Common Startup Mistakes and How to Avoid Them
Startup is truly the main word of the 21st century. It has rooted in our minds so deeply that we still call multi-billion giants like Uber startups, although they are already far away from the starting point. Nevertheless, the enormous demand for new technologies and products eager tens of thousands of people to start business they’ve dreamt for long.
We all know that probably 95% of all startups fail at early stages of their development, and these stories are often like an open book, but there’s a few popular mistakes that lead to a failure. Let’s review just the most visible of them.
Most people start own business with the help of finance partners, be it the family and friends, angel investors, VCs or other businesses. The important thing here is to understand the goals of your startup financing and the goals of your investors, which can be otherwise very much different from yours. This said, a company that promises you to help you start business, can have a similar business in the portfolio and can simply buy your startup out to destroy.
After all the financial relationships are clear, you and people investing in your business should have a strict agreement which goes over all possible scenarios in written form. Yes, even if your parents are your investors, you should still have a paper warning that they will most likely don’t get their funds back.
Weak Market Insights
You would be surprised if anyone told you how many startups are created by people who simply didn’t google that their idea is already executed by dozens of companies worldwide! However, for lots of ideas that is not a problem at all. Knowing your market and your target audience is a key to navigate around the competitors, especially with limited resources.
In the end, yet another food delivery sounds like a very bad money drain, but if you plan to launch a sushi delivery in a place where only pizzas exist, you may start business with ease.
Assuming Lawyers Are for Enterprises
Lawyer up! A startup can easily be ruined by a misspelled word in the founders agreement (you do have one, don’t you?), and a lawyer is your best friend to avoid any possibility of not just that. It is not unusual that investors or other corporate partners will keep successful operation of your startup as a Plan B, and legal help is very much required here, from your business plan to your first B2B contracts or happy private customers.
Of course, when you just start business from scratch, your resources won’t allow you to have a legal department, but you can always outsource to a professional or hire a specialized company on an hourly basis.
Looking Too Close to Your Nose
Never assume that your startup has the most chances where you live. Never start business with the boundaries too close to yourself. Most solutions are universal and can be rolled out anywhere in the world, and keeping this in mind from the very beginning will make you and other founders happy.
For instance, when you are planning to open a banking account for your startup, don’t think about the local bank just around the corner. Even if you are nowhere near expanding to other countries, plan ahead and open a business banking account that will allow you to freely send and receive money to virtually any account in the world, in multiple currencies. Otherwise, you will be dealing with great money and time spent on re-working your payments system further down the line. Most European electronic money institutions or fintech startups have special offers or purposedly-built products that perfectly match other startups.