Startups 101: Common Mistakes Startups Make & How To Fix Them

How many startups does it take to build a successful, scalable business? It depends on who you ask. According to Fortune, there are nine failed startups out there for every success story. Across the digital room, Forbes says it’s eight out of ten. Or is it three out of four?

Perhaps unsurprisingly, the statistics regarding startup failures vary widely across the board. It makes sense that an idea as abstract as failure is hard to quantify or evaluate. After all, ‘failure’ is almost a rite of passage for founders and innovators. At Cortado, we’ve each had our own experiences with that daunting F-word.

The good news? All of us who have failed have found success over time. Read on to understand common mistakes we’ve seen founders make and how to best recover from them.

Mistake #1: Missing the Fundamentals

Launching and building a business is complex, but sometimes the reason for failure is quite straightforward. The fundamentals are crucial to success, and startups must stress-test strategies from every angle to build a solid foundation.

Is it different? Business models that operate on a “copycat” model often fail. It’s difficult to stand out when you’re competing against a host of similar companies. General Partner Mike Moradi advises founders to examine whether they’re truly meeting a need in the market: Is your product differentiated enough?

Does it work? If you’re positive you’ve got a pulse on a market need, make sure to drill down and feel confident in your product. You don’t have to be Elizabeth Holmes to know that success as a startup often comes down to the simple question: Does your technology work?

Is the timing right? Don’t underestimate the importance of timing. Principal Susan Moring emphasizes that even with a great product and strong demand, startups can hit a snag if their timing is off. Being too early or too late to market can be the difference between success and failure (just take it from General Magic). Due diligence includes investigating the question: Is this the right time to launch?

How’s your follow through? Beyond the early days of your startup, make sure you’re covering the basics. Mike has seen startups drop off the map entirely for careless mistakes:

“I once saw a company fail in its first month, when its founder was careless and wired money to an international ‘vendor’ without verifying the wire details. It turned out to be a fraudulent transfer. They never got the money back, and had to return the remaining capital to their investors.”

Excitement and growing momentum are no reason to get careless. Always follow through on the basics and ask yourself: Are our processes sound?

Mistake #2: Being Too Quiet

Many first-time founders feel protective of their ideas and are wary of getting scooped by a competitor. But both Susan and Mike said one of the best things founders can do is share their ideas far and wide to get input from peers and experts.

Susan explains that despite the fear, having ideas stolen is rare. In fact, not sharing ideas can harm founders by minimizing your chances of finding co-founders and champions who will help improve your venture and make it more competitive.

Founders also benefit from intentionally building community. With the explosion of remote work, it’s now easier than ever to share your ideas and receive feedback from a national or global community.

Mike advises founders not to be afraid to reach out to executives and advisors in other cities, especially if they’re a strong match for your particular company or could provide expertise that isn’t available locally.

Mistake #3: Building the Wrong Team

Building an effective team is crucial for successful startups. Founders bring so much to the table: innovative ideas within the industry, deep understanding of problems that need solutions, and a deep motivation to bring change. But no matter how well-rounded a founder you may be, Susan recommends surrounding yourself with a team that you can trust implicitly, who think differently, and whose strengths complement your own.

What does the right startup team look like? According to Mike, the best teams have a diverse array of talents and experiences, divide labor accordingly, and communicate frequently. Mike notes that it’s usually easy to discern a high-functioning team when you see them interact — the right team can communicate well and work through conflict in healthy ways.

Need a litmus test? Imagine you and your team are stuck in a cabin for a week during an intense snowstorm. Are you all succumbing to cabin fever, or can you grit your teeth and work together for the benefit of all?

Ultimately, you’ll need to work with your team (including partners and investors) under intense pressure to find success. If you don’t have the right mix of people, expertise, and personalities to survive the winter, you may need to rethink your team lineup.

Recovering from Failure: Now that you know how to avoid the most common startup mistakes, it’s a sure path to success — right?

Not quite. The reality is that most startups fail, evidenced both by data and our team’s experience. In fact, it’s not uncommon for founders to run into failure more than once, as Mike explains:

“I’ve been involved in more startups than I can count, and only a handful of them have succeeded. To put it another way, I’ve failed more than I’ve succeeded, and that is okay, as long as I’ve learned from the failures and (hopefully) won’t make the same mistakes in the next company.”

The good news is that failure isn’t the end of the line. Most startups that succeed have experienced founders (and the only way to gain experience is through trying and failing, sometimes multiple times). Innovation comes through iteration and trying something new again and again. At Cortado, we look for failure in a founder’s past, as having a mix of successes and failures means founders will be more grounded and realistic when building their new company.

Here’s how you can move on from failure and learn from the experience:

Step #1: Take Responsibility

Before joining Cortado as our Venture Executive, I led a startup. I learned that the most important lesson as a founder from a startup failure is taking radical responsibility:

“Every cofounder, investor, early employee, or advisor invited into the journey was a personal choice. Every major marketing, product, or engineering decision directly or indirectly came from you, as the founder. Whether the business failed because of lack of market, technical challenges, or poor execution, the founder is ultimately responsible for that shortcoming.”

While it may seem difficult, accepting responsibility is the best way to lead through failure and improve the likelihood of success the next time around.

Step #2: Fail Correctly

While it may seem counterintuitive, there are right and wrong ways to fail. Mike notes that failing with integrity is a critical step in the process. What does it mean to fail correctly?

“When you fail, take the time to properly wind down the company, and make sure that you don’t burn any bridges. It is quite possible that you will have to work with some of your investors, partners, vendors, and/or colleagues in the future. Resist the urge to cast aspersions or “tell off” people. You will thank yourself for it later.”

Step #3: Audit Your Mistakes

Founders can achieve enormous growth when they identify the core failures of the startup and tie them to specific missteps in their thinking and actions, Cody explains. But learning from failure requires taking the time to sit down and analyze each aspect of the experience in order to identify where things went awry.

As you’re reflecting, remove emotion from the equation as much as possible and look at the cold hard facts. Ask your former colleagues for their input and perspective–things you may not have seen at first glance. And most importantly, don’t rush onto the next project before understanding what decisions or mistakes you should avoid repeating.

Step #4: Plan the Next Move

After accepting responsibility, dismantling your team with integrity, and taking the time to reflect on what went wrong, congratulate yourself! You’re one step closer to success. Even the huge success stories, like Amazon or LinkedIn, had failures along the way. Don’t let a roadblock end your journey. If Amazon’s path to success after failure isn’t convincing enough, take it from Mike:

“I wouldn’t have met my co-founders at NanoSource when they were needing help, had I not cratered my first company. That would later become my first major exit, when we were acquired by DuPont. If you choose to be an entrepreneur or serial founder, you are going to fail, and that is okay. Just do your best to maintain your integrity, and you will live to start another company. Bona fortuna!”

At Cortado Ventures, we invest in pre-seed and seed stage startups with a focus on energy, logistics, life sciences, and the future of work. If you are a Midcontinent startup or looking to invest in these startups, contact us to learn more.