Most first-time founders are people with a dream and focus who are ready to provide a better future through better ideas. They are willing to start something new with the passion and the drive to move through failures and loses. With their success comes some changes in the world – not to mention the impact on the bank balances of those around them.
However, the majority of these people often commit the same mistakes which the past first-time founders like them did. While working with several clients on their enterprise financing and transactions, we have come to realize that first-time CEOs are like a stranger moving into a busy road.
As a stranger, they are likely to be unconscious of impending dangers, lack good insight and consequently, make a mistake that can be life-threatening to their businesses. Therefore, before you jump into the “busy road,” endeavor to understand some common mistakes which first-time founders usually make and how to avoid it.
1. Failure to consider market risk at the beginning
One of the most important reasons behind most startups’ failure is ignoring or giving less consideration to market risk. Rather than evaluating the impending market risk, most startups often concentrate on making their technology platforms perfect. Considering the fact that most contemporary first-time founders are passionate technologists, they prefer to splash a huge amount on a product or technology that brings a solution. However, the truth is that what can kill a business is getting the market wrong – and not technology. To avoid such a mistake, you are best advised to use at least six months in talking with prospective clients and getting to know their needs. In this way, you will be able to ascertain your idea.
2. Accepting the wrong advice
Anyone can start talking and giving advice, even though they lack the right information. In Silicon Valley, you will come across several startup advice, but most are incorrect details which you should never apply to your enterprise. Without doubt, there is a high demand for people having valuable insights while people that spend more time advising usually offer a little impact. Whenever you have been given advice, endeavor to check the source, and respond wisely.
3. Paying less attention to constructive feedback
If you have a venture capitalist or a client who has connected significantly with your enterprise but chose to stop investing in your business or purchase your product outrightly, endeavor to give complete attention to their feedback. For instance, we once met a successful client company that found it quite challenging to monetize its highly popular product for several years. However, at a time, one of their investors advised how to monetize their products due to his longtime experience in the field. Even though the investor gave up on the company, believing it would be hard to surpass the top incumbent companies, the brand was able to implement the advice successfully and witness a massive boost to their sales. Eventually, the advice worth much more than the investment.
4. Moving at an extreme pace
According to many analysts, starting a business requires getting to the market first, hiring the best talent available and moving fast with the necessary capital to run. While sometimes, this advice is correct; however, we have seen companies that failed massively due to the extreme rate of growth. Be prudent at conserving the capital, pending the time when the brand will fully understand the needs of its customers. Then, you can fire! Endeavor to take one step at a time, and never fails to celebrate when you reach a significant milestone.
5. Employing the wrong team
Regardless of how perfect your business plan is, or the amount of capital involved, hiring the wrong team for the job can kill the dream prematurely. Out of moving too quickly, most first-time founders often hire the wrong head of sales and head of products – a massive mistake that can ruin it all. Some even hire workers with little experience because they were overly impressed by their previous performance in another startup. You can have two individuals working in the same company, yet possess a different level of experience. This is usually due to their level of engagement, pattern recognition, as well as self-reflection. In short, endeavor to assess your options and choose the best candidate for the job.
6. Overestimating the challenge of seed funding
Raising seed capital is not an extremely hard task, so getting all self-congratulatory after winning with a hot seed fund is not necessary. Only a small group of enterprises have reached their goals merely by having the right names in their cap table.
7. Undervaluing the difficulty of raising Series A financing
Once a company successfully reached the Series A funding milestone, then the founder can proceed from bootstrapping to erecting their dreams. Also, it is the beginning of a VC partnership, which is vital to the brand’s success. As a start-up founder, you need to focus on working hard to bring in Series A funding.
However, to attract the much-needed Series A funding, you need an excellent team, a good understanding of customer acquisition costs, revenue metrics, as well as data-driven pitch with more than four months of precision plans. Also, endeavor to have a real product roadmap and an excellent understanding of the competitive landscape. All these will save your business from the error of undervaluing the challenges of accruing Series A funding.
8. Mental fatigue
With the title of founder comes tremendous pressure, considering several tasks to execute and those to oversee. Founder tends to work for more than 80 hours within a week with less sleep. As a founder, you may be overworked and stressed out. Eventually, both your creative and analytical abilities may be affected. Most people don’t realize such a condition until it is too late. Founders need something to keep their mind off work for a while. By so doing, you will be able to handle inevitable disappoints that comes with startups. Don’t see other interests from your business as weakness; instead, consider them as a moment of reenergizing for the impending task.
While there is no magic formula for raising business from scratch to the desired heights, reducing the possibility of errors by avoiding the listed mistakes will boost your business chances of becoming a success.