10 spending mistakes early stage startups make and how to avoid them

Photo by Paul

It’s easy to do. You’ve watched Dragons Den or Shark Tank. You hear about the successful closing of fundraising rounds A, B, or C. You’ve seen every other unicorn startup raise millions without generating any income. So you think, “I MUST RAISE MONEY TO SPEND MONEY TO SUCCEED.”

Wrong. Almost 99% of the time, wrong.

At least that’s what we’ve learnt helped over 500 founders launch their ideas over the last 2 years at Escape the City.

Here are the top spending mistakes we try and stop people from making before it’s too late.

If all else fails, test your idea quickly and cheaply and, unless you’ve invented penicillin 2.0, you won’t need to spend a lot of money to launch.

Mistake #1: Get a developer to build your website

Typical Cost: £1000-£10,000

Solution: Use a simple website building tool with no coding like Strikingly or Squarespace.

Mistake #2: Get a developer to build your app

Typical Cost: £500-£10,000

Solution: Use a simple app building tool with no coding like Marvel. Even better, don’t build an app; build a manual mobile solution to test your idea first.

Mistake #3: Trademark your brand

Typical Cost: £250-£2000

Solution: Launch your idea! Dates of email correspondence about your idea or when your landing page went live will prove its existence.

Mistake #4: Hire a PR or marketing agency to ‘launch’ your startup

Typical Cost: £1000-£10,000

Solution: Learn multiple simple, cheap marketing tactics. Write a post on medium or product hunt to launch your product. Signup to ‘Help a Reporter’. Ask the agency to pay based on pre-agreed success metrics. #JournoRequest #PRRequest on Twitter are quick searches to help journalists with relevant pieces. Tool: Pr in a Box

Mistake #5: Hire a designer or agency to create your brand

Typical Cost: £500-£10,000

Solution: Build a logo and brand in an hour with these simple tools: Canva, Tailor Brands, SquareSpace Logo, Fiverr, Pablo (by Buffer), Unsplash Images, Phonto (text on photos)…

Mistake #6: Spend legal fees on Terms & Conditions and/or Contracts

Typical Cost: £1000-£10,000

Solution: Find easy templates online (search or forums) for first versions like Lawbite or look at your competitors.

Mistake #7: Print flashy marketing materials

Typical Cost: £100-£1000

Solution: Just don’t, this is for your ego not your customers, who don’t care. Print some stickers if you must.

Mistake #8: Running online ads (PPC) without training

Typical Cost: £500+/month

Solution: Start with simple low-risk ads on facebook or instagram and scale up from there. Always cap your daily / weekly total so it’s within range for your budget.

Mistake#9: Hire employees too early

Typical Cost: £800+/month

Solution: Outsource your work-life with cheap freelance services like TaskRabbit, Upwork, People Per Hour, Growth Geeks…

Mistake #10: Spend your time trying to raise money rather than marketing, selling, delivering your service

Typical Cost: 3 months at least of your time = double cost on business

Solution: Don’t fundraise until you have proven that people will pay for your idea and it has potential to grow, then if you need funding to scale, you will get it.

Total minimum savings so far: £6000 :)

Bonus Big-Boy Mistake: Pay for an MBA when you just want to launch an idea.

Typical Cost: £40,000

Solution: Don’t do an MBA (join the Startup Accelerator at Escape the City :)

— — — — —

Please share in the comments any other spending mistakes you have made (or seen being made) and how to avoid them!

Here are a lot more ‘tools’ I use to test and launch ideas into the world: My Lean Startup Toolkit

Good luck!

Ben