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Top 10 Mistakes that Startups Make

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As we know there is no limit to the ingenious ways people find to royally screw things up – as a start-up or anywhere else. As one expert puts it, experience is what you get when you fail to get everything else you wanted so, in lieu of learning the hard way, learn from others! In order of importance, most important to least, I’ll cover some of them:

Mistake #1 (The Worst): Burning Your Bridges

Paraphrased, this came out more as “live by your word and act with integrity”. Interesting #1, this, because its not limited to startups, obviously. In the world of startups, however, there are many inexperienced people, sometimes significant personal money at stake, lots of uncertainties and a huge amount of trust needed between investors, boards, founders and employees to pull it off.

This can cause people to behave, lets say, in a manner which is less than desirable or ethical. And outsiders sometimes take advantage of this (example quoted: Facebook’s and Microsoft’s habits of structuring acquisitions to offer more value to key people they want to keep going forward, vs. the deal already agreed between the investors and the founders/employees).

The point comes down to this. As you go into this with your team – all of the stakeholders – keep your word, make sure everyone feels good and properly treated and take care of your reputation. If you shake hands and then do something different it will come back to haunt you.

Mistake #2: Not Focusing Nimbly

Focus is critical in startups. Its very easy to get distracted, or overreact to outside factors. That said, the reality is that things change as you go along. So you need to be highly focused, yet nimble enough to change tack if something happens to significantly impact your plan. Fact is, many successful startups never set out to do what they ended up doing.

Ann Miura-Ko from her investments: Chegg was Craigslist for Colleges – until Facebook started doing it, so now it’s textbook rentals for students; Circle of Moms was started as Circle of Friends by two young, single (no kids) guys as a way to create groups on Facebook, so when Facebook started doing the same thing they focused on Moms as one of the key active large groups that formed under their prior plan. (Hmm, notice a theme in Ann’s investing??).

Focusing nimbly was also defined by one panelist as being able to say what you do clearly, in one sentence. Focus certainly, not sure about the nimble …

Mistake #3: (Not) Letting Your Investors Become Your Trusted Advisors

This one actually focused more on developing the right dynamic between you and your Board/investors. A consistent theme was along the lines of “well, you (the CEO/Founder) are in charge and you need to run the company”, with of course the caveat that if we don’t like what or how you do it then we’ll take you out. Reality is that you need to pay a lot of attention to who you take as your investors and how the dynamic will play out. Many investors have two completely different sides – when things are going well, and when things are not. So check out both sides with people who have worked with both sides – before you take the money.

If you need more help from your Board or investors its OK – to a point. Introductions to potential partners? Great. Taking over running the business – not good. It all depends on the timing, the relationship and the needs. Generally investors want you to listen to what they have to say, but not be told what to do (otherwise they should get someone else). So you have to figure it out but with their advice and input.

This also helps with one key point: never surprise your Board! Always keep them in the loop, knowing what’s going on.

Mistake #4: Not Having Trusted (Valuable) Advisors

Naturally I like this one (becoming a trusted advisor – and earning that role – is one of the ways I help startups myself). And I agree with it because even experienced entrepreneurs don’t know it all. They tend to know a few things well, and the rest has to come from around them – the team, the investors/Board and the trusted advisors.

In this case “trust” means “valuable”. They need to add true value. If they are just names on paper to look good then they’re just endorsements -and largely worthless. They need to be real help to you. You should hire an advisor the same way you hire an employee – carefully, with reference and other checks. Paid or unpaid, cash or stock, depends on the value and the role.

However advisors will get frustrated and move on if you don’t know how to use them, receive the advice and know how to parse and act on it. This does not mean blindly following the advice. But if you ask for advice then please accept it and decide how you will use it. And don’t try and do it all yourself.

Mistake #5: Not Recognizing When to Supplement or Shrink the Team

Founders who fear bringing in the right people at the right time are a problem. “When I find someone as smart as me then I’ll bring them in” – wrong! Engineer founders generally don’t know how to build sales and marketing. The culture you want determines the kind of people you hire. You should always be hiring or shrinking – but make sure the people are the right fit (don’t hire guys with machetes if you are already on the highway). Personal characteristics and motivation are always the most important, not the specific skills – you can learn the latter but not the former.

