My advisor Cayenne (name changed to protect the innocent) came up with this four-phase program for starting a tech business. As always, this is written for technologists — engineers, computer science/programmers, etc., who have a technology that might make a good business.

The four phases are:

1. prove the technology
2. prove the concept
3. prove the market
4. full commercialization

It's a nice model I think, and I've never seen it before, and it makes a lot of sense and provides I think a good structure for thinking about where you are and where you should be going. Note that I'm expanding and giving my own take here, so definitely don't hold Cayenne to all the details that I set out!

Phase 1: Prove the Technology. This phase is probably the easiest to understand. You have an idea for a technology, so you build the first version of it. Some people might call this building a "prototype" but I would heavily advise against building "prototypes". Build the real thing, not a fake of it. This is your alpha phase.

You might think that you're building "the product" during this phase but as we'll see later, the product in business is a much larger and more complicated thing to have, it's not just the technology, but also includes a market of people who are willing to pay money for it, a way to get the technology to them, and understanding of what they're using it for and why it helps them either make money or save money, etc...

So, the important thing here is to prove that your idea can be built into a functioning technology that actually does something. If you've been following Semacode, you might look upon the first release (1.0) as the completion of this phase, although to a certain degree there's always a blurred boundary, 1.5 was sort of the "beta" of Semacode but also part of proving the technology (that it could work on Java, especially).

Funding for the first phase is likely to come from the founders, credit cards, friends & family, and that sort of thing. Academic research maybe. Investors won't get involved generally at this phase (and in any case, you probably don't need them, since you're doing the work yourself, you just need living and equipment expenses).

Phase 2: Prove the concept. Now you have a working technology. You've been comfortable up to this point, but now what? Now you have to demonstrate that a market exists for your product. In this phase, you're not going to be making much or any money. The goal is to find and locate people or companies that have a demonstrable interest in actually paying for your product, and convincing them to run a "beta test" or a "test site".

There's a whole bunch of groundwork that you need to lay during this phase. The single most important thing you need to do is find multiple business advisors. There is literally no substitute for good personal one-on-one advice. Every business person, bar none, no matter successful they may be, no matter how large their company, has personal advisors and they all had advisors when they were small too.

I'll tell you one simple way to tell if someone's a good business advisor. If they're a good advisor, then they will quickly start to introduce you to other potential advisors, other people in their network, etc. They will be quickly opening doors for you to other people. They won't be afraid of contrarian viewpoints, and they will be well-connected in the local business community, if not regional and world-wide. They will have a large network of their own, which you will get access to.

Also you should find multiple, independent advisors. You need to have a few independent advisors — preferably people who don't know each other too well — so that you can maintain a certain level of independence. Even though your main advisor might be awesome, there might be someone even more suited to you on a personal level out there. Also, let's be frank, it will keep everyone honest and give you multiple points of view, so you can avoid tempting fate or having blinders on. Business is an art, not a science, so you NEED to be exposed to many points of view. Even if ultimately you decide that one or the other is right, or right for you, you have to be aware of the alternatives, and you're not going to read about them in a book or magazine, you have to get them from your personal connections.

Another reason you need personal advisors is that you really can't just post your business plan online and expect people to give you their honest advice. Two reasons. 1. In the current business world, you'd be nuts to post the plan online. Secrecy is so core to business culture that anyone who saw you do that would write you off as a nut. Also, you'd be allowing any competitors, or potential competitors, to see your plans and that (at least for now....) is not done. 2. People will not give advice to someone who puts their plans online because they want their advice to remain between you and them. Again, it's the culture of secrecy. Business advice is always given on a personal level, and almost never broadcast. I wish it were different, but it's not.

By the way, advisors need not be (and usually won't be) in a formal relationship. They don't expect it, so don't waste your time setting up a "board of advisors" at this point. These people are getting a reward from talking to you and learning about what you're doing and helping you. That's what motivates them (remember the secrecy principle — they can't just go out and find out what any business person is doing, so having access to you has value to them). Also, expanding and refining your advisors is something that starts but should never really stop. It's always worthwhile to meet quality people, and some of them might wind up being attractive advisors.

Finally there's definitely a mutual component here of getting along.

Anyway, you also need to build up the basic foundation of the business. You need to create a spreadsheet with your budget in it, that details your expenses at least, and your revenues if you have them. I don't personally adhere to building revenue projections at this phase. Because by definition, if you're in this phase you don't know what they will be. Also, use your network to find basic service providers: accountant, bookkeeper, lawyer, office space, IT services, ... and don't pay them or pay them as little as possible.

OK, there's lots more but I've written enough for today.