Recently, I was asked to talk at a local post-acceleration event for young startup founders (young startups, not necessarily young founders – which is super inspiring). The suggested topic was “startup mistakes to avoid”, which I found highly relevant for my current career situation, so I eagerly agreed to share my experiences.
As chance would have it, just a couple of days before that, I had stumbled upon a CB Insights report titled “The Top 20 Reasons Startups Fail”, based on 101 startup postmortems. That gave me a bit of a broader perspective on what else can go wrong in a startup. Here’s the first half on an infographic from the report, and I highly recommend reading the full thing if you’re a startup founder who wants to learn what to do not to fail and why failing happens to so many startups.
Now, it’s not like startups are meant to fail, but the truth is that most startups do fail and only a few percents generate high returns for investors. But I will not go into defining what a startup is and whether a startup needs to take an investor on board. That’s a whole different story and, anyway, many of the things I’m about to list will apply to your business whether you define it as a startup or not.
Just one thing I want you to remember: you will make mistakes and you will fail. That’s OK. Just get back up and keep going. Or know when to stop. And, most of all, try to avoid the mistakes someone else has already made. Here are mine – plus a couple that I’m glad I avoided:
#11 | Hiring marketing people: too many, too soon
“Let’s just hire the best marketing people we can find, they’ll know what to do!”
Actually, in the beginning, you shouldn’t hire too many of any kind of team members. But spending money on a marketing team before you have a product – and before you know people need it – is especially wasteful.
If you can’t convince people to use your product without marketing, you’re probably building the wrong product or addressing the wrong people. Learn how to get these right yourself, before (and/or instead) hiring the people who’ll do it for you.
At some point, having the best marketing team in your industry will make all the difference in the world. Before that happens though, there’s no point overdoing it. A good rule of thumb, actually, is to do everything you can by yourself, until you reach your level of incompetence – and then some. At that point, you’ll know what to expect from the person you hire and you’ll probably realize that you can start with just one person that’s way better than you at marketing (or programming, or accounting, or recruiting…), instead of hiring an entire team right away.
A note here, which will apply to a few of the later points as well: yes, some startups require bigger teams, more time and more capital to launch, like hard tech and biotech or medical startups. But, in most cases, having a big team isn’t going to solve the problem of a product that nobody needs. More on that topic soon.
#10 | Taking money from just about anybody
“We really need cash, any investor will be good.”
Ah, now that’s a tricky one.
You’ve tried to reach hundreds of investors and business angels. You’ve talked to a couple of dozens of them. No one wants to take the risk and invest in you at an early stage. And then this one lady shows up at some conference, totally crazy about your idea. She wants to give you enough money to build an MVP and she only has a few conditions that will allow her to “secure her investment”. Should you take the money?
Well, as always, it depends. I would suggest asking yourself a few questions first:
- How much equity will that person get? At a pre-seed stage, you shouldn’t be giving away more than 10-20%. Technically, your company is worth exactly nothing until it starts getting users and generating revenue, but that doesn’t mean you should let yourself be pushed around and sell a big chunk of what you work hard on for peanuts. If you really really have no other option, take less money for fewer shares and try to raise more money later on, at a higher valuation.
- Does the investor bring in anything other than the money? If you’re letting someone on board, it’s good if they’re an asset – they could be a great connector and introduce you to the right people in the industry, they could be your first client, they could have the right experience to help you scale your startup. If all they give you is the money, ask yourself if that’s really all you expect from an investor (yes, you’re allowed to have expectations!) and move on to question number 3.
- What’s in it for the investor? There’s no such thing as free money. When someone invests in you, they do it for a reason, the key one being: they hope to get more money out of it at some point in the future. More often than not, they will want some control over what decisions are made in your company and how they are made. Read the small print and consult a lawyer if you can, especially when something alarms you.
- Do you really need that money? Many things can be built on no budget or on a super small budget. If you’re working on your startup after-hours and you can continue doing it while making a regular salary, start putting some money aside while trying to prove that people need and want what you’re building. It may turn out that you’ll start making money on your product without needing external capital, and that’s the best situation to be in. Once you find a product/market fit and need money to scale, it will be so much easier to find an investor that’s a good fit for you and that will help you grow.
