Lack of confidence in your self, your product, and your startup is a surefire recipe for disaster. At the other extreme, too much confidence or arrogance can kill you just as fast. It’s always painful when a startup fails, but as a mentor to founders I would hope that you can learn from these failings and not stumble on the same issues:
- “Business plans are for dummies.”
Some startups think business plans are only for investors. In reality,
you should do a business plan primarily for yourself, as it forces you
to think through all the elements. If it’s not written down, you can’t
measure it, and thus you can’t manage it. Also written plans are much
more effective communication to your employees, lawyers, accountants,
and other key players in your rollout.
- “It’s the market, stupid.”
It’s great to have a passion about a favorite new toy you invented, but
just because you love it doesn’t mean the whole world will love it.
Another variation on this theme is the person who creates a “solution”
from technology, and then makes up a “problem” that it will solve. There
is no substitute for understanding the market, and sizing the
opportunity, before you climb out on a limb.
- “If we build it, they will come.”
The hot term these days is “viral marketing”, meaning we won’t do any
marketing, but our product is so great that everyone will know about us
anyway by word of mouth and through Internet social networks. In most
cases, viral marketing only begins to work after you prime the pump with
several million in real marketing over a couple of years.
- “We have no competitors.”
VCs and angel investors hear this one all the time. The investor view
is that if you can’t find any competitors, either you are not being
honest, or you haven’t looked, or there isn’t any market for your
product. Your funding request will likely go into the circular file.
- “More features than anyone.”
Just because you included all the features of Facebook, MySpace,
Twitter, and LinkedIn in your new social networking product, doesn’t
mean everyone will love it. In fact, quite the opposite usually happens,
due to complexity and work to switch. Investors like laser focus on a
market-need causing real pain.
- “Microsoft is too big/slow to be a threat.” Usually
the reason the big companies are no threat is that the market is too
small. Competing with IBM, Microsoft, and other large companies is a
very difficult task. Entrepreneurs who utter this line are kidding
themselves. They may think it's bravado, but investors think it's
- “We have the first-mover advantage.” That’s
probably the soft way of saying, we don’t have a patent or any “secret
sauce” for a competitive advantage. Unfortunately, a startup with no
brand name and no intellectual property is a sitting duck for the big
slow company, as soon as they see you gaining a bit of traction.
Sleeping giants do wake up.
- “No need to risk my own funds.”
This is usually seen as the difference between involved and committed.
Investors expect the founder and other principals to have “skin in the
game,” over and above “sweat equity.” If you and your friends are trying
to play Donald Trump, don’t expect other mere mortals to carry the risk
load for you.
- “We’re funded, now we can relax.”
Quite the opposite is really true. Now the real work starts to build a
sustainable business. Now you have to manage to budgets and timelines,
and avoid the temptation to splurge a bit on office space or too many
- “Me, myself, and I.” I
recently watched a promising startup I know wither and die for lack of
funds because the founder refused to consider stepping aside as CEO in
favor of a more experienced candidate, as a condition of a $1M VC
investment. I reminded him that he could easily “kick himself up to
Chairman”, but he wanted it all, and let ego take precedence over good