Winston Churchill once remarked that “democracy is the worst form of government except for all the others that have been tried.” Had he lived long enough to experience the modern tech economy, he might well have said something similar about launching a startup. It’s the worst way for founders to make a living — except for all the alternatives.
Truth be told, founding an early-stage technology company is a risky, thankless task. Scaling one is even more difficult; it’s no wonder that something like 80% of startups fail during the first five years.
Some of these failures are unavoidable, the result of bad luck or true externalities beyond founders’ control. But seasoned experts at blue-chip venture capital firms like Target Global know all too well that many failures are caused by preventable mistakes.
Detailing every single possible founder mistake would take days, so for brevity’s sake, this list includes four of the most common, most dangerous pitfalls. Keep it close at hand as you build your next big thing.
1. Launching Before Your Solution Is Ready
Even in a move-fast-and-break-things environment, some amount of business planning, product development, and market testing is needed before exiting “stealth mode,” experts say.
“Some founders succeed in building the plane as they fly it, so to speak,” says Yaron Valler, Target Global’s co-founder. “But few succeed before they know whether it’s a plane or a helicopter.”
2. Going Too Fast At the Outset
A related problem many founders have is trying to scale too quickly during the first phases of a startup’s life. This is especially problematic for startups with higher infrastructure requirements.
The solution: “go slow to go fast.” That is, scaling at a reasonable pace — generally 5x or 10x the previous iteration. “The idea of going slow…to go fast has been around for ages,” says efficiency expert Regan Bach, who advises startups to take a measured approach to growth. 50x or 100x per iteration could be too much to handle, leading to reputational challenges that may be difficult to recover from.
3. Disregarding Subject Matter Experts
It’s OK to cut against the conventional wisdom; many of the most successful founders do. But it’s rarely wise to disregard the advice of true subject matter experts. Better to add them to your team early, while there’s still time to identify and correct problems. This wisdom applies to team members you might not consider “experts,” too, like sales associates.
In fact, it’s arguably even more important for these positions, where you can personally do the job but might not be the best fit for it and, anyway, will soon have too much on your plate to give it the attention it deserves. For these jobs, it’s important to know when to first delegate the responsibility.
“Try to close at least 10 to 20 customers yourself first, before you hire a sales rep. You can’t teach them how to do it if you haven’t done it yourself,” says SaaStr’s Jason Lemkin.
4. Overestimating Your Runway
Does your startup have enough cash to endure four unprofitable years? What about seven or 10 years in the red That could be what it takes, says Startups.com’s Wil Schroeter, who notes that the typical startup takes four years to build momentum and up to 10 years to become fully profitable.
It’s important to estimate your runway during the initial business planning phase, before your cash burn accelerates as you grow your headcount, ramp up product development and deploy costly infrastructure. Be conservative. You can survive an underestimation of your cash efficiency; the inverse is a much bigger problem.
Start Slow to Go Fast
Wise founders understand all too well the tension between “moving fast and breaking things” and going slow enough to get it right the first time. After all, when the stakes are high, you rarely get a second chance.
Most of the mistakes described here stem from founders’ well-intentioned desire to outrun the competition. Unfortunately, speed increases the chances of a costly mistake: a buggy first product, a bad funding deal, a poor customer support system that damages your reputation beyond repair.
By going a bit slower than you’d like, you could save yourself far more time later on, and ensure that your startup outlives most of its peers.
