How to Make Money on Startups

5 min.

Getting a profit from startups is not as easy as it sounds. Too many entrepreneurs make the mistake of resorting to wishful thinking and over optimistic predictions, creating copies of existing products or believing their idea is best without testing it. Making money is about being calculated, focused and driven, and on the cut-throat startup market survival is impossible without competitive advantage.

Basic Idea

Any startup begins with an idea. The more original the idea is, the better. Your first step can be taking a popular idea that is not ideal and trying to bring innovation or perfection into it. Another option is combining solutions that weren’t combined before into a new product.

Example: Social network for doctors plus mobile health monitoring system. You combine popular features of social networks with a wearable device that tracks patients’ health parameters for a narrow professional market.

What is different?

  • It unites both doctors and patients
  • It uses the latest tech in wearable devices to provide mobile health monitoring
  • Doctors have 24/7 access to patient data
  • Doctors can substitute one another by sharing patient histories
  • Patients can get real-time consultations

Result: Combining proven elements with innovation gives you the competitive advantage you need.

During this stage, startups come to an IT company to have their idea evaluated and often disappear because the idea alone was not strong enough to find financing from investors. To avoid this, check your idea for viability.

Basic Idea Checklist

  • Does your idea correct an already existing product or that has flow


  • Does your idea combine two or more existing solutions into a new product or service on the market?
  • Have you prepared tech documents describing your product or service?
  • Have you prepared tech docs describing architecture of your product?
  • Have you prepared business docs describing the business value of your product or service?
  • Do you have an evaluation from impartial tech experts and business analysts?
  • Is your idea different from others in your niche?
  • Have you analyzed the pros and cons of your solution?
  • Have you studied your competitors?
  • Have you researched your market?
  • Do you have the plan for add-ons, upsells and accopanying products?

Now you have to take care of tech and business docs, pick your team and evaluate how easy it will be to realize the project.

Analysts can gage the idea with a detached mind, see pros and cons, study the competition and the market, test it for longevity and future developments like add-ons, updates, upsales and complementing products. Such an in-depth analysis usually takes from two weeks to a month.

Proof of Concept

Proving your concept may take from a month to six months and is a stage where you have to demonstrate that the project won’t hit any hidden rocks, problems of the last mile and other challenges. If these can be predicted, however, you have to prove that you will be able to overcome them with minimal damage to the whole business. Before you begin this stage, understand why it’s important:

Proof of Concept: Goals

Why do you need this?

To prove to potential partners and investors your works now and work in the future

Major goal: Establish viability

How do you establish viability?

  • Prove the product works on a focus group
  • Document test runs, find tech issues, plan methods to correct tech issues
  • Correct bugs and tech issues improving the product constantly
  • Get user feedback and improve product
  • Suggest business strategy

Here you need to show the product works not only in theory but in reality. Testing on your target audience is great for this purpose. Documenting the test runs is also important. Having a marketing strategy that demonstrates development opportunities and steps for growth helps you understand where you are going and build your business to reach long-term goals.

Proof of Concept: Questions to Answer

  • What challenges may your product encouter in the future?
  • Have cleared the legal issues such as permits, licens and patents?
  • If you have legal issues, how much time and money will you take to fix them?
  • What problems of the last mile can you predict?

Your product will always be a balancing act of what you are missing versus the ‘golden blocks’ you do have that can overcompensate for what is lacking. Missing one crucial aspect at this stage may influence the budget and derail the project entirely so you have to look at potential problems and their fixes carefully.  If your productivity is not at the desired level, for instance, libraries will have to be written from scratch or new modules will have to be bought, tested and automated, costing you more than you have planned initially.

Minimum Value Product

A minimum value product (MVP) is a product that is not perfect or finished but that already has commercial value and is selling on the market. At this stage, all licenses must be covered and no open source modules used. The product must be ‘kosher’ for commercial use. That’s the stage when you show investors the product works and prove they can get return on their investment because of a solid marketing strategy you have developed.

Minimum Value Product Checklist

  • Is your product centred on one unique feature that sets it apart?
  • Have you cut all the extras and focused on basic functionality?
  • Do you have a clear plan to bring your product to the market?
  • Do you know target audience closely?
  • Are you making product improvements based on user feedback?

Focus Groups

Trying your concept on focus groups is far more important than striving to make a perfect product or a ‘spaceship’. Feedback from users can make or break a startup. Don’t be afraid to introduce a flawed product and ask users to help improve it. Users who get what they want become emotionally invested fans, organically expanding your customer base. Also, focus on your target audience, rather than trying to conquer large numbers of users.


Make prototypes to see how many people are interested. Sales speak louder than any product description, pitch or piece of documentation. Promoting and selling more builds your reputation and powers you with numbers demonstrate to partners and investors.

Extending Your Product

Improve and extend your product. A smaller but more flexible product is easier and cheaper to develop further. ‘Spaceships’ take too long to build, enabling your competitors to showcase their product at multiple tech exhibitions while you are perfecting yours.  A smaller product will also be easier to combine with others. While you introduce upsales, updates and add-ons, you will be growing your customer base as well, giving you valuable user data you can later sell.

Stock Market

Taking your product to the stock market or selling your company to a large vendor is the next level for your business. You have done the heavy lifting and can now reap the benefits of all the hard work.

A summary infographic of the most essential steps to make money from a startup is below:

How to Make Money from a Startup Scheme

What do you think about these startup tips? Do you have any important steps to add? Share with us below and tell us how you plan to make your first million on a startup.