First open two terminals/consoles. One for the proxy and one for the server.
For each terminal navigate/cd into ether the proxy or server folder.
To start the proxy and server run the start script in each terminal.
For example on mac: sh start-mac-linux.sh.
You can now connect with localhost:25565
I recommend changing the forwarding secret located in proxy/forwarding.secret
and server/config/paper-global.proxy.vlocity.secret
proxy: 0.0.0.0:25565
server: 0.0.0.0:25566