Over the years, I have often pondered the reasons that startups, especially promising startups, fail. I once asked a good friend who is on the “investor” side, if he could identify any really unusual ways that startups failed, as I could not. He couldn’t either.
The truth is, most startups fail, not because the technology is too hard or doesn’t work (with the exception of new medications/therapeutics, which have a $1 billion gauntlet to prove they work!). Most startups fail because of mistakes, simple and avoidable mistakes that are well known to people who work a lot with entrepreneurs.
So, I decided to create a list of ways entrepreneurs mess up their startups for our VentureWrench community. I started out with a target of 25, but I end up with 50! Because there are so many, I’m posting them in groups of 8-10 and when they are all posted, I’ll publish a neat single summary document for you as well.
Try and avoid these!
1. Startup with a “small idea” either in terms of technical difficulty (too easy) or market size (too small to be fundable).
2. Forget to “Design the Perfect Investor™” and instead pitch to whatever investors you can get a meeting with.
3. Poison the investor well because you pitched the wrong investors for your startup (see #2).
4. Have too many co-founders – it splits the equity too far to be motivating.
5. Have NO co-founders and think you can be everything to everyone.
6. Have a 50-50 equity split with a co-founder (especially without an agreed upon way to legally end disagreements).
7. Risk having a lost founder – a founder who owns founders shares but has left and is not contributing (have a buy-sell agreement!) Some investors recommend/require founder stock vesting, but as a founder I loathe this option, it may have to be negotiated with the buy-sell agreement having vesting clauses if someone leaves.
(stay tuned for part 2!)