The 3 Most Common Mistakes Founders Make When Building a Company

Learn from these issues and you may be in better shape at your own startup

8 min readDec 19, 2020

After seeing startups from the inside and out, from seed rounds to billion-dollar companies, from board meetings and CEO dinners to coaching sessions and leadership retreats — I see three mistakes get made at companies time and time again:

Underestimating the importance of narrative when fundraising (and expecting a good product and/or solution to speak for itself).

Spreading solutions too thin, and serving many customers poorly instead of a select group very well.

Neglecting to reevaluate and reorganize talent for the startup’s current needs.

I firmly believe that investors invest in (and employees join, and journalists write about) compelling stories, and your pitch deck is really just a vehicle for telling the story you want to tell. So, start first with the narrative and build the deck after you have it nailed.

The best advice I ever got on narratives was from Slava Akhmechet of RethinkDB on a matter totally unrelated to raising money. He said that every story in human history followed the same arc:

The world is a certain way.

Something changes.

The world is now different.

This may seem obvious to you, but I love the simplicity of it. I bet you that any story you can think of right now follows this outline. Like every narrative, your pitch will follow the same arc.

The world is a certain way — Here you outline your background and the current state of the market: How you were introduced to the problem and why you are an expert, the order of magnitude of the problem today (it should be big!).

Your narrative must be concise and accessible.

Something changes — Your solution to the problem and why now is the ideal time for it.

The world is now different — aka how your solution changed the world: product traction (especially metrics/milestone focused traction), the remaining opportunity (or why your traction will continue and make you big!).

Your narrative must be concise and accessible. Anything that doesn’t powerfully support one of these points, I would leave out.

I view this narrative as a story you tell through conversation. If you have a powerful narrative you should be able to have a conversation with someone who is a novice at your industry and guide them through it, and at the end, they should think your company is amazing and probably going to be very successful. In fact, to refine my narrative I often do exactly this (it doesn’t have to be with potential investors) and use it to iterate the story I am telling (adding or removing specific facts, changing orders, etc.). Getting the right narrative is the most important part of the pitch process, so I would make sure you spend a lot of time perfecting.

I wrote more about this in the blog post, “Creating Your Startup’s Narrative and Pitch” and developed a template of what should and shouldn’t be in your pitch deck.

Mistake 2: Spreading solutions too thin and serving many customers poorly instead of a select group very well

You need to decide who your customer is. At justin.tv, we could never decide who our primary customer was. Was it the viewer? Was it the broadcaster? What kind of broadcaster? Talk show streamers? Because we were scared to commit, and thus tried to serve everyone, we served everyone very poorly. Only when we decided to focus in on gaming broadcasters and pivot to Twitch did we truly find product-market fit.

You need to focus on a specific customer. It is easy to get distracted by shiny new opportunities. For example, a big customer (10x bigger than any existing customer) might come around with a big revenue opportunity. But servicing that revenue opportunity may result in a bunch of custom work. Do you take it? Many CEOs are tempted, but it won’t help you serve the customer base you set out to serve. In fact, it will hurt your ability to execute as well as you could for your original customer base.

The co-founders of TRM share their journey of how they found a market to better justify and iterate on their product development and fit.

“Hire and fire like it’s your most important job.”

Mistake 3: Neglecting to reevaluate and reorganize talent for a startup’s current needs

Having the wrong people can manifest itself in executing slowly against goals. Mistakes get made, wrong paths get taken, and progress can grind to a halt.

The remedy to this is for founders to have ongoing, assertive, and candid conversations with team members about the needs of the startup, and whether the team members are able to meet those needs, as well as what support is needed by the team members to meet them. If they aren’t able to do the job, the team members should be layered under someone who has more experience. Newsflash: You aren’t doing anyone any favors leaving them in a job they aren’t able to do. If you leave them there they will eventually burn out and quit (but first probably become toxic within your organization).

As co-founder and CEO of Lattice, Jack Altman puts it well in his post on building startup teams: “Hire and fire like it’s your most important job.”