal Communication is Key For Your Tech Startup

To get the perfect outcome without the need for any further alterations,

To bridge the gap for lack of developer knowledge about your startup idea,

For faster implementation, launches, and updates,

You should master internal communication—translating your needs, market needs, and customer needs to your coder.

Otherwise, you and your development team will be confused, potentially costing you money and hours lost. This happens a lot. I take these calls regularly and hear the stories.

Non-technical founders often write out their product needs while completely omitting to consider the app’s backend. As a result, the time needed to develop an app grows.

This is why I always start every single project with an in-depth roadmap.

Tips for communicating with your dev team

The following tips will help not only when hiring developers or freelancers but also when working together on the all-important product you’re bringing to market:

  • Know the standard developer terms like DevOps, Frameworks, CSS, CSS3, HTML, and HTML5
  • Outline your must-haves 
  • Divide your project plan into bite-sized chunks
  • Dedicate a timeline to each task 
  • Stay ahead of your developers 
  • Don’t assume; confirm things. Everything.

Why Early-Stage Tech Startups Must Presell

There are startup projects and startup businesses; the difference is sheer— is someone buying from you? Do you have any customers, maybe 100 or even 10? 

You can’t be a tech startup founder just by declaring you are one.

You must have a graph going upward and up to the right.

You’ll be an unfunded founder, and your self-proclaimed title won’t carry much weight until you’ve actually achieved something. When you sell something to someone, people start to pay attention. 

That’s why execution is the most vital. 

Many founders I have worked with made this mistake. They don’t start preselling.

A Prime Example

Tom Sagi, Co-Founder and CEO of Hourly, realized that his family’s construction business needed an update to manage his hourly workers’ time and pay. But he couldn’t find a single app that could do everything.

To bridge the gap despite having no prior experience building a tech firm. In 2018, he introduced Hourly, an all-in-one application to handle time and attendance, payroll, and workers’ compensation insurance with a single click. Also, it successfully raised $7.2 million. 

But he waited.

Marketing was put on hold while Sagi built the Hourly platform. He believed that a product couldn’t be marketed unless all the issues were resolved and it was flawless.

But product promotion requires time. He might have started developing Hourly’s brand and audience throughout that development period and created the groundwork for launching Hourly.

Instead, he launched his client acquisition and branding initiatives from scratch when he was ready to launch the platform. 

So, don’t just sit and wait for things to complete. Trust your idea.

You have to make your move now.

Storymapping Can Speed Everything Up

In 2005, Jeff Patton introduced storymapping to address a common problem in projects: focusing on feature development at the expense of the overall user experience and agile software development. 

What is Storymapping?

Storymapping is a technique that visually represents how a solution will be developed incrementally with fast feedback cycles. 

Unfortunately, most tech startups don’t storymap, and more often than not, they end up wasting 6-figures and months building the wrong product with the wrong team.

This happened to several of our most important clients.

Here’s how storymapping is a game-changer for tech startups:

Comprehensive Visualization

User storymapping provides a complete and comprehensive visual representation of a project or product, allowing teams to see the entire landscape of tasks and features at once.

A diagram showing the stormapping process of an app and its user features.
Storymapping Visualization
Gap analysis

Teams can spend time developing solutions and identifying the jigsaw pieces lacking from the solution.


Teams can easily rearrange user stories on the story map to determine the optimal sequence of processes for end-users. This helps in prioritizing “must-have” stories.

Avoid waste

With a holistic vision, teams can prevent over-engineering or developing superfluous features. 

Shared Understanding

Allows team members to connect the dots between user stories, features, releases, and the overall product roadmap, ensuring everyone is on the same page.

Key points from the Patton, J & Economy, P, 2014, User Story Mapping book sketched out with the writer in the background.
Source: Patton, J & Economy, P, 2014, User Story Mapping book

How to Prioritize Storymapping Steps

Minimum Viable Product – For example, if you’re making an app, your million-dollar MVP might be as basic as allowing users to log in and perform an important action.

Prioritization – You can determine which steps are necessary (must-haves) and which ones are nice to have but not critical (could-haves). This way, you ensure you address the most important user needs. 

Mitigated risk – Storymapping is like a pair of binoculars for spotting potential challenges or roadblocks in your project plan. It helps you identify the riskier areas that could cause problems down the road.

Success Story – A Tech Startup with No Experience (or Money)

BlueVerse came to us as a tech startup with no experience whatsoever and without a penny to build anything. These three young entrepreneurs were just about able to raise the funds for a roadmap workshop.

