7 avoidable mistakes first-time entrepreneurs tend to make
It is usual for entrepreneurs to make mistakes. First-time entrepreneurs make more of them. After all, it is common to make more mistakes when you are learning the rules of any new game. The game of entrepreneurship is no different.
Unfortunately, all mistakes are not equal. Some mistakes hurt more.
Here are seven of those that will hurt more. These are in no particular order.
1. We are Good Friends. So We Should Make a Good Founding Team
I picked this first as there are two schools of thought: some people say they don’t want to build a business with friends and some people like me always build business with friends.
If not done in the right spirit and for the right reasons, things can get messy when you build a company with friends. It can even hurt your friendships. It’s hard to be objective with friends, as people cannot easily forget about their friendship when they are having a heated discussion.
If you want to succeed with friends in business, you should start with at least three things –
- Have really good reasons to succeed
- Learn to be reasonably objective and
- Structure deals in such a way that it’s always fair – no exceptions.
The last item about structuring deals need to go through what I call a “10-Year Test.” Fast-forward ten years in your life and look back at this day. If you think you will feel the deal you made ten years ago was fair, then it’s probably a fair deal.
2. Let’s Divide the Pie Equally
Taking on from where we left off in the last point, structuring founders equity is where founders mess-up big time. Many times founders think they are equal because they all started on the same day. It is like saying all the people in a race will run in the same speed because they are all starting to run at the same time. It’s ridiculous to think that way.
There are other things to consider such as:
- The value a co-founder brings to the table
- The contribution by him or her that will move the needle
- How are the founders perceived in the marketplace? Perception is reality
- How committed is the co-founder to the cause? Yes, every co-founder is fully committed. Some co-founders are “more fully committed”.
Dividing founder equity equally is usually a cop-out choice because they don’t want to deal with what they think is going to be an “emotional and tough” discussion about value and contribution. It’s a price to pay that’s worth paying at the start or else some founders will pay a bigger price at the later stage of the company.
3. Let’s All Take Leadership (CXO) Roles
When you are starting up, there is nobody else in the company so it is tempting to take up ALL the top roles you can think of in a company. One of you may become the CEO; the others may take on the role of COO, CTO, President, and CMO etc.
In general, not all the founders who take on CXO titles are qualified to take on that title. Sometimes you as a founder (taking on that CXO role) know this but justify the decision with some weak arguments or you can’t resist the temptation because your co-founders are doing it.
It could be a disaster in the making because one of the ways outsiders judge your company (any company for that matter) is based on who is responsible for what. If they find a mismatch in the capabilities and the role, they downgrade the potential of your company silently.
4. Build it And They Will Come
It’s your product and you are bound to be super excited about it. But that does not justify you and your team members getting lost in a “product bubble.” The biggest problem with any product is adoption - even the best products need some kind of change in user behavior and people hate to change. There are some exceptions, of course, but the chances of that happening to you are very slim.
It has to start with “awareness” in the marketplace that your product “exists” and is filling a need that matters to them. If you were a serial entrepreneur with past successes, you have an implicit platform to share your new story and get attention. Since you are a first-time entrepreneur that is not an option.
You and your team have to believe that bringing a product to life does not mean that you build your product in your garage and continue to stay there. That is at most 50% of your work. The real work begins when your users successfully use and benefit from your product.
5. Our Collective Network is Huge. We Don’t Have to Worry About Early Wins
This is a trap and a big one for a group of first-time founders. If you are in that group, it might be common for all of you to go through your collective rolodex and build castles in the air of what the collective deal potential might look like.
True you will get a lot of meetings from your collective network. This is because your friends might want to support you by hearing out or they may just be very curious about what you are up to. If they can satisfy their curiosity at the comfort of their offices, some of them will probably do it.
Sooner than later, you will need to build highly responsive sales teams (FREE eBook) but in the early days, that team will comprise of the founders and early employees.
6. Our Product is so Easy to Use. It will be Shocking if People Don’t Use it
With that attitude, there is a good chance that you will be “shocked” out of your naivety. Your product rarely gets adopted without going through several changes. Remember that your product is easy to use for you because you are living and breathing it every working day. You have all the motivation to spend that kind of time on your creation because it is your creation. There is nobody else as invested as you in seeing this successful. That is not the case for a potential customer. He or she might show some empathy (or sympathy in some cases) but that’s about it. If they don’t “get it” quickly, they are off to their other priorities.
You would wish they had more patience but unfortunately, they don’t. If that doesn’t sound right, look at yourself in the mirror. How many new products have you started using happily in the last six months? I bet it’s not too many. It’s the same for others too.
7. They Just Don’t Get It…
A startup rarely fails “all of a sudden.” The clues to failure are always there along the way – it comes in the form of feedback. If you are not open to good feedback that comes from an alternate worldview, you will continue on a path leading to nowhere.
You might be quick to get defensive or completely dismiss feedback that is not in line with your original thinking or plan. When the person giving the feedback retreats or agrees with you, there is a good chance that they are agreeing with you because they feel that it’s not worth their time to fight with you. It is one of those arguments where you lose by winning.
When you consistently feel that others are not getting it, it is a good sign that it is you who isn’t getting it.
About the guest author
Rajesh “Raj” Setty is a serial entrepreneur and a business alchemist based in Silicon Valley. He currently serves as president of WittyParrot. He was instrumental in founding several US or India based technology and publishing companies.Raj has been a member of Band of Angels since 2007 and is an award-winning teacher at the Founder Institute.