Starting a company is hard. There’s a reason that over 80 percent of all companies fail within 18 months. Luck certainly plays a part, but there are also very tactical steps founders can take to increase their odds of success.
First time founders, especially ones that haven’t thought much about what it truly takes to start and run a company, tend to be especially susceptible to naive and detrimental mistakes.
Here are seven of the most common mistakes that can be avoided to increase your chances of success.
- Not paying enough attention to the founding team and early hires.
Data shows that starting a company with one to two other people tends to be the best recipe for success. There are plenty of counter examples, but having one or two others to bounce ideas off of, work through tough times, and offer different perspectives typically yields the best results.
Finding the right co-founders is crucial. It’s easy to have an idea and just start recruiting anyone that is willing to work with you. But, rushing into this process and just agreeing to anyone is often a huge mistake, since founders spend an extreme amount of time with one another.
Knowing your cofounders, what they’re good at, how they handle pressure, and some of their habits can be helpful in determining a fit. It’s important to think about how someone will balance you out and how you’ll work together in both the good and the bad times.
This goes beyond just founders too. The first few employees are nearly as critical. Any team member who is likely to drag others down, or who aren’t a good culture fit, can really sink your company. Despite a need for more output early on, it’s almost never worth sacrificing quality.
- Being unrealistic with expectations.
People often start companies and overestimate the hype and glamour that is really involved in the entire process. It is easy to imagine raising a bunch of money, having tons of press coverage, and receiving endless recognition from friends and family.
Any founder that goes in with some of those expectations is likely going to struggle long-term. Starting a company is grueling. There is significant stress and it requires relentless work. Results might not come immediately, or even close to immediately .if you are not prepared for that it’s easy to lose your energy and motivation to continue working.
Founders that set expectations really high will inevitably fall harder if they aren’t met. Being able to maintain energy and motivation to work through both good and bad times is critical. Therefore, having realistic expectations help keep momentum trending upwards.
- Not focusing on users.
It’s easy to imagine building a company or product that operates at a massive scale and with tons of features and benefits. The first step, though, which is often missed, is solving a problem for people or making their life significantly better. Founders often create products, get negative user feedback and then blame their users for mistakes. Realizing that your users are crucial to long-term success is crucial to finding product market fit.
- Not being honest with themselves or their employees.
Going along with expectation setting is transparency. If things aren’t going well (you are running out of money or the product is not working as anticipated), it can be easy to lie to yourself and your team. We often believe our own ideas are more impactful and valuable than they actually are. We lie to ourselves (and our teams) when we ignore data and just trust our gut feelings.
This is one of the worst things to do because it wastes not only the founder’s time and energy, but that of their team, supporters and (if they’ve gotten there) investors. Being brutally honest about what is working and what isn’t is crucial.
- Bad managing of investors.
It’s sexy to have an article in TechCrunch about your company raising a bunch of money. While sometimes necessary, many companies raise money for the wrong reasons. They do it for the fame and fortune because they want attention. This can lead to all sorts of problems down the road — as the cap table can get messy. In raising too early, they may also draw attention to their company at the wrong time.
On the other side, some founders cannot raise money but will do anything that their potential investors ask. That can lead to just as much damage. It’s helpful to listen to potential investor concerns and opinions, but holding them as the gold standard, just because they have money, is a big mistake. It can cause founders to be prioritize making money or growing quickly as opposed to users.
- Taking too long to launch.
Founders think they need the ‘perfect product’ before sending it out into the world. There are often many issues with this approach.
Early adopters often don’t mind small hiccups if they love the value they’re getting.
Second, getting feedback and testing assumptions as soon as possible is crucial. A company might have an assumption that users will be willing to spend $10/month for their product. That idea could have driven the decisions they’re making about the product. Conducting surveys can be helpful, but there’s no way to know for sure. The only thing you can do is actually ship the product out. That way you can get feedback quickly and iterate on your idea.
Plus, there are so many UI/UX aspects to a product that rigorous testing can drastically improve features quickly.Taking the risk and getting real validation is the only way to get going.
- Forming bubbles.
There are seven common mistakes here, but there are hundreds of others that first time founders often do not realize they are even making. Founders who surround themselves by others who have been in their shoes is extremely valuable. It can help through difficult decision making and guide early efforts.
Finding not only strong, experienced mentors, but also ones from a diverse background, is the real key. People who can offer different perspectives and add value in different contexts will help diversify the opinions and feedback that a founder receives. That is much more effective than relying on one mentor whose advice might have been unique to his/her past situation