Accelerator Co-Lead at Fast Track Malmö Startup Coach at startupaction.co Former VC at Daphni
I’ve really seen all kinds of mistakes made by startup founders during my hundreds of meetings as a Seed and Series A investor in venture capital.
Now, as a startup coach, I’ve been able to go deeper with each founder. I’ve been able to understand why these mistakes happen and discovered the best ways to avoid them. Of course, I want to share them with you so you can avoid them!
The most common mistakes are these 3:
Let me deep-dive into them one-by-one, and explain how to avoid them!
The most crucial time of a startup happens at the idea stage, even before the founder has quit their day job. What happens in this stage often determines if the startup will be a success or not.
With a bad idea, the startup will be mission impossible. With a winning idea, everything gets so much easier. Like getting customers, raising money, and even hiring!
Let me tell you the story of Slack, who went through this transformation.
Stewart Butterfield, alongside his team, launched a game called Glitch in 2009. They had a beautiful vision for the game aiming at socialization and exploration…
The game gained some attention and a lot of players tried it.
The founders were super excited about their success and looked into their user statistics… Only to discover that they didn’t have any returning gamers.
“Most people — like 97% percent who signed up — would be out of there within five minutes”
Butterfield later said in an interview.
They fought for 3 years to beat that number — but never came close to creating a successful game. So the game closed down and let all of the employees go.
But, they still had $5 million left in the bank from the last investment round. Maybe there was still hope…
The founders started bouncing ideas between each other — until they realized that their next business idea was right in front of their eyes!
The team had developed an internal communications tool, with a feature to keep the history of previously sent messages.
They had created this tool to make communications flow easier, and make previous discussions available for new employees. It was created from a pain point and a specific need.
A solution they realized actually could have legs on its own. They started going after customers — it became a big success!
Ten years after launching Glitch, Slack is worth $20 billion dollars and used by 10 million people daily.
The biggest mistake made by young startup founders is to imagine a beautiful product that will impact the world. Then, they go for that idea because it sounds good on paper.
So how do you know if your idea is good?
It’s based on an actual need and it satisfies a real pain point — confirmed by real users or customers.
The best way to confirm your idea is to speak with real users or potential customers!
Let me explain this with a story…
Imagine this: You have a startup that is an online car dealership. You’re buying and selling between consumers.
Your online service has some success — even though you’re far off from reaching the millions of cars you need to sell.
Now imagine: You’re in a meeting with the perfect investor. 15 minutes into your presentation, the investor interrupts you and asks…
Investor: Why aren’t you doing B2B? The market for company car leasing is huge!
Startup founder: Eh… We haven’t really looked at that…
Investor: You should seriously consider it! I prefer to invest in B2B companies.
As a startup founder, you have two options here:
Startup Founder: Yes, sure! Our technology can definitely be used for company customers as well… We’ll add that.
Startup Founder: That sounds interesting but at the moment we’re focused on consumers. We’ve had great feedback on this product.
In the first option, the startup founder will start going after two markets. The two markets then share the founders’ growth efforts.
The growth curves would look like this:
In the second option, the startup founder invests all his/her growth efforts in one market:
The same effort for double the growth!
Which of the two companies above would you rather be a founder of? Which one would you rather invest in?
Yes, exactly what I thought… The second option is way better!
If you have something that is working, stick to that and ONLY that. It’s not until you have 100+ employees when you can start to expand your offer.
There are plenty of bright and shiny opportunities that you can go after… But the fact is that:
“Startups don’t starve, they drown”
(Quote by Shawn Carolan)
Stay on course, and you won’t drown!
So, this is a big mistake many founders make after they’ve received their first round of funding.
Let me tell you the story of one of the startups that I’ve been coaching:
This startup has a B2C app within the healthcare sector.
They were so happy to raise their pre-seed round of $400k.
“Wow, now we have the resources to do plenty of advertising. We’ll be everywhere: on Facebook and even on TV!”
They hired an agency to help them set everything up. They were so excited, as it seemed like the road to world domination was laying straight ahead!!
But then everything changed…
Even though they had many new users trying the app, very few of them became loyal users…
The investment in marketing never returned any revenue.
It was clear that their app did not have a product-market fit. All the money spent on marketing was wasted because people don’t like the product!
When I helped them discover the data in their system, we found a lot of growth opportunities. With the user data, we were able to reveal insights that would help them increase the usage of the app.
Marketing is not the only road to growth. All startups sit on large amounts of data that is a gold mine of information. When they take action on that data it leads to growth, without having to increase marketing spend.
Here is another startup that I’ve worked with:
To avoid making this mistake, you need to continuously use your data to uncover insights about users.
These are the 3 most common mistakes that I see startup founders do (not only young, all ages really!).
If you manage to steer away from these you’ll be ahead of most other startups on the road to success!
I wish you the best of luck!
P.S. For you to get started, I have created many free templates and sheets that you can refer to for your startup to grow faster. Click on the link to access all the free resources. So don't wait and grab these templates and sheets today
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