Without writing any code or hiring a single developer, they created a 12-month, step-by-step roadmap and a clickable prototype in just five days. They showcased their roadmap and functioning prototype to investors, which allowed them to close a 6-figure seed round.

The tech startup is experiencing rapid growth, raising $1M @ $5M valuation in seed financing backed by an elite advisory board, with over $70M generated for its partnered businesses.

BlueVerse CEO Mason Still holding two checks the startup received for funding.
BlueVerse CEO Mason Still, with the all-important funding

A founder can come from any walk of life, and you don’t need to learn how to create an app if you are an entrepreneur with the desire to launch an app; instead, you need to understand how to complete tasks.

Market research, sales prowess, fundraising, monetization strategy, and hiring are key qualities that contribute to your tech startup’s success. Non-tech leaders need to be good at attracting technical talent.

Teams with various expertise, where individuals complement each other and work together to achieve common goals, have the highest chance of success.

Starting a Tech Startup?

Why We Always Start Our Projects With Roadmapping

Why We Always Start Our Projects With Roadmapping 1456 816 James Knight

In my ten years of working in the tech industry, I have seen startups consistently wasting $100K+ and 6 – 12 months building the wrong product with the wrong team. 

Without strategic roadmapping, startup founders risk misalignment, wasted resources, and a diluted product vision. It’s a shortcut to startup chaos.

Unfortunately, most founders don’t use roadmapping. Instead, they write out a spec, take it to a dev shop, and trust whatever number they tell you. That’s what these founders did. 

One of the significant problems of not starting your project with roadmapping is that there’s a strong chance you put the essential pieces of your project last. 

When building new and innovative things, we are, by definition, exploring an unexplored space. If someone else is already doing it, then we’re not really entrepreneurs. We’re just copying.

So, when we are trying to do something new or do something in a new way, by definition, we’re exploring the unknown. Too many projects start by confirming the known things and then moving on to the unknown stuff at the end. 

In this article, I will cover the following to prevent you from doing this:

If you already see the light, I recommend roadmapping your project before spending a single dime or making a commitment with anyone. 

Roadmap Your Project

What is Roadmapping?

Roadmapping is an organization’s strategic planning process to outline a clear and visual path for achieving its goals and objectives over a specific time frame.

With product roadmapping, this process involves determining the requirements needed for taking a company’s product vision to a market-ready product. 

Product roadmapping involves:

  • Defining your targets.
  • Exploring risks and identifying key questions.
  • Sketching your customer map.
  • Strategically aligning these targets, questions, and maps.

When you don’t Roadmap your product

If a piece of software has one new innovation at its core, that could be an innovative application of technology, an innovative technology all on its own, or it could be applying a solution that’s worked in another industry to our industry, some innovation, that’s new. 

But it’s got a bunch of other things, too. That piece of software has all of the boilerplate, as we call it, all of the admin admin, the login, the settings, and the stuff that every piece of software has. 

If we don’t roadmap and identify the important bits first, we’ll often start with the stuff that we already know and just confirm it. 

Wasting money and time

So, we’ll build a login for our new software, build settings, and create all of these things that have been made before. And then, at the very end of the project, we’ll get to the hard part. 

At this point, we’ve already spent 80% of our budget. We’ve already wasted 80% of the time that we thought we were going to take this whole project, and when we get to this last 20%, we realize now that this innovative part is hard, and it might take another 80%. 

And it might cost another 80%. So our budget is 50% over, and we will be six months late. All because we did all the stuff we knew we could do before doing the stuff that we didn’t / weren’t sure we could.

This applies not only to technical or product pieces but to anything unknown when building a new project. If no one will respond to your emails because they’re not interested in what you’re selling. You probably shouldn’t build it.

We should make sure that the people who are going to buy our product will buy it before we build it and invest a ton of money in it. 

We roadmap so that we can identify the risks, bottlenecks, and questions that need to be answered before we go and start building things and spending money.

How Roadmapping Helps Visionaries

James Knight, No Nerds CEO conducting a roadmap workshop.
No Nerds Roadmap w/ Death Row Records 2023

Another reason we roadmap is that there are a lot of projects that start with this Polaris in mind, this North Star that founders at pointing towards, and entrepreneurs are by nature visionary. 

Founders have big visions; they have this idea of an idealized product they want to bring to market. And that vision is sometimes huge. And, a lot of times, they’ll go and base that vision on competitors in the market. 