Mistakes #6 and #7: Not Having a Real Plan – and Not Knowing Where You Are On Your Roadmap

A key emphasis here was to insure you figure out what type of business you are building – a big or small company, a home run or a single. This is really important because it determines much of what you do – and who you hire and whose money you take. The reality is the vast majority of startups that succeed turn out to be single. Very few ever IPO (fewer than ever). Most will get acquired if successful. And for you as a founder you may be a lot better off taking smaller money from angels or smaller vc’s, controlling your destiny more and getting a larger share of a smaller business (and more total dollars) than someone who swings for the fences and even if successful gets a very small piece of that bigger business. Regardless, you need to build your business to be independent, not just to be bought.

Always have a clear plan – but be nimble enough to change it if you need to. If revenues are less than you planned then you need to find new growth or cut expenses. This is partly why investors bet on people – things rarely go according to plan and how the people handle it is key. Knowing where you are on your roadmap then becomes key – is your hypothesis (for that’s what it is) working or not? By the way – as I’ve written about before – tying funding to milestones is wrong, not just because its a cheat on valuation by the investor but because you may need to change the plan and the milestone becomes a millstone.

However metrics are important. Here’s what we said we’d do. Here’s what we did. Here’s what we’re going to do next. It’s your feedback mechanism. Why is something drifting? Be ready to reset if needed, or take other action. Be super transparent, regular, communicative and avoid surprises.

Mistake #8: Being Penny-WIse and Pound Foolish

As a financial advisor and CFO to startups of course I have to echo the starting point on this one – the panel’s statement that you need to have a good CFO or Controller. It’s still a surprise to me that so many startups don’t have either one – and in fact frequently don’t even have a good bookkeeper or basic financial information available. The panel view was that you need someone on board who doesn’t want to spend money BUT the real key is someone (CEO’s are often not the right ones) who can help make the right trade-offs. After all, saving $5k a month in online marketing is a false economy your total burn is $150k/month and not spending the $5k means you take X months longer to make your target. Not having a top sales person is a bigger mistake than having a colour copier. I’ll repeat a personal view here: the right financial person on board (emphasis on RIGHT) will pay for themselves many times over in better business decisions and return on investment.

When you have raised money (see below) then have self-control and don’t defocus. If your plan said you would spend $Y on marketing and you raise the money you needed then don’t go spend that $Y on swanky new space instead.

Mistakes #9 and #10: Never Be In The Position Where You Have No Money; Don’t Raise Too Much or Too Little

Sounds obvious. Amazing how many don’t figure it out. Cash is the rocket fuel so you need to raise it. Be sure you know you much you need to get to the next key funding milestone – then raise more because it will take longer than you think to achieve that milestone. But also, raise money when you can, not when you need it. Timing is a key factor – not just in your business but when the market is more ready to supply funds is critical.

Be forced to make tradeoffs and prioritize. Be very lean during product development and market discovery, then accelerate to ramp up the customer acquisition and returns.

Raising lots of money at a high valuation means you need to have a big exit. This will NOT happen for most companies. Solid singles (an exit in the $50 – $100m range) are a great result for most people. When raising money don’t obsess on valuation. Take a reasonable valuation and focus on increasing it solidly between rounds. Down-rounds are viewed very negatively (in fact they can be the kiss of death).

Finally, raise money strategically. This means raising based not just on cash needs. You need to have in mind what business you’re building over the longer haul, who the investors are and what they bring to the table that can truly help move the business froward. Yes, terms are important but get a win-win-win out of it.

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About the Author

This article was written by Philip Smith of Silicon Valley Frontlines, he provides consulting to startups and emerging companies.

Entrepreneurship

The Legacy of AIM

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On a cold February morning in 1997, America Online filed a patent for something that was to become the basis of hundreds of social tech startups.

They called it the “Buddy List.” It was the heart of the digital social structure that formed AOL Instant Messenger.

The first words of the patent abstract explained:

The invention implements a real time notification system that tracks, for each user, the logon status of selected co-users of an on-line or network system and displays that information in real time to the tracking user in a unique graphical interface.

If you were a 90’s kid, chances are you remember what a Buddy List was. You likely recall the AIM install CD, your screen name, and how much effort went into your carefully crafted away messages. You can probably reminisce about competing for time on the home computer so you could chat with your friends.

The world had never seen anything like it. And it captivated us all.