To sum up: remember that not all money is good money. And your momma probably told you that already, didn’t she?
And since we’re on the subject of mothers, if you really believe in what you’re doing, you shouldn’t be afraid to ask your family and friends (and fools) for money. In the end, you’ll do everything you can to make sure they don’t regret their investment and they make a ton of money off it, right? And if you don’t believe in your vision enough to not be embarrassed to ask your close ones to invest in it, then, well… find a better vision, I guess. Or develop the one you have into something you actually believe in.
Remember though that, whomever your investor is, you should make sure to have a written contract that regulates your business relations. When your startup is worth nothing, it’s easy to think you can rely on handshakes only, but remember that you’re trying to build something super valuable. Whenever money is involved, even the best of relations can suffer. And if there’s nothing to argue about, because everything is indisputably on paper, that’s one less thing you have to stress over.
#9 | Making a product for undefined users
“Well, it’s not something I would use, but there definitely are people out there who will.”
If you’re building something you need, then you know you’ll at least have one user. If you’re building something for your team or your company, you know you’ll have many more users, and that there’s a chance other people have similar needs. Being your own user is a very good starting point. You know your problems and you found a way to deal with them. Do go out of the building and talk to people who have the same problems though, if you actually plan to scale your product to more than one person or one team in the future.
That doesn’t mean you can’t build a product for someone else. Again though, it’s good if you at least know the industry you want to operate in and know for sure that you’ve identified a real pain point. It can be a problem the people you’ve dealt with at work have and you know quite a few of those people already. But it can also be a problem you’ve noticed and dug deeper to discover its roots.
However you go about building your product, the first and most important thing is to make sure that there are people out there who will want to use it. Don’t waste time building something you “think” people want. Identify your users and talk to them, build a super-simple MVP or even an outline of your idea and see how your potential customers react to it.
And sure, if it’s something that’s simply fun to work on and you develop your skills while doing it, go ahead and code that app or design that website. Once you’re ready to build a real business though, don’t rely on your intuition only. Rely on real data and real needs of real people.
#8 | Hiring people based on their CV only
“He’s got the right skills and experience, we’ll figure out the team and culture fit later on.”
Like that one’s never going to backfire… Believe me, sooner or later it will. Over the past few years I’ve learned that hiring a new team member: 1) doesn’t have to be as stressful for you as it is for the candidate, and 2) will always be one of the hardest business decisions.
Basically, if you hire good people, you increase your chances of success. If you hire mediocre people, those chances will be equally mediocre. And this is especially true in the case of your first hires.
I’m no HR guru, so I won’t give you any absolutes here. I don’t think there are any absolutes when it comes to hiring anyway. Do know though, that it’s better to spend more time finding the right person than hiring someone who has a good-enough CV or good-enough personality.
My rule number one would be: you have to feel like the person you hire is the right fit for your team (however you define that fit). And the team that person is meant to work with also has to feel the same way. My rule number two, which is actually as important as rule number one: the person you hire has to show signs of taking initiative and ownership over whatever it is he or she is destined to do in your startup.
For a while I thought that hiring the most experienced people you can find is a good thing – in the end, you want your product to be perfect and that requires expertise of the people building it. But I’ve realized that startups are meant to be built by people with passion for what they do, who care about the company they work in as if it was their own. A good CV helps, especially when talking to investors and showing them what stars you have on board, but in the end, they’ll also tell you that traction trumps everything. And traction is built by teams who care, not necessarily teams consisting of ex-Googlers and Ivy League graduates only.
#7 Thinking that a great product will sell itself
“Once we build it, they will come.”
Yeah… no.
There possibly are a couple of startups that exploded in popularity by pure chance, but that’s most likely not going to happen to you.
Remember when I said that you don’t need a marketing team that’s too big and/or too early? Well, I still stand by what I wrote, but you also have to realize that no product is good enough to be sold if you don’t tell anybody about it.
That doesn’t mean you have to spend millions of dollars on advertising. It’s actually much better to concentrate on the people (possibly innovators and early adopters) who are the most likely to be the first to use and pay for your product, and to get to them in some creative ways.
I would recommend reading Growth Hacker Marketing and Traction as a good primer on how to sell and market your product.