They’ll say, well, WhatsApp has this feature. So we need that feature. Instagram has this feature. So we need that feature. Gmail does this. YouTube does this. So we need to do this too.

That’s great, and it’s great to have that Polaris, but a lot of times, we have budgetary or timeline or go-to-market constraints that need to be satisfied in 30 days and 90 days in six months, 12 months.

And so what roadmapping does is it helps us identify that Polaris, put it on the board as the Northstar that we always want to point towards, but also it helps us identify off ramps.

For example – what can we do in 30 days? What would success look like in 30 days?

Strategic roadmapping answers these questions and risks we identified and allows us to actually get this thing built while at the same time gaining some interim success along the way as we continue marching towards that Polaris.

Why we use Workshops for Product Roadmapping

We use workshops as part of our process, as workshop mentality has so many benefits when it comes to product roadmapping. 

A good example is when you and your team have been working on a problem for months, maybe even years. We often use workshops to sit down with people who have had this brilliant, innovative idea stewing in their brains in some capacity for five-plus years.

When you have an idea you’ve been thinking about for five years, that idea matures and evolves in your head. Our memories are relatively faulty. And so even with a partner that you talk to every day, there will be elements of your plan in your head that have evolved in a different direction than your partners. 

There will be conversations you had with partner A 12 months ago that the two of you remember that you did not have with partner B six months ago when they joined. And as a result, they have been operating with a different assumption this entire time. 

And it never occurred to you that this could be the case because you and Partner A are so sure about that from the conversation you had.

Workshops help with Brainstorming

No Nerds Head of Design taking notes in a roadmap workshop
No Nerds Head of Design – Roadmap Workshop

One of the main reasons we workshop is to get everyone in a room together and have them take a turn in the hot seat. We use this to reach into each of their brains, into this giant cobweb network of ideas they’ve connected over the last six months, 12 months, or even five years.

We will then pull that cobweb out thread by thread, lay it out on the table, and compare everyone’s individual roadmaps to ensure they align.

Partners who sit next to each other and talk about their project every day, when they come into the workshop, have things they realize about what they’re working on together that they’ve had misconceptions about for years.

From first-hand experience, it’s a very magical process to sit down and pull those ideas out bit by bit.

Visual Components help us understand

The final piece of our process is the use of visual components. When we do a roadmap, one of the things that we’re doing is we’re going to lay this vision for your product out visually. 

A lot of times, when people are preparing software projects, they write out the specs. They write out the product document, the features they want, and why they want them, and then research and link to textual articles. 

And the problem there is that roughly 65% of people are visual learners. If your spec is just written and not visual, there’s a 65% chance that the person who is supposed to receive that spec will misunderstand it. 

So, this visual component part of roadmapping is extremely important. If we depend on written descriptions of what we want to do, we are guaranteed to have misunderstandings and misconceptions about our product.

The Value of Having Goals and Off-ramps

Goals and off-ramps are an essential part of our product roadmapping process. When used correctly, they often allow us to utilize shortcuts (good ones) and demonstrate traction cleverly. 

Using shortcuts to your advantage

Roadmapping helps us identify places where we can cut corners, not in a bad way, but as effective shortcuts. A well-thought-out strategic roadmap lets us identify things we can do quickly for free or by using off-the-shelf products. 

Depending on what our off-ramps are and the questions we’re trying to answer in those off-ramps, we might be able to get away with not building a big, giant, custom two-year software project. 

Instead, we could duct tape together a Shopify-type form and Convert Kit to get 90% of the product in a testable fashion, get it out the door, and start answering those questions. 

Demonstrating traction for growth

It’s a lot easier to get people and partners on board, whether investors, other co-founders, or full-time hires, that we’re trying to target as players and want to convince them to leave their cushy jobs and join our risky startup. 

And it is a hell of a lot easier to get those people to join our team in whatever capacity they will join when we have this demonstrated traction in place.

And that traction doesn’t have to be that we have a two-year custom software project in the market selling itself. It could be duct-taping together these three pieces of off-the-shelf software. And what we got out of that was a letter of intent signed with a large enterprise.

That allows us to show our product is worth it by saying, “Hey, we actually have ten paying customers here in our local market.” 

Sure, they’re paying for a service instead of a product, but that service mocks out what the product would do. So, we now have some evidence that building the product will be worth it.

Having those sorts of off-ramps built into the roadmap allows us to prove some success and secure additional support through investment, co-founders, full-time hires, etc.

