Failure is an essential part of the startup sphere, and it’s not always bad. There are lessons to be found in failure that can propel you to success on a future project. That being said, failure is never positive when it’s the result of mistakes that should have been easily corrected beforehand.
To help entrepreneurs get their new year started right, we’ve compiled a list of mistakes to avoid that will help entrepreneurs on their road to success – or at least toward the useful kind of failure.
1. Splitting things 50/50
If you are a pair of entrepreneurs who are founding a company based on an idea you generated together, the desire to split profit and decision-making equally can be a strong temptation. It’s also one of the biggest mistakes a developing startup can make.
Sure, it might seem like both founders are on the same page in the early stages of the startup, but when conflict arises – and as you develop your product and the business becomes more complex, it certainly will – not having a clear way to make decisions will leave your startup spinning its wheels when it should be racing forward.
Although it might be an uncomfortable conversation, determining which founder holds a majority stake in decision making early on – or if you should bring in a third voting party to break ties – will save you so much pain in the long term.
2. Valuing the idea over execution
At the heart of every great startup is a great idea, but unless it can be properly executed, then that’s all it is – a dream in somebody’s head with no way of making actual money.
At the end of the day, execution is everything. In our experience, most founders realize this, but there are some who sabotage their venture while it’s still an idea because they are not willing to allocate the necessary shares or credit to the people who can help them make their idea a reality.
Do not let the dollar value you imagine your idea is worth stop you from seeing actual dollars in your bank account once your idea becomes a business.
3. Burning through money too fast
When you’re an entrepreneur who has been living on ramen and working seven days a week on your idea with no compensation, there’s nothing more exciting than when you finally get some money from investors to take your idea to the next level.
It can be tempting to put this money to work as fast as you possibly can by upgrading your equipment, finding office space, or hiring people to make your life a little easier. After all, investors are telling you your idea is good, and you’ll be making money in no time, right?
Wrong.
When deciding how to use your money, make sure you are spending it on needs rather than desires. Hiring another programmer so you can put in fewer hours may seem tempting, but unless the person you want to hire is essential for your project, your money could be put to better use.
In any venture, unexpected things will happen. Challenges will arise, people will disappoint you, things will break, and even if your first round of funding wildly exceeded your expectations there is no guarantee you will be getting more of it.
Keep a close eye on your finances and make sure you have enough to guide your company through hard times – because they’re always right over the horizon.
4. Letting your ego take the wheel
One of the key ingredients of a successful entrepreneur is flexibility. There are scores of people in the world with great ideas, but only a select few with the skills to bring those ideas to life and to pivot them in the face of unforeseen challenges.
If you become too enamored with your own perceived genius and convince yourself you can do no wrong, then you won’t pivot quickly and effectively when reality tells you it’s not working.
A mark of a truly great entrepreneur is the ability to acknowledge and learn from their own mistakes. They look at everything they do with a critical eye and are not afraid to accept criticism or help from people outside of their immediate circle.
If you want somebody to coddle you, call your mom. If you want to build a successful company from the ground up, tell your ego to wait outside until you have the success to back it up.
5. Valuing loyalty over skill in hiring
Every entrepreneur has people who were there for them early on in the process. There’s no realistic way to get an idea off the ground without the help of friends, family, and professional contacts. Often times, founders utilize the help of people they know for seed money or different tasks related to building their product.
Once a product gets funding and shifts from startup to actual business, it can be tempting to reward the people who were with you from the beginning with important jobs or large shares of your growing company. This is a mistake.
You should always try to do right by the people who believed in you but never let settling up come at the expense of your company. Your cousin might feel like he’s owed the job of lead programmer because he was the first programmer when you were working in your basement, but if there is a better candidate for the position then you owe it to your investors – and yourself – to make sure you hire the best person for the job.
6. Being too protective of your idea
As an incubator that has worked with many different startups, we understand more than anybody the impulse to be protective of your idea. Finding a novel solution to a problem these days is difficult, and once you find an idea you believe in there is an instinct to protect it at all costs.
