Category

Mistakes

Mistakes that Kill StartUps #12: Spending too much

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This can often be confused with raising little money. If you do run out of money it can be either of the two mistakes – you raised too little, or you blew through it too fast. You can often distinguish between the two simply by looking at the amount you raised. If you raised a large amount of money and still ran out of it – you have a spending problem.

This problem seems to be dwindling in new age startups. The basic costs to set up a company have been getting cheaper by the day. HOWEVER, the cost of human resources is always high. There are many areas such as HR where startups can tend to get carried away. It is here that you need to be extra cautious.

Hire only the people you need and don’t underestimate your balances.

This can often be confused with raising little money. If you do run out of money it can be either of the two mistakes – you raised too little, or you blew through it too fast. You can often distinguish between the two simply by looking at the amount you raised. If you raised a large amount of money and still ran out of it – you have a spending problem.

This problem seems to be dwindling in new age startups. The basic costs to set up a company have been getting cheaper by the day. HOWEVER, the cost of human resources is always high. There are many areas such as HR where startups can tend to get carried away. It is here that you need to be extra cautious.

Hire only the people you need and don’t underestimate your balances.

Mistakes that Kill StartUps #14: Poor Investor Management

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Its important to be able to manage your relationship with your investors. When you get funded, the fact of life is – they’re your bosses. But there should be a line drawn defining who takes care of what. It is good to keep your investors informed and in the loop. Ignoring them will not get you to goo places. But simultaneously – you cannot let them run your company. If they could, they should have started one of their own.

Be smart at keep the business building to yourself, and keeping the investors happy in their own way. Your focus should be your product. Do not waste time disputing the little nothings with the investors. These problems are directly proportionate to the amount your raise. Like mentioned in the #13 – the more money you raise, the more accountable you are.

Mistakes that Kill StartUps #15: Sacrificing Users to Profit

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Your focus as a startup should be on generating users and not a profit. This doesn’t mean you ignore the financial side of things – but only that you keep it for later.

Startups often get hung up on trying to make money. What they fail to see is that the simplest way to do this is, by solving a problem. It sounds pretty easy, but oddly, there are only a few startups that actually succeed in figuring out what it is that people WANT really. The moment you have this covered, you can then focus on the business model. Keep the profit making discussion for later.

Paul Grahams simple ideology should be taken into consideration here.

How To Create Wealth = (How Much People Want Something  X  How Many People Want It)  – Now turn that number into wealth. Companies that put their users first, tend to do better. The happier the users, the happier your sales, and the happier are you.

Mistakes that Kill StartUps #18: A Half Hearted Effort

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If you’re starting a company, respect your decision enough to put in all your effort. Most failed companies (the companies we don’t even hear about) are the ones started by a bunch of half-hearted founders with a fleeting idea but no guts to take it forward.

Their goal? To make a lot of money. Their plan to do so? In conclusive. And their contingency strategy? Their day job.

How can you build an entire business if you still have your day job? Not that it is not possible, but it’s definitely not the most ideal of cases. These founders tend to use their day job as a safety net to fall back on. There may be a number of reasons behind this. They don’t have the guts to put it all on the line. They don’t believe in the success of their idea enough. They are hoping this idea will be a fluke success and will quit their day job only when it starts generating money of it’s own (which almost never happens)

If only we could count the number of startups that have died down because they were a bunch of guys that decided to work out of someone’s basement AFTER their day job, and eventually lost interest enough to abandon the idea. If you truly want your startup to be successful, you should direct all of your attention to it. That starts with quitting your day job, and investing all your effort into the venture.

Mistakes that Kill StartUps #13: Raising too much money

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There is such a thing as too much money. Contrary to popular belief. This plays an especially crucial role in the world of startups. What founders fail to realize is – the more money they raise, the more the accountability.

Raising too much money can cause a founder a tremendous amount of stress. The more the funding, the more sleepless nights. Investors want to see their money go to work. They want accountability for every penny you spend. It is safe to say that, when you raise too much money, your responsibility to show positive results (and FAST) is higher. Getting funded has a tendency to paint pretty pictures in the founders head. But the reality of the matter is, the problems you face as a startup with funds are more. Your team goes from founders to employees. It’s important to remember that an employee is not as committed as the latter. Many times, productivity reduces, sales go down, and the overall pace takes a backseat.

So when you map out the amount of funding you need, look at it realistically. If you raise too much money, you will have to showcase too many returns, in too little time. You want to spend more time building your business rather than consoling your investors.