A Roadmapping Success Story

I’ve spoken in-depth on why you should start your project with strategic roadmapping. To back it up, I want to share a recent prime example of how this works.

BlueVerse – A Healthcare Startup

When BlueVerse came to us as an early-stage startup, they didn’t have a penny to build anything. They managed to scrape together enough for a 5-day roadmap workshop with us. Without spending a dime or writing a single line of code, the results speak for themselves:

Before Roadmapping
  • BlueVerse had an enormous vision, described in a single 2-page Word document.
  • The startup came to us without design, experience, or funding to build anything.
  • BlueVerse was looking for design & development partners to help build their vision.
After Roadmapping
  • Complete vision turned into a 12-month, step-by-step roadmap.
  • Clickable prototype in hand after just 5 days, ready to sell to customers.
  • Took roadmap and prototype to investors and closed a 6-figure seed round w/ $0 development costs.

No Nerds saved us from burning tens of thousands of dollars building something custom by showing us how to reach our targets on our own. They spent an entire hour arguing that we shouldn’t hire their team. You’d be stupid not to sit down and map your product out with them.

Mason Still, CEO @ BlueVerse

Roadmap Your Project

How to Build a Million-Dollar Startup: A Non-Technical Founders Guide

How to Build a Million-Dollar Startup: A Non-Technical Founders Guide 1920 1080 James Knight

I’m James Knight, Founder & Chief Nerd at No Nerds No Problem. I help founders iterate faster with a team of nearshore Nerds. I’ve spent the last ten years obsessing about how to help non-technical founders build and launch their startups and MVPs. I’m a Bona Fide Nerd myself with an undergraduate degree in Mathematics.  

Since leaving Google in 2015 and starting my startup consulting agency, I’ve grown this company to 30+ nerds across six different countries, been featured in Bloomberg, and have helped more than 35 companies launch their MVPs and raise a combined $700M in fundraising using our Nerdstorm process. I’m here to help you do the same.

“Independent software {firms} such as Mr. Knights {No Nerds} represent an elite echelon of the so-called Gig Economy.”  Bloomberg

In this article, I will show you how to lay the groundwork to build your million-dollar startup and how we did this for multiple clients. Be sure to read (or skip) to the end to see how we helped an early-stage startup with no money raise six figures in funding without writing a single line of code. 

Table of Contents

What Makes a Million-Dollar Startup?

In the world of startups, we often hear the daunting statistic: a staggering 90% of startups ultimately fail. But let’s change our perspective for a moment. What if we turn our attention to the 10% that defy the odds, those that flourish and succeed? What can we learn from them? Let’s explore the key ingredients that set these triumphant startups apart.

1. The Market Fit Maestro: Catering to Customer Needs

Success begins with an unwavering focus on understanding customer needs and solving their problems like no one else can. These startups actively listen to feedback, readily adapt their offerings to meet market demands, and consistently strive to stay ahead of the curve.

2. The Visionary Vanguard: Cultivating a Cohesive Team

Behind every successful startup is a leader who inspires, motivates, and galvanizes the team. These visionaries foster a thriving culture, champion collaboration, and boldly embrace calculated risks to propel their startup toward its ultimate goals.

3. The Resilient Trailblazer: Rising Above Adversity

The startup journey is riddled with challenges – securing funding, outpacing competition, and attracting top talent. But the leaders of flourishing startups refuse to let setbacks define them. Instead, they learn, adapt, and pursue success, always staying the course.

How To Set Early-Stage Valuations

A startup founder must conduct a thorough valuation process to attract investors and make informed decisions. This process determines the required capital and quantifies the startup’s worth. Calculating startup valuation is crucial for fundraising, as it involves investors acquiring equity in the company.

Calculating Expected Value

Unlike established companies, early-stage startups move too quickly for traditional valuation models—like those based on Discounted Future Cashflows or EBITDA multiples. Instead, investors base valuations on what they expect the company’s future value to be based on its current state.

Expected Value (EV) calculations are an elementary financial concept, computed by breaking down an investment into its possible future outcomes, assigning each of those outcomes a probability, multiplying that probability times the value of that outcome, then adding those values up to reach the total expected value:

Expected Value (EV) Calculation

EV = Sum (Outcome Probability * Outcome Value)

Calculating these individual outcomes and probabilities is straightforward for assets with extensive market histories. But with startups, we only know the value of two outcomes:

(A) Possible Success: Total Addressable Market (TAM) – X% of $YB market

(B) Failure: $0

Many first-time founders make the mistake of basing their personal valuation expectations on Outcome A. While understanding a startup’s TAM (Total Addressable Market) is important, investors know that around 90% of startups fail. 

