Top 10 Pitfalls To Avoid As A Startup

In 2013 I started running startup pitch events for startups to pitch to investors not really understanding that this one event would continue for the next 7 years and over 35 events. Close to 400 startups have pitched at our events called StartupPOP.

I, myself, either run or I am on the board of 5 small tech related small companies or startups. I am hesitant to call them all startups, because one is actually in year 19. Can you call that a startup?

So, it’s not that I have any specific amazing billion dollar experience to tell you how great I am in startups. I am ok at it. Not a mastermind genius. I do like to write about startups. And I am definitely passionate about that. I have had my own tech startups. We can say that most startups, especially tech startups either never get started, never get built, never get enough capital or make any money. These startups many programmers and the tech community create we usually abandon for many reasons. It’s a learning experience usually. I could write another whole article on what makes them fail. Usually it starts with the team, but there are many reasons. I have had one that was sold off, but even that startup was never that big.

I am no expert if you equate success with money. We will get to that later in this article if you read on.

However, from experience, sometimes I come up with trends or spot important elements as to why a startup has succeeded or why it has failed. This is really important in evaluating your potential success in your own startup.

I’ve come to believe that your success as a startup is not all built on reading about the greatest successes of all time, but rather on studying why startups fail. If you understood all the failure points, that would give you enough knowledge to avoid all the pitfalls. And as you probably know you can gain knowledge through your own failure experiences the hard way or learn from others’ failures.

I’ve come up with a list of things to avoid as a startup from watching hundreds or a thousands of startup pitches over the years. I am no venture capitalist looking at pitch decks; I am no billionaire Elon Musk. I am just a curious person. I apply these same elements to the startups I get involved with now. I am a team member of one early stage startup with the potentially for major market disruption, so I like to learn myself from my own articles! Writing is an education unto itself for me personally.

Ok, so here is my list of 10 general things to avoid when you are in a startup…

1. Never Lock-In Mentally On A Single Idea
Be flexible. Understand that the world is constantly changing. Understand that how you see the world may not be how others see it. You can be in your 40s-70s and create a startup, but you have to understand that a 20 something may not see it as you do. Understand that your vision may have to change. One of the things you do not have on your side as well in a startup is time. Sometimes I see startup founders with an idea from 10 years ago that now is no longer viable. This is not back then. You may need to move on and change.

Image for post
Image for post
Photo by madeleine ragsdale on Unsplash

2. Don’t Chase The Train
I have a saying, you can either be on the tracks way before the trains comes and you can see it coming. You can be standing right while the train is passing. And you can be running down the track chasing the train. So often I see people jumping into a startup trend too late. If you are just creating your own CBD product now; buddy you are too late. That was like 7 years ago to have a chance. I could be wrong about this, if you are doing it differently. Bottom line get involved with startups that are the next train to come and not the ones already past the station.

3. Don’t Blow The Wad
Money ain’t cheap. Raising it is difficult. And just because you have a wallet full of hundreds of thousands or millions of dollars does not mean it has to be spent on crap. But often it will be. I’ve actually had a consulting meeting with a startup founder or two who tell me that they have already spent $250k, $600k, $2 million. And quite often I look over what they have accomplished and sometimes it is something and sometimes it is nothing. I mean absolutely nothing. The answer is don’t spend anything unless necessary. Somebody told me that they started their non-profit startup by hiring a $9,000 a month consultant. Huh! First off non-profit is a bad place to start. It usually means nobody will making anything. Second who was this bozo who took all that money and produced nothing? Be cost effective. Watch the dollars. Spend absolutely nothing unless it brings in revenue or there is a path to revenue.

4. Toxic People
I love people. Because I am a writer, I love when I run into a real character. I kind of collect a bunch of nutty but lovable contacts. Every person I meet is different. No two people are the same. Most if not all startups need to be partnerships. Even if you are the 100% equity owner, you need workers who are like partners. Hopefully it is a long time friend or person you know. Even then you may not know them from a business perspective, where some people can be difficult. Often you meet up with someone to form a partnership because you both bring something unique to the table. For my first real startup after a 10 year corporate career, I partnered with someone I hardly new. And luckily he was pretty straightforward with me and we succeeded in building a large business together as we got to know each other. But the truth is, I have been in several business relationships where things have gone sideways. And almost always along the way, I kind of knew the problem person and their personality or bad habits or actions would rear its ugly head at some point. Be prepared for this or don’t do a deal with them! Best to maybe avoid them.

5. Not Leaps, But Baby Steps
One thing that the guru-like partner you join with, who has all that experience, may try to get you to do, is to expand the plan. Let’s say you start with one small idea for a block-chain based mortgage company. I use this example, because I heard this plan like 5 times from 5 startups. But let’s say your partner/leader says, we are going to add on block-chain for all finance. Then he says we are going to do all block-chain for everybody. Then he says we are going to replace all payment systems. Then he says we are going to replace the banks. :) See a pattern here. If they are had just stopped and focused on what was in front of them, they would not lose their way. Amazon just sold books. Google was just a search index. Apple was just a computer company. Hopefully you get that, and to get to the sky’s the limit you need to take off.

