Starting up a high-tech business is risky and difficult, but the rewards can be tremendous. Good planning is the key - - developing a marketing plan, writing a strong business plan, assembling just the right people around you and doing all the legwork necessary to patent a product that can make a good profit.

Even after you've laid the necessary groundwork, though, there is hard work to be done in terms of finding money to move the company forward and creating a business. Many businesses don't make it, instead falling into one of the many traps that entrepreneur's face, such as poor planning, lack of capital, or inexperienced management.

Simon Johnson of MIT's Sloan School of Management divides the process of starting up a high tech business into the following stages. These stages often overlap, according to Johnson, who says that many tasks, such as getting funding, are ongoing.

Stage 1 - Create the vision

Stage 2 - Get funding

Stage 3 - Build the team and the organization

Stage 4 - Go to market

Stage 1's vision usually starts with a great idea - a breakthrough technology, product, or market opportunity, and these ideas usually come from research labs, or from failure. Judy Estrin, former chief technology officer of Cisco Systems and the founder of four successful companies, says the role of startups is to create a new market, which is an inherently risky venture. "You have to be willing to fail," says Estrin.

In stage 2, Johnson says, most startups need between $50,000 and $200,000 to get off the ground, but most companies eventually need what he calls real money - i.e., $1 million or more. Most often this money comes from venture capitalists who are looking for a large, fast-growing market, a great technology that can be commercialized, a successful business (as opposed to a product), and - most importantly - good people. Arthur Rock, a venture capital legend associated with the formation of such companies as Apple, Intel, and Teledyne, is often quoted as saying, "I invest in people, not ideas."

A typical venture capitalist fund receives over 2,000 business plans each year and automatically sends a rejection letter, unless there is already a key endorsement or the founder is a serial entrepreneur.

Stage 3 is where you will do much of the work described in this module: form your company and your team, insure your business, select a name and establish an office - the nuts and bolts of a start-up. But it is also where you create a cohesive organization that has your vision at its center, and the time when you decide what your company's values are. "You ought to be conscious of your culture, you ought to be really methodical about it," says Jeff Hawkins of Handspring, who finds that the culture of a company "starts at the top and infuses through the organization."

"You ought to think about it," he says.

In stage 4, bringing your product to the market, Johnson says it is a common misconception among high tech startups that the most important things are to be first in a market and to capture the largest market share. Even in markets with strong network effects and with the potential for lock-in, however, execution is at least as important as speed, according to Johnson; and no matter how big your market share is, if you can't be profitable your company isn't going to last long. "Just because you're running a high-tech startup, doesn't mean the basic rules of strategy don't apply," he says.

No one can promise that your startup will succeed. But with careful planning, hard work, and the help of a skilled team - both your founding team and the professionals you hire - you can start off your start-up on the right foot.

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