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Top 10 Mistakes that Startups Make



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.


About the Author

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


Lessons Learnt from The Lean Startup



The Lean Startup book authored by Eric Ries has been sitting on my shelf for quite sometime now, so since I am currently contributing to the making of a startup I figured I’ll take a look into it.

The book is divided into 3 parts, after reading the first two I had my mind blown with the pragmatic and scientific approach to building startups that is described in the book.

In this post, I would like to share some important insights that I gained regarding building highly innovative businesses.

Validating Value Proposition And Growth Strategy Is The Priority

Usually, a highly innovative startup company is working in its most early stage at building a product or a service that will create a new market.

Consumers or businesses have not been yet exposed to something similar to what is going to be built by the startup. Therefore the absolute priority for startups in early stage is to validated their value proposition i.e. to get real data about eventual customers interest regarding their product/service.

The other priority is to validate that the growth strategy that is going to be executed is, in fact, effective.

The growth strategy of a startup is its plan to acquire more and more customers in the long term and in a sustainable fashion.

Three kinds of growth strategies are described in the book:

  • paid growth in which you rely on the fact that the customers are going to be charged for the product or service, the cash earned from early users is reinvested in acquiring new users via advertising for example
  • viral growth in which you rely on the fact that customers are going to bring customers as a side effect of using the product/service
  • sticky growth in which you rely on the fact that the customers are going to use the service in some regular fashion, paying for the service each time (via subscription for example).

These growth strategies are sustainable in the sense that they do not require continuous large capital investments or publicity stunts.

It is important to know as soon as possible which strategy or combination of strategies is the most effective at driving growth.

Applying The Scientific Method

The scientific method is a set of techniques that helps us figure out correct stuff. After making some observations regarding a phenomenon, you formulate a hypothesis about that phenomenon.

The hypothesis is an assumption that needs to be proven correct or incorrect. You then design experimentations that are going to challenge the assumption.

The results of the experimentations makes the correctness or incorrectness of the hypothesisclear allowing us to make judgments about its validity.

In the lean startup methodology, your job as an entrepreneur is to formulate two hypothesis:

  • hypothesis of value (assumptions about your value proposition)
  • hypothesis of growth (assumptions about the effectiveness of the growth strategy)

These hypothesis are then validated/invalidated through experimentation. Following the precepts of lean manufacturing, the lean startup methodology prescribes to make experimentations while minimizing/eliminating waste.

In other words, you have to burn minimum cash, effort and time when running experiments.

An experimentation in the lean startup sense is usually an actual product/service and helps startups in early stage learn invaluable things about their eventual future market.

Sometimes startups learn that nobody wants their product/service, imagine spending 8 months worth of engineering, design and promotion work (not to mention cash) in a product/service only to discover that it does not provide value to anyone.

Minimum Viable Products And Feedback

As we pointed out earlier, an experimentation can be an actual product or service and is called the minimum viable product(MVP).

The MVP is built to contain just enough features to validate the value and growth hypotheses, effectively requiring minimum time, effort and cash.

By getting the MVP launched and in front of real users, entrepreneurs can get concrete feedback from them either directly by asking them (in focus groups for example) or via usage analytics.

Analytics scales better then directly talking to customers but the latter is nonetheless used to cross validate results from the former.

It is crucial to focus on metrics that creates fine grained visibility about the performance of the business when building(or using) a usage analytics system. These metrics are called actionable metrics because they can link causes and effects clearly allowing entrepreneurs to understand the consequences of ideally each action executed. Cohort analysis is an example of a analytics strategy that focuses on actionable metrics.

The bad kind of metrics are called vanity metrics, these tend to hide how the business is performing, gross numbers like total users count are an example of vanity metrics.

The author cites several examples of different startups that managed to validate or debunk their early assumption by building stripped down and non scalable MVPs and even sometimes by not building software at all.

You would be surprised to hear for example how the Dropbox folks in their early stage managed to created a ~4 minute video demonstrating their product while it was still in development. The video allowed them to get more people signed up in their beta waiting list and raise capital more easily.

Closing Thoughts

In the first two parts of the book, the author talks also about how employees inside big companies working on highly innovative products and services can benefit greatly from the lean startup approach, although very interesting this is not very useful for me right now.

The third part, talks about the challenges that arises when the startup gets big and starts to stabilize and how to address them. Basically it revolves around not loosing the innovative spirit of the early days, again, this is not very useful for me so maybe for good future reading.


About the Author

This article was produced by Tech Dominator. see more.

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How to Create Buzz around Your Startup Idea



Chase the vision, not the money, the money will end up following you.

– Tony Hsieh, Zappos CEO

There is something very exciting starting up a business. Startups offer you a chance to do something fresh and take new ideas to the public. But if you’re going to succeed, you need to get it right from the very start of the journey. Creating buzz around your startup’s launch is possible, and here are some ideas to help you do it.

Blog About Your Startup Journey

This is a great thing to do if you want to create a personable and refreshing brand image. People like to see how your business is doing and how it grows from an idea into a fully fledged business. Blog about what you’re doing and how your business is expanding. If you can develop an audience of readers ahead of your startup’s official launch, it will be easier for you to hit the ground running. You can then make the blog the voice of the company as it grows and starts to turn a profit. This is something that you should think very carefully about when starting up a business.

Make Plenty of Announcements

You should try to make a lot of announcements when you are leading up to the launch of your startup. There are plenty of people out there that will be interested in hearing about what you’re doing. You need to start by creating a strong presence on all the key social media sites. If you can do this, you will build up an audience that will then be receptive to your messages. They will also be there to spread the word and share announcements with their friends on social media platforms. This can be hugely important when you’re trying to raise brand awareness and expose your announcements to as many people as possible.

Organize an Event and Invite People

Organizing a real event that people can turn up to and attend can be a great idea. It makes your startup’s official launch feel more real. If you just set a random date for the launch and don’t mark it in any way, it will be much more difficult to create a buzz. Hire a stage, sound system and find bleacher rentals to host the event. Then you can write a speech and make a plan for the schedule of the launch. If you can do this well, you will create a lot of buzz, and maybe get some more coverage for the startup too.

Reach Out to People Who Can Give You Publicity

There are plenty of people out there that might be able to help you achieve the publicity and coverage you crave. When your business is being talked about, people will hear about your brand and what it’s doing. So, you need to make sure that you reach out to many people in the press, the media and the blogosphere who can help you. There are many business magazines and websites that write profiles of new business and young entrepreneurs. If you can contact some of these people, they might be interested in offering you some coverage. Don’t underestimate how important this could be. Hopefully these ideas will help you with starting up a business.


About the Author

This article was produced by SolVibrations is a multi-author self improvement blog, aiming to inspire creativity within.

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