How to Start a Startup: A Clear Path for Founders
How to start a startup: A clear path for founders
Author: The Carta Team
Read time: 23 minutes
Published date: 5 January 2026
Learn the foundational steps to start your startup, from finding a problem and building a team to setting up your legal structure and raising your first funds.
How to find and validate your startup idea
A successful startup begins by solving a real problem that people are willing to pay to fix, not just by having a product idea. Having no market need is the top reason startups fail, accounting for 42% of collapses. The best ideas often come from a pain point you are passionate about and uniquely positioned to solve.
Customer discovery: How to know if you have a good idea
Once you've identified a problem, you need to validate that other people feel the same way. This process, known as customer discovery, is critical for early-stage founders and involves talking to potential users about their experiences.
Conduct market research
Market research is how you validate that your idea is more than just a personal frustration. It’s about talking to potential customers to confirm that the problem you see is one that others experience and want solved.
- Identify your target customer: Start with a specific group of people who you believe experience the problem most acutely.
- Prepare open-ended questions: Your goal is to learn about their problems, not to pitch your idea.
- Listen for patterns: Pay close attention to recurring themes and pain points in your conversations.
- Look for buyer intent: Early signals that people are actively looking for a solution or are very unhappy with existing options suggest a strong market need.
What to include in your business plan
Think of your business plan less as a formal document and more as a storytelling tool. Here are the key sections to include:
- The problem: Clearly define the pain point your startup is solving.
- Your product: Describe your product or service and how it addresses the problem.
- Target market: Identify exactly who your customers are.
- The competition: Acknowledge your competitors and explain what makes your approach different.
- Your team: Highlight the experience and skills of your founding team.
- Marketing strategy: Outline how you’ll reach your target customers.
- Financial projections: Provide a high-level forecast of your expected revenue and expenses.
Who should be on your founding team?
Starting a company is a difficult journey. Surrounding yourself with a team of experts you trust is critical:
Co-founders
Having a co-founder can provide much-needed moral support and bring a diverse set of skills to the table.
Lawyers
Selecting a team of lawyers is crucial once you're ready to accept a check from investors.
Advisors
Startup advisors can offer valuable advice and can often be compensated with advisory shares.
How to set up your company's legal foundation
Setting up your business as a legal entity and registering it with a state is important:
- Know when to incorporate your startup and file the necessary paperwork.
- Apply for a federal tax ID number.
- Open a separate business bank account.
C corp vs. LLC: What's right for your startup?
Choosing between a C corp vs. LLC affects your tax obligations and ability to raise money from certain investors.
| C corporation (C corp) | Limited liability company (LLC) | |
|---|---|---|
| Best for | Startups planning to raise money from venture capitalists. | Businesses that don't plan to seek funding. |
| Ownership | Owned by shareholders. | Owned by members. |
| Taxes | Taxed on profits; shareholders also taxed on dividends. | Members report profits on personal tax returns. |
Fundraising options
There are several startup funding sources to get the initial money you need:
- Bootstrapping: Funding your business with your own savings.
- Angel investors: Wealthy individuals who invest their own money in exchange for equity.
- Venture capital: Institutional firms that invest in high-growth startups.
- Equity crowdfunding: Collecting small contributions from many people online.
Valuing your company
To manage your company’s equity, knowing the valuation of your company is essential:
- 409A valuations: An independent appraisal of fair market value.
- Pre-money valuation: Value of your company not including the investment amount.
- Post-money valuation: Value of your company after receiving funding.
Startup taxes
Founders have several key tax considerations to keep in mind. Whether your company is a corporation or an LLC affects its tax liability.
How to build your minimum viable product (MVP)
An MVP is the most basic version of your product designed to solve the core problem for your first set of users. The goal is to test your assumptions and gather feedback from the market.
Exit strategies
An exit event is typically an IPO or M&A, giving existing shareholders a chance to access liquidity.
Frequently asked questions about starting a startup
What is a startup?
A startup is any new business in its early stages of operations and fundraising.
What is an entrepreneur?
An entrepreneur is an innovator who brings new ideas or products to market.
Can you start a startup with no experience?
Lack of experience shouldn’t stop you from sharing your next great idea.
How do I start a startup team with no money?
You can start your team by leveraging your network or offering equity.
What is the best way to find a co-founder?
Leverage personal and professional networks or attend local events for founders.