And even amongst those that don’t, the vast majority of their portfolio companies will end up somewhere between Outcomes A and B. For an investor to accurately assess a company’s Expected Value, they need to understand these intermediate outcomes.

Estimating the Outcomes

Because they can’t possibly know the probability of every possible outcome between total market capture and failure, investors rely on their personal expectations of a company’s success. They base these expectations on three components:

  1. Quantitative: Traction metrics, i.e., is the startup currently growing?
  2. Temporal: Time, i.e., how fast is that growth happening?
  3. Qualitative: Belief, i.e., Does the investor believe the company can continue to grow?

How To Calculate a Company’s Valuation

These three components can be used to calculate a company’s valuation:

Valuation = (Qualitative Factor * Quantitative Factor) / time

Valuation = (Qualitative Factor * Quantitative Factor) / time

Where our Quantitative Factor (Fqt) is some form of traction metrics, t is the amount of time it took to achieve those metrics, and our Qualitative Factor (Fql) is an arbitrary value chosen by the investor based on their belief in the company, market, and founding team.

Let’s look at it another way:

V = Metrics * Multiple

V = Metrics * Multiple

Where Multiple is a combination of the Qualitative Factor (Fql) and Time (t).

Revenue v. Pre-revenue Valuations

The metrics used in the above calculation depend primarily on whether or not the startup currently generates revenue. Those that are, use their annual revenue (AR), while those that don’t use Monthly Active Users (MAUs).

Revenue Valuations

Revenue-generating startups are valued based on their speed in achieving current annual revenue. The valuation multiple, typically ranging from 5-15x, is determined by investors, but industry trends indicate specific benchmarks. 

Startups reaching revenue within 12-18 months can expect an average multiple of 10x, while faster achievers may see multiples of 15x or higher, mainly if the revenue is recurring.

Pre-revenue Valuations

Pre-revenue startup valuation depends on the investor’s estimation of Customer Lifetime Value (LTV), which considers metrics like Customer Acquisition Costs (CACs), Session Length, Churn Rate, and demographics. 

These metrics significantly impact LTV, leading to a wide range of multiples for pre-revenue startups. Typically, MAU multiples range from $75-150 per user, with an industry average of $100.

Assuming we can earn the average industry multiple for our startup’s valuation (i.e., we can reach our growth targets within our first 12-18 months). What metrics justify a $1M valuation?

How To Calculate Metrics Correctly

Accurate metric calculation is crucial for startups, providing a clear view of performance, growth, and overall business health. It enables informed decision-making, identifies strengths and weaknesses, and supports funding and partnerships.

If you calculate metrics right, you can open your business to valuable insights, increased success chances, and confident navigation of the competitive landscape. Let’s get this right.

Use our Free Metric Model

To help you get started, we built a simple model of the below calculations here. Feel free to make a copy of the spreadsheet and change the variables at the top to see how they affect your target valuation.

Revenue-based Metrics

For revenue-generating startups with a 10X multiple, we need to show $100K in annualized revenue. Broken down monthly, that’s just over $8.3K per month.

Calculating revenue-based metrics

V = $8.3K Monthly Revenue * 12 months * 10x multiple = $1,000,000

Depending on your ticket price (value per sale) that means we need to reach the following sales numbers to justify a $1M valuation:

  • 834 monthly customers at $10 each.
  • OR 84 monthly customers at $100 each.
  • OR 9 monthly customers at $1K each.

Non-revenue Metrics

The calculation for pre-revenue startups with an expected LTV of $100 is more straightforward: we need to show 10,000 Monthly Active Users (MAUs) to hit a valuation of $1M.

Calculating non-revenue metrics

V = 10,000 MAUs * $100 LTV Multiple = $1,000,000

How To Reach Million-Dollar Metrics

If you want to build, launch, and grow your company to $1M and beyond, a “great idea” isn’t enough. It takes a capable founding team months to turn their vision into an actual product, take it to customers, and reach the traction goals necessary to earn those valuations.

Reaching those goals in 6 months? That takes a rockstar founder or founding team leading a killer execution team. Do you have what it takes to hit those metrics in that timeframe? Our clients have done that and then some.

