Having seen a few thousand pitches, mentored 100’s of founders through incubators and accelerators, invested in over 50 startups, both through BlueChilli and privately, and having my on failures on my belt, here’s 8 ways you can f**k up your early stage startup. The good news is they’re all preventable!
1. forget to sell
This may sound obvious, but the number one way to kill your startup is to forget to sell your service or product! Too often I see startups around that work on the philosophy “build it and they will come”. Unfortunately, this isn’t the case. You need to be selling to customers! You need to be working on your sales from day one. Building your online reputation, collecting customer information before the product is launched.
2. build too much tech
I call this the “developer’s dilemma”. When sales aren’t forthcoming, the first reaction is to build more features. Wrong! You need to be selling more and building only the features people need in order to buy your product. Keeping things simple is the best way to test your market. The trick here is to focus on your “Minimum Viable Product” or “MVP”. This is the smallest feature set you can put together which enables a transaction to occur. Growth hacking is the collective term for the tools used to validate and verify what’s absolutely necessary.
3. take too long to launch
By all means you shouldn’t rush your development (and compared to large corporate companies you will be appear to be sprinting) but the longer you wait to launch the product the longer it will take you to learn from your customers and the greater the risk of having an invalid product market fit.
4. run out of cash
A mentor of mine who also doubles as a senior exec at one of Australia’s largest private banks told me “cash is more important than your mother”. Now I love my Mum, but the importance of cash can not be understated and it must be managed super carefully. If you’re not good with money, the first step is to admit it (see point six) and to then put controls or people in place to protect the company from you, get a part-time CFO to help you, do monthly reconciled accounts, use an online platform like Xero. Also, if you do raise capital, don’t go and spend 1/5th of it on a party when you close the round! Believe it or not, I’ve seen this happen where a startup spent a fortune on a “launch party”. Understandably, this left a sour taste in their investor’s mouths and the media ROI will never justify it.
5. focus on only one customer
I’ve see a startup make themselves un-investible and ultimately collapse when they focused all their attention on their first customer. Each time the customer asked for a feature or something, they obliged, to keep them happy – ultimately thinking it would be good for the market as a whole. Unfortunately, but focusing all their attention on that one customer they effectively built a product which was perfect for that one customer but unattractive to everyone else – they were effectively an outsourced dev shop for that customer, but weren’t receiving any money for it! So make sure you know the difference between something that improves your product for your community or one-off customisation which a customer should pay for.
6. fail to take responsibility
At the end of the day, if you’re the founder of a startup and you’re the CEO, the responsibility for the success or failure is on your shoulders. You need to accept this. Blaming others, be it employees, your co-founder(s), investors, for a failed contract or not connecting you with the right person is ultimately your responsibility. In other words – STFU or do something about it!
7. Be too greedy
I’ve seen a situation where a startup founder was part of an well known US accelerator program which gets remunerated with a minority stake in each company through their program. The founder received all the benefits of the program and on completion, they shut down their company and re-registered a new shell just to avoid giving equity! Whilst there’s nothing strictly illegal with what they did, it isn’t acting ethically. The danger here is that this behaviour is ultimately uncovered and makes any future dealings much much harder. In short – it isn’t worth burning your long term bridges for a short term potential gain in the name of greed.
8. let your ego get in the way
Finally, you need to be humble. This was an important lesson I learned with one of my first startups over a decade ago. I thought our brand was everything and arrogantly started expanding out in to other territories. I arrogantly believed that our product was right and that people would buy it because we had success in a limited geographic area. How wrong I was. I let my ego get in the way of doing proper market research and completely failed at understanding the market differences – a failure which ultimately lead to the collapse of the business – and a very expensive one at that!