AOL Instant Messenger is shutting down for good, 20 years after it launched.

But what it established lives on. AOL didn’t know it back then, and we don’t realize it today, but AIM is the father of our modern social web.

Don’t believe me? Let’s start with the Buddy List.

Buddy List

Think about what’s at the foundation of any social media you use today. It’s that list of other human beings. Followers, friends, whatever they’re called. Social media doesn’t work without these groups of real people and it all originated with the Buddy List.

The Buddy List was everything. Credit

The Buddy List was exactly what you’d think — your list of friends. You controlled who was on it. You could find new people through information they put in their profile, but you had to both agree to the connection — if you were on their buddy list, they were on yours.

The most important feature of the buddy list was the ability to see whether each person was online. This remarkable little feature created a way to “feel” that your friends were around. There was an intimacy and immediacy to it.

Being on someone’s buddy list meant something. Nothing had ever come along like this before AIM, where you had a digital group of connections tied to your real relationships.

Away Messages

If one of your friends wasn’t online, you’d see their “away message.”

AIM away messages.

Have you ever written a tweet or status update? Then you’ve gone through the same process AIM users went through to write away messages. It is the ancestor of those widely-used features.

The away message started as a set of three default options: online, busy, or away. But then AOL set up the ability to write a custom message and it quickly transformed into a way to express yourself to your buddies. From simple plans you had for the day, to quoting lyrics from your favorite songs, the away message let you broadcast anything to the world.

Profiles

The modern digital profile is quite a remarkable thing. In essence, it represents the notion that we can have a web persona that we completely control.

We’ve all agonized over the perfect profile pic or handle. We make conscious decisions about cover images and bios so that we present to the world exactly the image that we want.

That all started on AIM.

Some examples of AIM profiles.

The service let you choose things like an avatar, bio, fonts, and colors, but your biggest decision was your screen name. It could be anything from xXPunkRockPonyXx to InternetDiane. The possibilities of every alphanumeric combination allowed you to choose something meaningful, personal, and easily recognizable, so that’s what everyone did.

This kind of customization helped us realize how what an online persona could be.

Messaging

Online instant messaging hit a sweet spot. It was better than email and less formal than a phone call. It fit right in with what the rising generation wanted as a form of communication.

Chatting on AIM. Credit

It’s still something we can’t get enough of 20 years later. The underlying concepts of Facebook Messenger, WhatsApp, Slack, Discord, and Snapchat all began with AIM.

This is where communication and real human connection actually happened. Things like late night chats with your best friend about the latest music or deliberately worded conversations with that girl or boy you had a crush on.

It was all about the contact with other human beings over the internet in a real, direct, private, and personal way.

The Running Man

AIM could be considered the first social media superpower. It was a digital consumer tool used at an unprecedented scale, a household name.

It defined the social potential of the web for Americans. Perhaps more than any other product, AIM helped establish the internet as a place to hang out rather than a simple utility.

Entrepreneurs realized that, too. AIM was the starting point of an exponential trend in social web startups. Companies like Twitter, YouTube, Facebook, LinkedIn, Pinterest, and Instagram are some of the major players who have ridden that wave.

The running yellow figure of AIM’s logo seems fitting in retrospect. The idea of always on, always transmitting captured the feeling quite well.

Now the runner is passing the baton.

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About the Author

This article was written by Jordan Bowman.

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Entrepreneurship

Making Globalisation Work for Startups

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AI platform Globality is giving small and medium businesses access to broader opportunities.

Ina post-Brexit, “America First” world, protectionism seems to be back in fashion, and globalization has become something of a dirty word. Since the 1990s, global trade has helped lift over a billion people out of poverty, driven sustained economic growth, lowered consumer prices, and delivered unprecedented freedoms to much of the world’s population.

Still, middle-income earners have seen their living standards stagnate, while many of the great leaps forward in automation are destroying the jobs of those least able to cope, with vastly greater levels of disruption feared.

Large multinational companies still seem to be the greatest beneficiaries of a globalized marketplace. Small and medium-sized businesses, which constitute the bulk of the world’s economy and drive most job creation, find it more difficult to make valuable connections that can lead to international trade opportunities and contracts with large organizations.