The only point I want to make here is this: do something to make sure that your potential customers know your product exists and that it’s perfect for them. If you’ve talked to the right people before and while building a product for them, it should be easy enough to convince at least a few of them to give it a try.
#6 | Convincing yourself (and others) that being stressed or burnt out doesn’t apply to you
“Me? Stressed? I’m calm as a f***ing millpond.”
I’ve listened to a summary of Thrive book the other day, and the author says that women are more prone to stress than men. That’s kind of frustrating, but hey, just another downside of being a woman, deal with it and move on. Men stress too.
Actually, I feel like, in a world where everyone is slightly overstressed and overstimulated, startup founders of both genders have it equally bad when it comes to mental health. What makes it worse is the fact that women feel like they can’t show they’re weaker than men, so they pretend nothing’s wrong, and men feel like they’re too manly to show signs of being mentally unwell, so… they pretend even more.
I have a huge strand of grey hair that I blame on being overstressed and not doing anything about it for way too long (it probably has more to do with genetics though). There’s a thin line between the amount of stress you need to stay motivated and the amount your body can’t handle. I wish I knew that when running my first startup. Some stress can be good, too much stress can be bad, and not acknowledging you’re stressed out is the worst.
I used to think that working 16 or 18 hours a day was something to be proud of as a startup founder. Now I know that it’s a rare necessity that has its health-related consequences. I used to be jealous of people who could sleep 4-6 hours a day and be super energetic every day. Now I just accept the fact that my brain and my whole body needs time to regenerate and that I’m more productive after a good night’s sleep.
Unfortunately, I don’t have a magic cure. I’m still trying to find my balance. What definitely works for me is simply making time – time for something other than work, time that I have for myself without feeling guilty about wasting it on things that won’t mean pushing my startup forward. I think everyone should have that time. Mark it in your calendar and force yourself not to work, if you have to. Also, make time to get enough sleep. Be mindful, meditate, exercise, socialize, eat, pray, love, walk on grass or sand barefoot, take your dog for a run, play with your kids – whatever makes you feel calm and happy and whatever is not work.
Sure, I still believe you should love your job, but I just don’t think that means you should work and do nothing else in life. Make time for life.
#5 | Assuming you have a product/market fit
“I think the customers need and like our product…”
According to Eric Ries, the author of The Lean Startup, “if you have to ask whether you have product/market fit, the answer is simple: you don’t.” That pretty much sums it up. The only thing you have to worry about when you get to product/market fit is not having enough people to handle the incoming customer requests or production requirements.
If you don’t have a product/market fit, on the other hand, you need to actively seek out customers and convince them to use your product. They don’t recommend it to others without incentives or even with incentives. They don’t come back as often as you would like them to, or maybe they never come back. They simply don’t love your product and have other ways of dealing with their problems – or maybe their problems aren’t big or urgent enough to use your product.
If you need something more concrete though, Eric Migicovsky of Y Combinator recommends reading this article to make this concept sort of quantifiable.
#4 | Not talking to customers
“We know what the users want, let’s just build this for them instead of wasting time on talking to them.”
All of the things I listed above as indicators of the lack of product/market fit are great reasons to talk to customers and find out what’s going on. That’s an amazing moment to reach out to them too. Having real customers means you can get very detailed feedback on what works and what doesn’t work. E-mail them, call them, schedule a meeting and ask about what they like about your product. Spend time with your users.
You should talk to them even before that though. It will help you build the right product for the right people.
Have I mentioned something about building the right product for the right people before? Well, there you have it again. It’s definitely one of the most important things you can do to not fail as a startup. Know your customers and make something they want. That’s actually the main thing Y Combinator and Startup School will teach you: MAKE SOMETHING PEOPLE WANT. In order to know what they want, you have to talk to them, period.
Don’t brainstorm what your product should look like over and over again with the same group of people, who aren’t even your target – unless you’re building something for your own team only. Don’t create another user persona. Find a real person to talk to every time you catch yourself thinking that creating a made-up customer profile might be a good idea.
I’m not very good at talking to strangers and I know that you probably would rather read a couple of market reports instead of talking to humans. I definitely would. But if you’re in the business of building things for humans (and animals owned by those humans count too), there really is no other way.
#3 | Building the perfect MVP
“Let’s add some more features and make it prettier before showing it to the world. It’s not ready yet.”
