Some startups are rip-roaring successes that fundamentally change the world. Others are never seen or heard of again, and the people behind them vanish. The question, therefore, is what is it that ultimately ends up killing startups. Is it incompetence or bad ideas? Or it is down to things that are more specific than that?
Obviously, startups have to make or offer something that their customers want. But besides that, what is it that most often lets startups down?
Mistake #1: A Single Founder
If you’ve spent a lot of time observing the startup world, you’ll have noticed something: almost all of the most successful startups out there were started by more than just one person. Even companies, like Oracle, which apparently had only one founder, actually had more people, to begin with working to get the job done.
It’s such a common theme that it must be something important. When you think about it, however, it makes a lot of sense. Founding your own company is a massive undertaking, and involves so much work that it almost necessitates an extra pair of hands. What’s more, having a second and third brain in the loop helps founders find new and exciting ideas that they wouldn’t have arrived at by themselves. Nothing is more important in the early stages of a startup to have people you can bounce ideas off to arrive at a better product or marketing.
Mistake #2: Opening Yourself Up To Risk
Risks for startups are all over the place. Perhaps the principal risks are those concerning liability and intellectual property. On the liability side, it’s important to find local insurance experts that help you with business general liability insurance. Since risks to employees and customers interacting with your business will exist, no matter how much you do, taking out some form of insurance is essential (and usually the law).
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On the intellectual property side, startups often fail to protect their property from stakeholders in their business. They will sometimes hire employees without clearly stipulating in the contract that they may not appropriate ideas from the company for their own ends. Founders can often get into trouble when they hire a bright programmer, and then that programmer goes off and builds their own similar product, taking a lot of business away from the original startup. Pro tip: always get employees to sign non-disclosure agreements when joining your company.
Mistake #3: Failing To Manage Investors
Although it might seem like it, investors aren’t an unlimited pot of gold that founders can dip into, as and when they please. Instead, they’re real people with a real interest in making sure that your company is performing. If it isn’t, they’ll withdraw their capital and leave you high and dry.
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This isn’t to say, however, that founders should do exactly what investors demand. Investors like to believe that they know the market better than the founders do, but sometimes their ideas are just plain stupid. Smart entrepreneurs walk a tightrope between listening to their investors and ignoring them where appropriate.