If you are recently thinking of starting a new business and bring your idea to the market, and create a better future for you and your family, there are some certain steps that you need to take. These usually include writing a business plan, presenting your business idea to some investors, gathering a team, developing the product and so on. But there are lots of ups and downs down the “Building a new business” road that you are taking. In this article, I want to talk about 8 big mistakes that young entrepreneurs do when they are starting a company.
As an attorney who has partnered with companies to conclude hundreds of venture financing and related business making — and breaking — transactions, seeing first-time entrepreneurs pursue their vision will sound like I’m seeing them in a busy road. They may be oblivious of the local risks, have no real insight into what to avoid to keep safe, and making the very same life-threatening mistakes as many other entrepreneurs who have stumbled down the same busy road. That of course will ruin businesses.
Here are some typical mistakes first time entrepreneurs should learn to avoid as they step into the business world:
Neglecting market risks when starting a company
Neglecting or downplaying market risk is still the single greatest cause for businesses failures. Much of the entrepreneurs put so much focus on mastering their technology solutions — which is appropriate, considering that all of the founders are enthusiastic technologists — and not enough to guarantee that these systems offer actual business value. And as one of my favorite books, Max Finger and Oliver Samwer’s America’s Most Popular Startups: Lessons for Entrepreneurs states, “Sometimes companies burn a lot of cash on a product or innovation looking for a solution.” But it’s wrong about the market, not the innovation, that’s going to destroy you. A smarter way, say the writers, is to spend six months talking to prospective clients to consider their expectations and validate the concept.
Taking the wrong guidance
Talking is cheap, or, as William Shakespeare said in Othello, “plain prattle without practice.” Those are the words to live in Silicon Valley in which start-up advice is easily available, but much of it is false. It’s a truism that most individuals with insightful experiences are in very high demand, whereas others with lots of time to provide guidance normally don’t have any value to impart. Respect the source and weigh the answer proportionately when getting advice.
Ignoring positive feedback
Entrepreneurs should be careful of dismissing the input of a venture capitalist or a future buyer who has been intensely involved with your business, but eventually declined to either invest in it or purchase your product right now. As an instance, one of my most profitable customer businesses has been trying for years to commercialize an immensely famous product. They ultimately built a pricing strategy that helped them thrive, thanks to the guidance of Kleiner Perkins VC Randy Komisar. He had invested his time investing in the venture, thinking that their probability of beating the incumbents was just too slim. But based on Randy’s long years of industry-related expertise, he gave advice on how best to commercialize the firm’s product. The guidance was important and the organization was wise enough to execute it.
Going too quickly
Most startup analysts say that you have to go first and go hard — go to market first, hoard the best assets, and steam ahead whilst shoveling money into the boiler. Sometimes that’s true, but I’ve seen many more businesses struggling to expand too fast. It’s more sensible to maintain money till the company knows what the client actually wants, and then, blast the torpedoes! Nest co-founder Matt Rogers states that while the organization had a vision of a smart home, it first had to work on the thermostat: “Take one step at a time and make sure to mark big successes and achievements along the way.”
Employing the wrong people
Al Davis, owner of the late Oakland Raiders, has often been blamed for drafting speed, and not football skills. Even if everyone seemed to realize that the Raiders required defensive strengthening, Davis would still choose to build a fast, wide receiver. That’s presumably why the Raiders have not really won the Super Bowl in 35 years. Likewise, often first-time founders employ the wrong people. They recruit their sales manager too soon and their product manager too late. They often prefer to recruit key employees with very little expertise, too inspired with the time spent on a profitable start-up or tech company. Two individuals will work side-by – side at the same organization and leave with drastically different degrees of experience based on their dedication, self-reflection and awareness of trends. Sorting the pile according to business needs and not flashiest resumes is critical.
Overestimating the difficulty of seed funding
It’s not too difficult to raise seed money, so the entrepreneurs need not be too self-congratulatory to invest in a hot seed fund. Very few businesses have ever flourished unless they have the best names in their very cap table.
Underestimating the difficulty of collecting Series A funding
Series A funding is a landmark where the entrepreneur can eventually go past bootstrapping and develop their dream. It also signals the initiation of a partnership that is vital to the future of the firm — a VC associate. (And note, the individual investor is more crucial than the fund to the survival of the company.) The founders must significantly boost their game to gain Series A funding. My friend Jason Lemkin notes that the entrepreneurs need great staff, a data-driven presentation of 18 months of accuracy planning, a real knowledge of consumer acquisition expenses and other sales measures, a detailed view of the business environment, and a realistic product roadmap. That’s not easy — not to make the job product very decent anyway — and it isn’t something that you can put up in a coffee joint in a single day.
Founders face a lot of anxiety. That’s normal, since many of them work 80-hour-plus in a week and can’t get through a full night’s sleep without waking up from a bad dream. They’re often overstressed, depressed, and anxious, and it takes a toll on their artistic and analytical ability which they often don’t notice until it’s too late. Founders need a ballast — something that’s incidental to work — so that unavoidable failures will not become points of crisis. So many individuals in the start-up community perceive outside ambitions as a symbol of vulnerability, but that’s ridiculous.
No one has a golden blueprint for the success of a first-time entrepreneur. But if by avoiding these 8 mistakes they can de-risk the course of their business forward, the odds of fulfilling their world-changing dream will improve significantly.