Seven Excellent Ways to Ruin Your Startup
Seven lessons from startup wizards on the most common mistakes made by entrepreneurs
Startups fail often. And it’s not just because they didn’t raise twenty million with a sexy VC, their Total Addressable Market wasn’t forty-five squillion or they weren’t the Uber of this or the Airbnb of that. It’s often because they took some awful advice, overlooked something critical or made a completely avoidable mistake.
In 2017, I was selected for the Microsoft Accelerator. It’s a three-month semi-intense, a three-quarter glamorous startup program that is designed to accelerate startup growth. On the whole, it was a pretty solid three months with good content, and provided the true value of all accelerator/incubator/reactor programs — it connected me with potential customers and future investors. But, what it also did, was plunge me into the startup world. A world I have become obsessed with.
It’s a world that is easy to be seduced by, it’s awash with the smartest and ambitious minds who have dedicated their souls and inexhaustible energy to the entrepreneur cult. It’s full of hope and optimism that’s fuelled by stories of mouthwatering exits and consciously casual footwear. But something that fascinated me from day one of my ascent into this community, was that even though a startup may have an amazing idea, a killer team and opportune market, some still flop and flat-line. It made no sense to me.
Fast forward to the present day and I’m one success down, and few investments in and midway through launching the new one. But in my spare time, I host a show where I interview amazing startups and successful investors to gleam helpful and practical advice for early-stage startups and people who are thinking about taking the entrepreneurial leap.
One question I always ask is — ‘what's the worst mistake you see founders/startups make?’
If you’re looking for a silver bullet, I haven’t found one, however, some things come up a lot. Here are the ones that are mentioned consistently, so hopefully, you can avoid making them on your path to startup nirvana.
Not understanding the problem
We’ve all had that moment where we start a sentence with ‘Wouldn’t it be cool if…’ and then our entrepreneurial juices start flowing and we consider hurling our savings at someone to build this cool thing. Sadly, despite how Hollywood this may feel, it’s a terrible strategy. Products that don’t solve a problem, don’t have sustainable growth.
Kevin Monserrat, CEO of London based VC and former head of dealflow at Microsoft, stated that;
Startups need to truly understand their customer’s problem before they do anything else.
Solution? — Spend more time than anything else at the beginning talking to your prospective customers to deeply understand the problem that you’re trying to solve. Learn the language they use, the struggles they have and the pain it causes. You need to be able to walk in their shoes and feel real empathy. Once you can do this and articulate it back to people, your solution is going to be infinitely better and more successful. Some tips on this in the ‘Building things people don’t want’ section.
Thinking your product is amazing
It’s natural to be protective of something you’ve built. You’ve probably poured more metaphorical blood sweat and tears into it than anything in your life and it’s now essentially a Horcrux. But not being able to accept feedback and criticism will break your business. Apple updates its software constantly and Blackberry belligerently stuck with the keyboard. Who won?
“Your product is wrong, accept it. Now make it better”
Solution? Treat everything in your product as an experiment. Get people you don’t know to test it relentlessly and don’t be precious about anything. Invite people into your office and film them using the product on their own. It will make your gut wrench, but it will give you more value and insight than anything else you do.
Building things people don’t want
Now look, I know you’re thinking. This is so obvious Thomas, what a rubbish point to make. But CB insights did a post mortem of 101 failed startups (more on this later) and found the top reasons for failure to be — No market need. Which is pretty astounding when you consider what that means. It means a team of probably very smart people has invested serious time and money into developing and launching a product to only then find out that nobody wants it. It makes no logical sense, but it seemingly happens a lot!
Solution? Market research. There are three really great ways to do this that are relatively low cost and time before you start building
- Surveys. Run a Facebook ad for the survey and include a prize as motivation. It doesn’t have to be much, but a set of AirPods or an Echo will get you hundreds of responses. TIP — take time to ensure you have the right questions and audience answering them or the resulting data is useless.
- Focus Groups. I’m a massive fan of these if you get people in a room talking about a problem (not your product) you’ll learn so much about what they want. If you’re struggling to find people, run an ad on social media offering an Amazon voucher to come to a user group. TIP — don’t invite people you know. They will likely know what you’re building and will unconsciously swing the discussion.
- Interviews. Find someone who would be the perfect customer fit and take them for a coffee where you can download everything about the problem and what they’d want in an ideal world to fix it. You will be surprised how willing people are to help.
“Lock yourself in a room and build a product your customers really want and has scaleable growth”
Doing it on your own
The list of skills needed to make a startup successful is massive. And you don’t have them. Sorry. You may well have a lot, but you don’t have them all. Warrick Hill, serial enterprise-level entrepreneur and former CEO of Microsoft for Startups, stated —
“Probably my greatest mistake was trying to do it all by myself.”
Solution? Firstly, be brutally honest with yourself. Make a list of the activities that need to be completed to make the company a success and be honest with which of them you are going to be exceptional at. For the rest, find a co-founder or hire someone.
Secondly, a mentor is incredibly helpful in building self-awareness. When it comes to finding one, look for someone who can forge a genuine relationship with you as an individual. Here are three questions they should be able to help you answer;
- Are you truly ready to do this?
- Are you smart enough or have enough understanding?
- What are the gaps you need to fill?
Focusing too much time on raising capital
As mentioned a little bit further up, CB insights did a post mortem of 101 failed startups and found the top three reasons for failure to be — no market need, ran out of money and lack of cash. Running with the same thought process, Consilience Ventures, a new early-stage fund in London ran a similar analysis and found that founders can spend up to 60% of their time focusing on fundraising, which means they’re only spending 40% focusing on their business.
Your startup cannot afford for you to be only spending 40% of your time on it. There’s a reason you’re the captain of the ship and if you’re not at the helm, no amount of money is going to get you out of those stormy waters.
Solution? Write at all the activities that need to take place for a round; writing a deck, finding investors, writing follow-ups, producing and providing due diligence information, to name a few. Now ask yourself if this is something someone else in the team can do? Delegate appropriately and share the load.
Four years ago I helped launch a product to market. I spent two months planning with heaven knows how many blue sky meetings and I shudder at the thought of what we spent with agencies to come up with mediocre ideas. But, after some fairly solid arguments, lots of coffee and more doughnuts than is socially acceptable we came up with an incredible campaign. It was awesome. Genuinely. Sadly, it fell flat on its face and the conversion rate was awful. The post mortem revealed the single error, we made assumptions.
The truth is, you don’t know what’s going to work. And no matter how edgy your hipster agency is, they don’t either. If you commit to an advert, email format or anything that is designed to gain customers or attention, you need to experiment and test. Constantly.
“Every time we make an advert, we test a least fifty variations”
Try variations on everything — colors, tones, images, call to actions, channels, timings. Spend as little as possible, look at the results and commit to the winners.
Forgetting why you did this in the first place
Starting a company is hard. It may well be the hardest thing you ever do. And the difference between you achieving your dreams and returning to commonplaceness, is above all else, going to be dictated by your commitment and resilience.
Dealing with rejection, heartache, and failures is ten thousand times easier when you have a purpose and a clear vision of why.
Solution? Take some time out on your own. Switch off your phone and ask yourself ‘why am I doing this? What do I want the outcome to be?’ When you figure it out, write it down and keep it somewhere safe. However often you need to, refer back to that piece of paper and remind yourself why.
I hope you found this helpful.
Back yourself, you can do this.