Here are two examples (names removed at client request):

Example 1

Example 1 - Social networking startup - 10K users in ~1 month

Social networking startup – 10K users in ~1 month

Example 2

Example 2 - D2C startup - $35K in sales in first 90 days ($11.6K monthly):

D2C startup – $35K in sales in first 90 days ($11.6K monthly):

Both of these companies were worth $1M+ within three months of launching their product. OK, so what type of team got them there? How do I create such a team? Read on.

Ready to launch?

How To Build a Million-Dollar Team

We know what metrics we must show to reach a million-dollar valuation. We’ve seen that other companies have done it. OK, but what does it take for a startup to do the same?

Y Combinator, the most successful Startup Accelerator of all time, often says that startups should spend their time “writing code and talking to customers.”

Put another way; startups have two jobs: Building and Selling. That means that every successful startup has two distinct sides:

(1) The Business

Comprised of business-minded visionaries who identify opportunities, conceptualize products, and successfully sell them to customers.

(2) The Nerds

Designers & developers who are capable of taking the Business’s vision and implementing it.

What if you had a founder who could assemble, vet, and manage a team of world-class nerds without giving away 50% of equity, wasting hundreds of thousands of dollars on expensive freelancers, or wasting six months of your time sourcing work from India?

But what kind of person does it take to lead a Million Dollar Business? A million-dollar founder. 

How To Think Like a Million-Dollar Founder

Even with a team of (Math) Olympian-tier Nerds and a perfect team executing flawlessly, a startup is only as valuable as its vision. And its vision is only as valuable as its founding team.

So what kind of non-technical founder can hit a $ 1M valuation in six months?

Here’s how you do it:

  • You have to have an idea for an ambitious startup. Small ideas don’t get big valuations.
  • You have to be willing to invest time and money into making that idea a reality. We can show you how to be efficient with those costs, but development isn’t free.
  • You must be willing to put in the work: even with others executing your vision, reaching Million Dollar Metrics is a full-time job.
  • You must be willing to take your product to market every few weeks, even if it’s not “finished” or “perfect.”
  • You have to be open to criticism and be able to take harsh feedback from your team and customers.
  • You have to be willing to sell, sell, sell.

What type of founders can’t hit these metrics?

  • Founders who aren’t willing to get their hands dirty. Startups are hard work.
  • Founders who aren’t willing to take risks. You win and lose at the table you play at.
  • Founders who only hire technical talent based on how cheap they are. You won’t even reach LAUNCH in 6 months with budget providers.

Why do founders fail?

Non-technical founders don’t fail because their ideas aren’t ambitious enough, because they don’t know how to run a business, talk to customers, or sell their products. 

They fail because they over-invest in bringing their MVPs to market, work with partners that can’t deliver that MVP effectively and efficiently, and reach launch with no traction, money to improve their product, and no way to raise more funds.

How To Prevent Your Startup From Failing

How do we keep our clients away from the 90% fail club? We use a one-week roadmapping workshop called the Nerdstorm. We’ve tailored and fine-tuned this process to turn ideas into something tangible. More than just a toy—something real that you can take to customers and sell and fundraise with.

Your new product shouldn’t take six months and $100K+ to bring to market. This is why we developed the Nerdstorm as a 5-day product, design, and development sprint built to get The Next Big Thing™ out of your head and into the hands of your customers.

James Knight, No Nerds CEO in a Nerdstorm session
James Knight, No Nerds CEO – Nerdstorm Session

We have used this approach repeatedly to take concepts to clickable prototypes in a week. Instead of having calls about calls, you should be raising capital, closing your first customers, and testing new business outcomes. 

If you already have the capabilities to do this, great, as I have yet to see a faster, more affordable approach to kickstarting development and getting customer feedback in days, not months. If not, check out these success stories and see if we can help.

Nerdstorm Success Stories: 

Ready to launch?

The Takeaway: Unlocking the Keys to Success

While I self-promoted in this article, that is not my overall goal. I am passionate about helping early-stage startups reach their potential and avoid the dreaded 90% club. I don’t just ask my team of Nerds to build a product and disappear; quite the opposite. Our work is usually just getting started post-launch.

The world of startups is teeming with ambitious dreamers and relentless doers who dare to shake things up. Success, however, is reserved for those who can adapt to a perpetually changing landscape while remaining steadfast in their core values and vision.

Unleash your potential by learning from the elite 10% who demonstrate that, with determination, adaptability, and passion, nothing is impossible. Let’s ignite a new revolution that propels even more startups into the exclusive 10% club.

What do you think it takes for startups to beat the odds and thrive? Did I miss anything? Share your insights and experiences in the comments below.