Building a business from the ground up can be incredibly rewarding, but it’s not without its challenges.
Having personally been through the roller coaster of the startup journey and exited three companies, I’ve learned a few lessons along the way. As an experienced and hopefully wiser entrepreneur, here are some things I plan to do in my new startup to avoid past mistakes.
Common Startup Mistakes
- Tackling the problem your startup is trying to solve without fully understanding it.
- Neglecting to raise enough buffer capital.
- Simply meeting the KPIs set for you by investors.
- Having a drawn-out customer onboarding process.
- Settling while hiring.
Drop the Sales Pitch When Reaching Out
One of the biggest mistakes I made in previous companies was not doing enough upfront research. I didn’t spend sufficient time understanding the market, the problem we were solving or our ideal customer profile.
This lack of validation led to numerous pivots and adjustments, which slowed our progress and resulted in us having to raise more capital. When you validate that your startup idea has value first by talking to contacts, you can gain feedback on product development, pricing and go-to-market strategies.
This time around, I prioritized speaking with potential customers about our idea. We didn’t even have a business at that point to sell.
It’s amazing how many people are happy to openly share their opinions when you have no sales agenda.
Each conversation gave us valuable insights that allowed us to refine our thinking. Many of these conversations also resulted in introductions to other senior decision-makers who were more than happy to share their thoughts on the problem.
Founders, use your LinkedIn connections and set up calls with key decision-makers and industry experts. If you make it clear you’re in the exploration phase and not selling anything, it can lead to dozens of conversations, which provide a wealth of information to refine your understanding of the problem and solution.
It will also lead to a great set of potential customers and partners later on when you’re ready.
We plan to continue this discovery process indefinitely, ensuring we remain closely connected to our customers’ needs and continually evolve our product based on their feedback.
Raise Enough for 2 Years — and Then Some
In every startup I’ve launched and in more than 125 angel investments, one truth remains constant: Things rarely go according to plan. Whether it’s unexpected delays, necessary pivots or unforeseen costs, there are always challenges that require more resources than anticipated.
Raise more capital upfront than you think you need. Build enough capital to cover two years of operations — and build in a buffer, just in case.
When we recently closed our own seed-round, we were very conscious of the need to have enough capital to plan for the unexpected, giving us a runway to navigate unforeseen challenges and prepare for the next capital raise on our terms.
Blow Your KPIs Out of the Water
Ahead of any future funding rounds, investors will often set expectations for the key performance indicators they want entrepreneurs to hit if they are to invest in a future round.
But here’s the thing: What a VC told you in the moment may not hold true later down the line. The state of the fundraising market might be different, or their portfolio makeup and fund stage might change.
Often, funds invest in longer term investment strategies when they are early on in their fund lifecycle and put aside a certain amount of capital for follow-ons.
When a fund gets past its primary investment stage (three to four years in) it shifts strategies and makes bets on the investments that look like they’re hitting their stride, where more capital will unlock more velocity and lead to a conversion in fewer years.
They’re reluctant to invest in companies that are not showing that same level of acceleration.
So, this time around, I’m taking any VC KPIs with a grain of salt. Our goal is to achieve two to three times more than the expectation. If you know the bar might change, aiming to clear it significantly is going to improve your chances of raising your next round with favorable terms.
Streamline Your Customer Onboarding Process
One of the persistent challenges in enterprise software is the lengthy onboarding process. In my previous startups, the onboarding cycle often took three to six months, involving extensive coordination and project management on both the customer’s and our side.
This drawn-out process created a massive climb before we could demonstrate any value, risking customer frustration and potential churn.
This time, I’ve prioritized not just the minimum viable product but also the minimum viable integration. Our goal is to have a solution that customers can start using within a day or, at most, a week after signing the contract.
By designing our platform to be easily set up in the customer’s environment, we can quickly showcase value and reduce the initial friction. While deeper integrations can unlock additional value over time, our focus is to ensure that the initial setup is as close to plug-and-play as possible.
This approach will help us avoid the pitfalls of lengthy onboarding and enable us to deliver immediate results. So much startup advice focuses on MVP, but it’s just as important to prioritize MVI.
Hire People You’ll Want to Re-Hire
Entrepreneurs on their first startup might not have the luxury of being able to hire the best, but not prioritizing your team is a false economy. Building a team of talented individuals who are smarter than you and empowered to make decisions can supercharge success.
When you find someone who’s truly top of their game and brings the right mix of knowledge of the subject, name recognition, respect in your industry and an ability to work in a startup environment, you’ve hit the jackpot.
We had two or three of these folks at my last startup and it transformed us. Similarly, we had people who only met one or two of these criteria, and they usually didn’t work out.
Knowing the significant role former employees played in my previous companies, it was an easy decision to bring them along this time around. If you treat your employees well and with respect and provide opportunities for growth, you might find yourself re-hiring them for future startups more than once.
Starting a new company is always fraught with challenges, but learning from past mistakes can pave the way for smoother growth and success. By simplifying integration, overachieving on KPIs, validating thoroughly and building a strong team, I’m hoping for a few less bumps in the road this fourth time around.