This is due in large part to the outdated procurement process based on Requests for Proposals (RFPs), which is still the standard across most industries. RFPs are not only extremely time consuming, but such competitions are used as cover for a procurement decision that has already been made, so prospective smaller suppliers never really stand a chance.

Joel Hyatt cofounded Globality to prove that technology could be the missing link to make globalization work for more businesses. By providing a matchmaking platform that connects big clients–Fortune 500 companies spanning financial services, pharmaceuticals, food and beverage, consumer goods, and other sectors–with a diverse pool of providers, he wants to help those small and medium-sized companies land contracts that would otherwise be out of their reach.

He served as the national finance chair for the Democratic Party during Al Gore’s presidential campaign in 2000, and after the election, partnered with Gore to start a media company that they sold in 2013. When Hyatt started Globality in 2015, Gore became an investor. The company has since raised $35 million in their latest funding round and embarked on a major expansion of its platform that uses artificial intelligence to match the small clients with big contracts all over the world. So far, over a dozen fortune 500 companies and over 40 multinational corporations have signed up on the client side, and its SME (Small and Medium Sized Enterprise) Service Provider Network covers every continent and more than 100 countries.

The platform is made up of three main elements, explains Globality CTO Ran Harpaz: The first gathers information from the client, helping them to determine what their real needs are. The second matches them with the best service provider to fulfill those needs, and the third helps build the relationship by fostering collaboration between the two parties.

For the first part, the client answers a detailed Q&A devised by their experts. Their algorithms then extract a variety of data points from those clients using NLP (Natural Language Processing) and continues to build upon that in a constant learning loop. It takes all the information from the questions it asks of both client and providers during the matching process to suggest a shortlist of possible matches, which is then reviewed by an industry expert consultant at the final stages.

This AI-powered consultancy model effectively harnesses the best of both worlds, according to Harpaz, as it scales the nuanced, sector-specific expertise that traditionally comes at a prohibitive premium. By leveraging machine learning to recognize interactions–often spotting patterns in the data that might not have occurred to a person and using that in the matching process–this high-level human know-how becomes accessible to companies without multimillion-dollar consultancy budgets at their disposal.

“At every step, the system is collating feedback from both sides, learning from signals that tell it how the match is actually working in practice by prompting them with questions based on interaction data,” Harpaz says. “This systematic approach to human knowledge representation effectively gives people superpowers, by taking that magic sauce of human interaction and knowledge, and making it possible to apply that consistently and at scale.”

Although this process is building toward ever more efficient automation, Harpaz says that they will always need a human expert to look at those matches with a strategic eye and make the final decision on the most suitable pairings. “What Globality is doing is making high-level knowledge and expertise accessible to a much larger pool of companies and people, rather than only the large corporations who have been traditionally able to afford the services of consultancy firms,” he explains. Globality’s pricing model is usually free for client companies, with suppliers being charged a percentage of the contract’s value, but only once they receive payment themselves for the services they provided.

Waqqas Mir, a partner at Axis Law Chambers, a law firm based in Lahore, Pakistan, is one of the suppliers using Globality to reach international clients. Mir feels that law firms such as his in developing countries often lose out on such business because of their size. Being on the platform, however, gives them the opportunity to open up new channels of communication, which he believes provides great value in the long term. “That allows you to begin a relationship and remain on their radar,” he explains. “The whole thing is motivated by a desire to ensure a more inclusive global economy.”

Globality matched a Fortune 50 company with South African marketing agency Colourworks. The company had to find service providers who were Broad-Based Black Economic Empowerment-certified by the South African government. “So we worked backwards from that, looking at all the providers who matched the certification criteria, and narrowing it down from there,” Harpaz says.

Since winning the Africa account, the agency has continued to use the Globality platform to connect with their new client on a global level, and are now exploring the possibility of working with them in Germany. “In this day and age, it is so easy to do business online or over video conferencing, so distance is really not a barrier,” says Lexy Geyer, account director at Colourworks.

Enabling smaller companies to become “micro-multinationals” means they will in turn fuel job creation and economic growth throughout the developed and developing world. Globalization and AI are often portrayed as inevitable waves of disruption that will leave chaos and inequality in their wake and ultimately make much of humankind and their skills redundant. But if platforms like Globality continue to create opportunities for diverse smaller businesss in this global marketplace, perhaps globalization can become a force for good.

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About the Author

This article was produced by Alice Bonasio.

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