“Perfect” and “MVP” are two words that shouldn’t be allowed in the same sentence. “Perfect MVP” is an oxymoron. MVPs are, by definition, imperfect. MVPs can be glued together out of weird bits and pieces, as long as they work. They’re allowed to be ugly, even. Actually, if you release an MVP that is far from perfect and doesn’t have all the features you think people need, yet those people still want to use it, you have a clear confirmation that you’re solving a real problem and there’s a market for you out there.
At the risk of repeating myself, there’s one thing you really need to understand: your startup has to solve real problems of real people. Yes, even if they didn’t realize they had that problem until your startup came along.
I have to admit that there are products that people don’t know they need until they get their hands on them. While creating a pain-killer (real problem-solver) is pretty much a surefire way to succeed as a startup, creating a vitamin (something people will get hooked on even though it doesn’t necessarily solve a problem that’s really painful for them) is also a way to go. In either case, though, I believe you should give your product to the people as soon as possible.
It’s OK to launch an imperfect product to a small group of people and work on it some more before releasing it to a larger audience. The feedback you’ll gather on the way will be more valuable than any in-house user testing and research. You can’t be afraid to fail. And if you are, trying to perfect your product won’t help with that anyway. You will keep coming up with ways to postpone the launch. Trust me, it’s better to get the negative feedback early on and learn how to react to it. It’s not about getting immunized and starting to ignore it though. It’s about learning that any kind of feedback is better than no feedback at all.
“MVP” means “Minimal Viable Product”. Think about what’s the simplest thing that will solve your customer’s problem, then think about how you can simplify that even further. When you really cannot simplify it anymore, you have your MVP.
#2 | Choosing the wrong co-founders
“You seem like a nice gal. Let’s do startups together!”
There are so many things that can go bad in a startup. And if you begin by making the mistake of starting a company with the wrong people, everything else will most likely fall apart before you can even get to any of those things.
Let me start by saying that great friends aren’t necessarily great co-founders. It’s a good start, but you have to ask yourself if that person is someone you want to rely on when, well, shit hits the fan.
Imagine the worst possible business scenario. For example, you ran out of money, neither of you has another job, the investment you were pinning your hopes on fell through, and you have to fire the four employees that look up to you and adore working with you. Then, think about if your friend is the person you would want to rely on when all hell breaks loose. Remember, we’re talking about a situation that involves making sound business decisions, while also being supportive, so you’ll need more than a shoulder to cry on.
Also, make sure that the other person understands what running a startup means: you have to spend your own money in the beginning, possibly working a full-time job while building something after hours for a few months, then quit your job and agree with all the insecurities that entails. And let’s say you’re lucky and you start making money and/or find an investor. That still doesn’t necessarily mean you can start paying yourself a market salary. You’ll have to spend your money wisely and probably get used to the fact that your star employees make more money than you. Sometimes, you’ll have to decide whether to pay yourself or spend money on marketing… You and your co-founders need to understand all the risks.
So, maybe it’s better to build a startup with someone you’ve just met but who has great references, has already worked on a startup, and is willing to take the risk and even put in some money to jump-start the project?
That sounds like it could be a great idea, especially if the two off you hit it off right away, but be careful. If you really really want that person to be your co-founder, spend some time together and get to know each other better before starting a company.
I’ve heard a piece of good advice recently from someone who tried this approach. He said that he thought he found the perfect candidate for a co-founder but changed his mind after going for a week-long trip with him – to a tech conference or something like that. I remember thinking that this is a pretty genius test of character – you get to see how you interact when there’s just the two of you, you’ll probably see how the other person handles stressful situations and you’ll see how resourceful he is.
So, if nothing else, at least travel for a few days with the person you want to spend the rest of your startup’s life with.
Whether you co-found a startup with a friend or a stranger, I think there are three most crucial things that can become a source of conflict, stress, and suffering:
- Your visions of what your startup (product, users, company culture, recruiting style, etc.) should be can be pretty much the same in the beginning but then drift apart.
- You may feel like you’re putting in more work and care more than your co-founders.
- The money may become an issue even before your company is worth anything.
I don’t want this article to turn into a book (yet), so I won’t go any deeper into these here but do let me know if it’s a topic you crave to know more about, and I’ll see what I can do.