However, if you get too protective of your idea and begin reaching for an NDA before you even give your elevator pitch, we guarantee you will scare away savvy investors. Nobody wants to be liable to the terms set out in your legal paperwork until they know you are the real deal.
While protecting yourself with things such as NDAs is important later in the process, in order to attract money you need to talk to people, get them interested in your concept, and show you have a real plan.
Elizabeth Holmes raised funds for Theranos through firm assurances she could deliver, and it turned into a $9 billion tire fire. You will not have the same opportunity. You need to show your idea is viable before bringing NDAs into the mix.
7. Innovating too much
This might sound insane, but this is simply human nature. Decades of research in many different institutions located in countries across the world prove that humans have a desire for something referred to by researchers as “optimal newness” – that is, an idea that is novel but vaguely familiar.
While innovation is important in the startup sphere, creating an idea that is too novel will make it hard to find funding and turn your idea into an actual business.
This is not an excuse to generate derivative ideas. While derivative ideas will make money in the short term, they rarely have any kind of long-term value. Instead, push yourself to try and come up with something new while also asking yourself if the people you want to sell it to will be able to relate to it.
Think of it this way – had humans been presented with a self-driving car in the era of the horse and buggy and been asked to adopt it, there would probably have been more panic than excitement. The reason we are comfortable with the soon-to-be-real concept of driving at high speeds down the freeway with a computer behind the wheel is because of the innovative yet relatable steps people took toward this goal.
If you have an original idea you know will change the world, figure out how to bridge it to something that people are familiar with now. Start with a plan to show them the steps toward the place you want them to be.
If you really trust in your destination, you can’t be afraid to build the road.
8. Ignoring the paperwork
In the earliest stages of a startup, when you are working with a small group of people you know, it can be tempting to seal deals with a conversation and a handshake. Although this method of deal making will save you lots of money on lawyer fees, it also creates a ticking time bomb that could potentially go off.
People, while amazing, can also be incredibly frustrating. Memories are inconsistent, conversations convey varying meanings, and nothing is usually as straightforward as we want it to be. If you want to spare hurt feelings or, court battles later on, make sure to keep an eye on your paperwork.
Want to give a friend who is a programmer some equity in exchange for work? Get it in writing. Do you know a marketer who is willing to help you craft a proposal for a small fee? Get it in writing.
Basically, if it has anything to do with equity or money, make sure to get it in writing.
9. Not forming a clear idea of your target user
This should go without saying, but a surprising amount of founders surge forward with an idea they think is golden without bothering to nail down a clear picture of their target user.
Before beginning any venture, it’s important to develop a clear vision of who you are creating your product for. Are people like you the target user? Great. Make sure to find other people like yourself and ask them if they think your idea is a good one. Is somebody who is not like you the target user? Also great, but make sure you are communicating with who you want your user to be so you can see if your idea resonates with them.
In any venture, there’s a temptation to believe your idea is good and people will like it. However, if you don’t make sure what you are building resonates with your intended user, you’re basically flying blind.
10. Underestimating the work it’s going to take to succeed.
The road an entrepreneur walks is often long, treacherous, and lonely. Everybody dreams of founding the next big billion dollar business in their dorm, and while this happens for some people, most entrepreneurs who make it persevere through years of failures, frustrations, and a bank balance closer to what a child would count to on Sesame Street than the nest egg society expects of a stable adult.
On the road to success, there will be people who tell you that you can’t do it. There will be obstacles that you never expected. You will fall down. Sometimes it might even seem like getting back up again is impossible.
If you want to be an entrepreneur because you think it is easier than climbing the corporate ladder, you want the pride of saying you founded a company, or you think it will be easy money, this road is not for you. There is no shame in not being suited to walk it, but it’s important to recognize that reality.
For the rest who walk this path because you know with every fiber of your being it is the only road for you, we hope that you found the above advice helpful.
Here’s to a prosperous 2017. May you reach your goals or, if not, may you fail toward progress and ready yourself for the next venture.
And if you’re a novice entrepreneur with an idea you’re sure is ready to take off, we happen to know of a pretty good incubator who could help you down that road!