5 Mistakes I Made on My First Startup That You Should Avoid
Launching a startup in 2020 seems to be the norm for many people, especially in a time of economic uncertainty. Many have realized that job security is now harder to come by, and being your ‘own boss’ could be the way to go.
As you get knees deep into one, you realize it gets progressively harder, and you run into more roadblocks as time goes by. When I launched my first startup five years back, I was brimming with optimism with our idea. I even took part in a few startup programs, and we made some first sales with only an MVP.
After over a year and a half of operating, our team finally decided to pull the plug due to a lack of motivation and one team member leaving. Although we made some headway with our startup, internal reasons ultimately spelled the main reason for our problems.
After thinking about it years back, I am grateful for the experience as it has helped me establish my current startup’s foundation properly. With this, let’s take a trip back in time to see what mistakes we made.
1. We didn’t set up a proper founder’s agreement
Yes, one of the number one rookie mistakes, but I have seen it more commonly pop up, especially for new entrepreneurs.
Many first time founders who start businesses with others fail to establish a proper partnership.
For us personally, even though we set up an equity split, we didn’t come up with any vesting schedule. This meant if one of us left, they could take a whole bunch of equity for free, which essentially ruins your entire company’s chance of raising any money.
Even if this sounds something silly to do, there are plenty of examples of ownership problems in previous startups.
One of the most classic examples is Facebook’s complicated ownership history.
Without going through the entire ordeal, Zuckerberg landed himself into a variety of issues with people like Eduardo Saverin and The Winklevoss twins. For Saverin, it involved ownership problems as Zuckerberg had promised equity in Facebook's early days to him.
Until 2009, he wasn’t even acknowledged as a co-founder, and it took a costly lawsuit to settle this (over 5% of Facebook equity, which is today worth upwards of $13 billion).
This is why spending some money early on to create a proper founder’s agreement, partnership, and company structure is important and can end up saving you plenty of money troubles later on (in the case of Facebook, billions).
2. We had a misalignment in team commitment levels
Sticking to a similar theme to the first point, having co-founders who are unaligned to vision, motivation, and work ethics can ruin an entire team's dynamic and progress.
Choosing the correct co-founders is one of the most important parts of working on a startup and often overlooked for first-time entrepreneurs. More than often, investors aren’t just investing in a product but also the team.
Remember, you’re working with these people on an idea with the potential to go full-time and beyond. In a way, you’re spending as much time working on your business as you would with your own family.
We had a team of 4, and although there were no immediate communication issues (which is a common problem I hear myself), our main problem lay within commitment difficulties.
Everyone had different commitment levels.
Every founder had a different amount of time they wanted to put into the business. Even though this was fine on paper, it was hard to understand everyone’s commitment without proper goals set up. This eventually boiled down to one person, ultimately leaving the business, which eventually crumbled the entire operation.
One of the most important things I learned is having transparent talks around motivations early on and what you want to achieve as a team. This means being aligned on full-time goals and how much commitment they want to put in now.
3. I brought in founders with no interest in the idea
In my opinion, there are too many teams where one person brings in a friend because they’re ‘good at coding’ or something similar of the sort.
Although this isn’t usually a problem, it becomes one when a founder is brought in for their skills but has no actual interest in the vision. This brings the risk of being demotivated in the long run, especially if your startup can’t get early traction or funding.
This happened exactly with us as I had personally brought in a member who I thought had great experience building applications but actually had no interest in the actual idea. Although he got along with the team well, after some time, a lack of motivation was showing due to a misalignment of the vision.
This ultimately meant deadlines were missed and took us a long time to get our initial platform off the ground.
4. We pivoted way too early
This one does sound kind of silly at first glance and definitely is more of an uncommon problem.
Even though we managed to get early sales, we thought the growth was too slow. Without proper validation and feedback from our customers, we decided to pivot our idea to grow the business.
This turned out to be a nail in the coffin as the idea gained no traction.
Even though we decided to pivot back, by then, we had all lost a lot of motivation and lost a lot of momentum. In reality, the only reason to pivot is if you’re forced to (e.g., for travel startups during COVID-19), you get validation, or if your initial idea has completely failed.
For us, there was no real reason for us to have tried to pivot for the sake of growth.
5. We didn’t talk to customers enough
Although it’s important to fall in love with your tech, it’s essential to do the same with your customers (not literally).
Doing user feedback with your customers and understanding their pain points from the foundation up will provide you essential feedback that is invaluable for any startup.
For us, we failed to do enough of this.
Although we did some user interviews, we should have continuously done them, especially with our customers.
Instead, we focused way too much on trying to scale and grow (and pivot) that we lost sight of what truly was essential, talking to our customers. This could have helped us align our vision and even find new opportunities elsewhere.
Starting your first business is never an easy thing to do. It becomes especially serious the longer you work on the business, including when you bring other founders into the mix.
I’ve learned a lot over the years since I launched my first startup, and it was invaluable in teaching me what not to do for future ventures.
Hopefully, these lessons give you some idea of what problems you may face in the future and how to navigate them.