I’ll just mention one important thing about point number three. Just like with investors, do make sure to write down all your money and equity-related decisions down with your co-founders and that they’re legally bounding. Things like who gets how many shares (and why), what happens if one of the founders wants to leave, or under what circumstances those conditions can be altered, may seem like something not worth mulling over when your key worry is launching an MVP, but you should definitely get them straight before officially establishing a company.
#1 | Believing you’re super special
“Yeah, 8 or 9 out of 10 startups fail but that’s definitely not going to be us. Our product is just too good to fail.”
Here’s the bad news: your startup isn’t going to magically turn into a unicorn.
Here’s the slightly better news: if you work hard and are intuitive and lucky enough, you can transform your startup into any animal you want.
You’re allowed to dream big, but you also need to stay grounded and realize how much work building and growing a startup requires. Also, know that it’s very much OK if you’re not planning to build a unicorn and you want your company to be worth millions instead of billions of dollars. You will have to have a different fundraising strategy though or do no fundraising at all.
Either way, you should concentrate on building a good product. How you go about growing your company depends, among other things, on the size of your market, who your customers are and how big of a pain you’re solving for them, as well as how much and how often they’re willing to pay to have that pain relieved.
You don’t have to become a unicorn, but aiming (realistically) high is a good thing. Just know that startups aren’t easy. They require a lot of hard work and even more luck – with getting the timing right, knowing the right people, stumbling upon great first users, being discovered by an influencer, etc. But none of this will matter if you don’t have a good product that people are willing to use and pay for.
You are amazing for wanting to build something from scratch and trying to solve a real-life problem for thousands or millions of people. That totally makes you special, and you should never forget that, even if you end up failing. You’ll learn so much building a startup that it will be all worth it either way. Do lower your chances of failing though, by understanding that you’re not so special when compared to other startups and startup founders, and by pushing even harder than them to get your startup to succeed.
Nothing will happen on its own, so stop believing in fairy tales and winning lotteries. Instead, start believing in yourself and making your own luck.
Final thoughts
If you are a first-time startup founder, believe me – I’ve been where you are and I read all kinds of startup advice. That didn’t stop me from making my own mistakes, even the ones I knew I should avoid. There’s always that little voice inside your head (or maybe it’s just my head?) that keeps saying: “that doesn’t apply to you”. Well, guess what, it usually does.
That doesn’t mean you’re not allowed to repeat other people’s mistakes. There’s nothing quite as valuable as learning by doing, and this definitely applies to making your own mistakes. Just try to trust me when I say that making mistakes is costly. It costs you time, which is a very crucial resource in a startup, and – most of all – it costs you your nerves. That’s exactly why that lesson sticks too. A traumatic experience is easier to remember and recall. So, I hope you at least try very hard not to do the mistakes many startup founders – myself included – already made.
I know it’s not easy. I just quit a startup I was the CEO of for almost 4 years, and I’m starting a new project – dodowork. I really want to do this the right way from the start but I keep catching myself thinking about complex MVPs and marketing the product before I even know there’s a product/market fit. And I’m already stressing over something that hasn’t even been launched yet.
But let’s not talk about me. Don’t be like me. Don’t do things that will help you fail. Do things that will help you scale. I will try to do that too. If and when I achieve the scale, I will definitely share my lessons here as well.
In the meantime, good luck with your startup and do reach out if you think I could help in any way. I still haven’t learned to say “no” when great startup founders ask me for advice, so take advantage of that while you can!
P.S. If you remember just one thing from all my rumbling, let it be this:
Talk to people a lot. You never know who may be that one person who helps you grow your startup – as a future co-founder, a team member, an investor, a power-user, a brand ambassador, or someone else entirely. And don’t forget to talk to your potential customers, even if that means you have to push yourself to do it. Do push your limits and work hard, but also remember to take care of yourself and your relationships. Accept small failures and aim for a huge success. And don’t beat yourself up too much if you make the mistakes somebody told you not to make. There’s, unfortunately, no better way to learn than through experience.
P.P.S. All the illustrations in this article are my work (there was definitely a bit of a learning curve there too), so if you want to use them somewhere, go ahead and do it, but remember to mention me and link back to this article :). Thanks!