6. Misunderstanding Commitments
We all have commitments. I have two boys who are tweens. I need to spend time with them and my wife. I have multiple businesses. I once started a business at night, when I had a full-time job. I write books and articles like this when I have some free moments in time. Someone asked me how I find the time. I don’t find the time. I take from one when I do the other. If your partner is working a full-time job and you are not, they have commitments and you need to understand that fact. If your partner has a dying parent they need to attend to daily, that is a commitment. One mistake I have made and keep making is under-estimating the commitment level to build a tech startup. We may think we can do it all, but we can’t. That’s why I often re-prioritize what is bringing home the real money and focus there for a while. My wife thinks I am doing it all wrong and I should only focus on one venture at a time. Wish I could. So should you. Get this right and you can get it all correct.

7. Wrong Investor
Recently a 5 time serial entrepreneur told us without any transparency the truth about investors, especially south Florida based investors. This could apply anywhere. There are two types of qualified investors. One is smart money. The other is stupid money. Smart money is a silicon valley reference to guys or gals who know what they are doing and have built a Saas company before let’s say. I am building one now, so I get that. Stupid money is a reference to investors with money ready to put it into your startup but have no technical or business experience in your area of expertise. Family money, own buildings, doctors, etc. The benefits of smart money are multi-fold. They could make your business work because they are not just investors, they know what they are doing enough to help you out. Bottom-line if you take money from stupid money investors make sure they are really stupid. If they know nothing about a Saas company and want to be in on all the calls and decision-making you may have a serious problem of having to answer why and be second-guessed every time you make a decision.

8. Thinking Money = Smarts
I learned this a long time ago working in south Florida. People in south Florida have a bad history of equating wealth with intelligence. Just because you meet an investor or person who has made $150 million, or inherited a billion does not mean they know how to do what you are doing. Let’s say they are from a family with money. That can be a problem. Thinking that a first time entrepreneur is going to be successful the second time is not always the case. Usually the second and even the third venture may fail. Just because somebody made money selling parking lots for millions does not mean they know anything about anything else, literally. I have seen this mistake made where guys with money or previous success were brought in to run a startup and failed miserably. Keep your eyes out for what we call life-time learners. That is the type of person you want as a partner or investor, so just because they have or come from money don’t let that influence you at all.

9. Your Idea Will Sell Everything
Quite the contrary. Ideas sell only about 10% to investors in particular. I did a presentation to inventors last year about why investors invest. It was all opinion. But at the top of the reasons investors invest is the person they are investing in. Investors want a winner. I don’t agree with it. It makes some sense, not real sense to me. But to investor the person being successful before is number 1 to most investors. Number 10 of all these reasons was “the idea”. It was hard for inventors to fathom this. The idea or invention was not that important! That’s anathema to an inventor. So what was important to investors: How close by they live to the business; the industry, a recent article or trend written heavily about in the Wall Street Journal, personal preferences, your team, how sell-able was the business, how much could it make in total, how could the startup fix a bad one the investors have already invested in, synergies with their other investors, a trend they are following like marijuana, AI or block-chain, could the investor work in the business, could the investor have their son work in the business. Hope you got the point there. There is less about the idea, invention or concept that was important to the investor compared with the entire package.

Image for post
Image for post
Photo by Artem Beliaikin on Unsplash

10. Power of The Purse
This final point is about spending in startups and what can go wrong. One of the startups I was involved with briefly had a problem with who controlled the spending. My other businesses never had this problem. And you may not understand there will be a problem until a problem happens. Generally we have trust in people, especially people we know. But just remember, trust but verify. Something about access to funds can drive certain people to make some unfortunate decisions. In our case there was nothing illegal, but definitely questionable. One single person in any startup can not be allowed to have sole discretion of startup disbursements (that means writing checks, using the ATM). A policy from the beginning should require spending above a certain amount, like a $500 limit, requires all partners to sign off (email notification is fine). This is an important part of being a partner. And getting the paperwork to state this spending limit is sometimes important if you don’t know partners well. Think about it. The larger problem may not be the spending or the money, but your partner’s motivation for being in the business in the first place. Are they there to save the world like you or just a paycheck?

If your startup partner thinks this is “his own personal venture” and not a team project, (you will hear it in their voice or tone or how they talk about the venture) that could be the source of the spending problem!

I hope you enjoyed this little article about what to avoid in creating a startup, especially a tech startup. I am in the middle of creating a book I was originally going to call Roadmap and materials like this are in this book. However, about 100 pages into my draft I realized all my tech startup stories were ending in a negative outcome, with tons of failures and mistakes, so I am rethinking the title and this book concept out a bit and rewriting with a focus on learning from the mistakes we all make in startups.

Please follow me here on Medium for my additional articles and my future book and please contact me if you have any questions about my own Saas startup SEO Turbo Booster at dan@seoturbobooster.com if you want to commiserate on how to get a startup off the ground and what we are going through with this Saas startup right now or anything else you’d like to discuss! If you want to learn about the startup with the major market disruption I am working on contact me about that. Would love the conversation. Have a great day!

Written by

Founder SEO Turbo Booster, http://seoturbobooster.com, Writer, Speaker, Consultant. Email me at dan@seoturbobooster.com to contact me.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store