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. 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 with a video insights for many of them. 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.