Category Archives: Threats

List of Startup Mistakes That Can Be Fatal

There are many things that can go wrong with startups.  Here is a set of startup mistakes that can be fatal that recur too often.

Startup mistakes that can be fatal

Inadequate Team

An inadequate team is most easily seen as having only one founder; a technical guy with no marketing guy or vice versa. But it is better said as …. Each startup needs a specific set of officers at its early stage. Be sure that all of them are there early on. When co-founders have past experience working together; this is a very good sign.

Startup Location

You need a good local ecosystem. Where that might be varies with your offering and target market. You need to have the relevant experts there. You need the ecosystem to have high standards. You need supportive populace. You need the right people to hire. You need appropriate industry sectors to be local. You want to be able to accidentally meet others in the same business as you.

Paul Graham said “What’s the sixth largest fashion center in the US? Whatever they are they’re probably so far from the top that it would be misleading even to call them centers.”

Niche Inappropriate

Many choose a niche that Silicon Valley sees as too small. Other startup CEOs choose a niche that is too large for their ecosystem to support.  You need to choose a niche where your core assets can win. One that will deliver a financial exit valued by you and your investors. One that your ecosystem can support.

Focus not valuable and unique

You should look for a specific market pain that needs to be solved. One that has not yet been solved by others. One that is mission critical to a large enough serviceable target market.

Website design

Many startups redesign their websites three or four times before they get it right. In part this happens because the offering is evolving and in part because their knowledge of their customer is evolving.  Plan on rebuilding your website 3-4 times.

Not Adaptable

Your original plan is almost certainly wrong. Be eager to improve on it, or to pivot dramatically. AOL was only one of many successful companies that shifted focus several times.

When you make changes; each change needs to utilize the value that you have created in the past. Always listen to your market and what it really wants.

Inadequate Core Knowledge

Whether your required core knowledge is market knowledge, partner contracts, nanotechnology or programming, you need the best knowledge on board. The CEO’s understanding needs to bridge the two or three most important knowledge groups.

Paul Graham said “Business guys can’t tell which are the good programmers. They don’t even get a shot at the best ones, because no one really good wants a job implementing the vision of a business guy.”

Incorrect Platform

In some cases choosing the best platform is essential to success. John Gale once caused a major Japanese manufacturing company to cancel a product launch; because he pointed out that they were basing their offering on an inappropriate platform.

Launching too early or too late

You can miss your “Window of Opportunity” this way. You can also give competition time to catch up. You can also miss out on key market input that impacts your design or channel or …

If your offering is not ready than you may destroy your opportunity to ever have a good launch. If you launch before the market is ready you can go bankrupt. But do not wait for it to be perfect!  No matter how good your offering is you will be redesigning it very soon.

So launch a useful MVP (minimum viable product) offering that can be evolved into a better offering. Launch and learn.

Marketing

You must have good marketing! What this means varies with your offering and your target market. In any event you will need to develop good user personas.

You need to understand your market. You need to talk with your future users. Develop user personas. Think about them and their needs!!

Paul Graham said “The most successful startups seem to have begun by trying to solve a problem their founders had. … if you’re trying to solve problems you don’t understand, you’re hosed.”

Inappropriate Amount of Funding

Usually this means that the startup did not raise enough money. This is usually because the startup did not have adequate advice in preparing and executing the fund raise; or because not enough investors believed in the startup.

It is a mistake to try to move forward with inadequate funding.  After each raise you need enough funding to:

  • Achieve the benchmark that justifies the next tranche of funding. This may take longer than you planned.
  • Operate for an additional 3 months after benchmark completion.  After you create the benchmark you will show it to potential investors. They then need time to decide to invest.

If you hire too many staff you may run out of money too soon.

A similar problem is raising more money than you are prepared to spend.  A similar problem is not believing that anyone will give you the funds; and not really being prepared to execute.

A similar problem is taking to long to raise a round; perhaps because you are looking for the perfect deal.

Investor Relations

You need to work with potential investors to qualify them and close them and manage the relationships.  Each of these tasks takes a good deal of time. The CEO needs to delegate some of his/her other tasks so he can do these tasks well.  Part of the investor relationship tasks can be delegated.

Choose investors carefully. Agree on terms, relationship, tempo of engagement, and what success looks like. It is easier to get divorced than to eject an investor.

After they are on board you need to inform your investors on a regular basis and be involved with them; without giving in to unreasonable demands.

Never have just one investor.

Venture capitalists (VCs) in the US intend to control the Board of a startup at the end of the B round of venture investment. Then they see the startup as their company.

When you run into problems, as frequently happens in the best of startups, investor and other Board member relationships can become complex. As an example, Apple once fired Steve Jobs, and did not hire him back until they were in dire straits.

Put Users First

  • First you make sure that you have an offer users will purchase in increasing quantities
  • Then you get the business model right
  • Then you get the business plan right

Advisers

Retain attorneys, consultants and other key advisers who really understand your business!

Be willing to do the hard work

You need to spend time with your market. You can never know too much about your customers

Internal Conflict

Be sure that you really want to be cofounders with the other cofounders; before you found the company. Use vesting!

John Gale observed a startup CEO and COO fight and destroy a startup because the Chairman (a cofounder) would not step in and fix the problem.

Inadequate Commitment by Founders

Each founder needs to believe in the startup and really commit to the startup; or not be there.

Luck

Sometimes bad things happen to good people.

Conclusion

Build a strong team; know your market; understand their pain.  Then you can reduce the number of startup mistakes that can be fatal.

References

 

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