The following review will provide several examples that every entrepreneur should try to avoid when starting a venture. Some of the holes referenced below go in parallel with going out of business.
With this in mind, we highly encourage you to carefully follow these guidelines. Remember, It is better to be safe than sorry. Each one of you should take your own decisions based on your due diligence, and other critical factors.
Top 10 Startup Mistakes
1) Having one founder. Startups should have more than one founder. The reason for this is credibility. Having at least two founders helps to diversify the work.
It’s also a good thing if the founders are from different backgrounds so that each one of them has something different to add to the mix.
Moreover, investments can be difficult to pitch with only one founder. With this in mind, potential investors might feel as though your ideas are not good enough.
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From a psychological standpoint, when you are involved in a startup there are going to be more bad days than good days (yes we know, it is unfortunate).
Having another founder that will support you through such days, and vise versa are key. One of the best things about the early stages of a startup is the brainstorming sessions. It is impossible to describe with words the great satisfaction of coming together as a team with the perfect solution to a problem.
Avoid individualism – that kind of spirit does not get you far. Team players are key, try to stay together as one and create an environment where everyone has each other’s back.
2) Wrong Location. Location is key. If you are located in the middle of nowhere it will be very hard not only to attract talent but also the investment that will help you to build and launch your company.
If you have an amazing idea and plan on executing it the best way possible, try to move to a bigger city where there is more action happening.
In the beginning, it will be hard to get used to a new city and all the new changes, but you can certainly believe that in the long run, it will be worth the struggle.
Some of the best cities to start a company are Silicon Valley, Boston, Seattle, Austin, Denver, and New York.
3) Doing too many things at once. One of the biggest issues that startups have is trying to do too many things at once. This creates distractions and focuses less on the tasks that need to get done.
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Do not try to go big right away. Make something small and make it better than anyone else. Once you have built your initial idea, then it’s time to start adding new features.
The easier you make it for the public, the better; otherwise they will get overwhelmed and won’t understand what you are doing.
Remember. There is nothing wrong with changing the idea that you initially started with despite what the market is demanding from your product. Some of the greatest projects did not turn out to be the way they were planned.
4) Hiring C- employees. On average it can take around 2 to 3 months to hire a person depending on your location. We advise you to be on the look 24/7 and never stop interviewing people. Talent is hard to find, but not impossible.
In the event you are a startup involved with the tech industry, make sure that you are hiring the best programmers. Before hiring them review projects that they have been working on, see case studies, and ask for a first-hand account from previous customers. This will help you in making an informed decision.
Furthermore, we recommend that you stay away from recruiters at an early stage. They do not care about your company as much as you do and the only thing they are going after is their 25% commission based on the annual salary of the potential person that you are trying to hire.
This is way too much money for a startup to throw out the window. It is a pain taking care of human resources, however, someone’s gotta do it. After all, this is your company!
5) Launching too soon or too late. If a startup launches its project too soon, there could be a possibility that the product is not complete, and will not satisfy consumers.
The main problem here is that if the project is not finished, it will completely turn off its users and as a consequence, people will not come back. On the other hand, you may have the problem of launching too late.
This issue not only gives a bad image to the company, but since you have not been able to accomplish your milestones, it also creates a hole in the company’s pockets because keeping the lights on is not cheap.
From our point of view, launch when you have something solid. Don’t plan to launch the absolute best while waiting until such process is complete, launch with what you need, and keep moving forward.
6) Raising more or less than the capital needed. Startups make this type of mistake all of the time. Make sure you have developed a detailed business plan that you are constantly updating and following carefully.
This business plan should be the company’s guidelines when entering a round of financing. Keep track of your finances, and know when you are running out of money.
Be sure to plan accordingly so that you can raise a little over the money that you need (in case of surprises) to carry your company until the next round of financing.
7) Lack of budgets. When startups raise the money they sometimes forget that money is very easy to burn. Even though you might feel like you have everything covered, that will most likely not be the case.
There are always unexpected expenses that come along the way. With this in mind, we highly encourage you to keep all the expenses as low as possible. Try to negotiate every single invoice, and extend as much as you can for the sake of your company’s cash flow.
Try to operate only with the necessary number of employees. Another example of spending money could be moving into an expensive office space before the company is making any revenue.
There are plenty of examples of startups that blow up their bank accounts by renting very nice offices… The moral – avoid getting an office space. Have it all start from your house if possible and only move into office space when it is the absolute last resort.
8) Investors with a lack of knowledge and expertise. Raising money is a tough battle. Dead money is the kind of investment that comes from a person who does not give an added value to the company.
A good example of this would be startups that only bring in any of their friends or family members at an early stage. These kinds of investors will not contribute the drive needed to have a successful startup.
This can also turn off angel investors and venture capital firms that might want to jump in at a later round of financing. Another piece of advice is to not have a large number of investors at the Seed Round (first round of financing).
Otherwise, it will get too crazy with the legal paperwork on the next financing round, and as a consequence, the attractiveness of the startup towards VCs and Private Equities will be extremely reduced.
9) Arguments between founders. There are many examples of founders fighting, which can potentially result in losing a team member. Try to avoid fights, establish guidelines so that it never gets to a situation that is impossible to handle.
Make sure your startup has a healthy working environment. Remember, startup life is very hard, to begin with, do not add additional obstacles and always try to understand each other.
As explained in our article “10 Must-Know Legal Tips For Startups”, having restricted stock will prevent founders from walking out of the company with all the stock.
Starting a company is not a joke and is a long road to follow full of obstacles and darkness. Make sure you have a trusting and special connection with that person that you decide to share this journey.
10) Lack of marketing. Your startup may have a unique product or platform, however, if no one knows about your product it’s the same as it not existing.
Make sure that you get the word out and reach as many people as possible. Figure out what are the best marketing channels to reach the right audience.
Keep in mind that print media or advertisements are less effective than online resources nowadays. In any case, as a startup, your company should NOT spend too much money on advertisement.