LinkedIn founder Reid Hoffman was talking about startups when he said that “You jump off a cliff and you assemble an airplane on the way down.” There always seems to be too little time, people, money or something else for doing all the things that seem necessary. Even though that may be the fact of life for any startup entrepreneur, some of the hardship may be self-inflicted and unnecessary.
It’s probably true that you learn the most when you make mistakes. Also, startups shouldn’t fear making mistakes when trying new things and approaches. Having said that, I think it makes sense to try to avoid some of the most typical mistakes that provide very little value and concentrate on some new ones that create new learnings.
Below are some thoughts in no particular order on the kinds of things or even mistakes that I think startups should avoid. Some I’ve learned first hand the hard way and some I’ve seen to happen in the tens of startups that I’ve worked with.
Don’t start with a org chart
If you don’t have customers and revenue, but you have an organizational chart with VP’s or similar, you are most likely spending your time on the wrong things. There are some official roles that need to be there, such as a CEO, but even that should not be the same as a CEO in a big company (you know, mahogany chairs, corner office, secretary, etc.). Certainly, startups need to agree on roles (“Tom has the main responsibility for marketing, Pekka for tech” etc.) in order to get things done. Still, the founders need to spend their time learning together what the actual business will be about, not worrying about organizational boundaries and the chain of command.
Don’t make a 12 month roadmap and stick with it
A lot of times success in big companies is measured in part by being on time and on budget and delivering the project roadmap. If you are in an established business and you can predict, for example, demand with high certainty, this makes a lot of sense. Eric Ries has a great definition for a startup: “human institution designed to deliver a new product or service under conditions of extreme uncertainty”. In other words, it’s good to make snapshots of what you think will happen, but always expect change and be prepared for it.
Don’t do too much before you really know what your customers want
Startup founders need to have a great deal of passion and confidence in their idea. Sometimes they may get carried away in this and believe that success is just around the corner only if they just add a few more features. More often than not, you can’t make a bad product into a good one by adding more features or optimizations. For example, if you cannot attract customers for your iPhone mobile app, you are not likely to be any better off by adding the Android app. Or if customers are not interested in your product, adding new payment methods will not increase your sales. Make sure your customers love your core product and use the new features to accelerate the growth.
Don’t take your fancy spreadsheet exercise as a portrayal of reality
It’s always good to turn your idea into numbers, because it’s a great way to test the business logic behind it. The problem with these spreadsheet exercises is that too many times the founders see it as a proof of the business model and as a real forecast for the business. For big companies with a lots of data points and historical evidence, this may be a plausible conclusion, but for startups it is not. Just think about it: you make the assumption that customers love your product so much that they want to tell about to 10 friends, 50% of which will do the same, 20% of those will buy your paid product that costs $3.99. After some viral rounds you end up with a great business with millions in revenue. Logical? Yes. True? Impossible to know. Now, instead of rushing to investors with this plan, you should rush to your customers to validate your assumptions and logic. Do they have the problem you’re solving? Are they using or even paying for something else for the same purpose? Do they love your solutions? Would they they recommend it and to whom? Etc.
Don’t try to build several businesses simultaneously
Entrepreneurs see ideas and opportunities everywhere and that’s a good thing. The hard part is usually when you have to decide what to do right now and what to leave behind – at least for the time being. It’s easy to see, for example, your technology as a potential solution to many different problems and target segments. Usually the reasoning is that it makes sense to leverage the investment for different use cases. Again, possibly a good idea, but not at the same time. Startups need to spend all time and effort to learn what is the problem and build a unique solution as fast as possible. Also, even if the underlying technology is almost the same, the business logic and the way you’d run the company may be very different. Just consider how different, for example, sales, marketing or customer support functions are for a B2C and B2B companies.
Don’t ask for an NDA everytime you talk to someone about your idea
Feedback and talking to potential customers and partners are the lifeblood of startups. Without them very little learning will happen. If you require an NDA (non-disclosure agreement), you will loose many opportunities to learn. Also, think about how unique your idea itself is really. For example, before Facebook launched in 2004, there were already tens of companies offering social networking services over the internet (for ex. MySpace, Friendster etc.). In other words, the idea wasn’t unique, but how they did it was. If you really think that you have some unique intellectual property that should be protected, submit a patent application. That will protect you much more and it will also look good in the eyes of the investors.
As always, your experiences may be different. In the spirit of learning, I’d like to hear if you agree or disagree or if you have in mind some other mistakes startups should avoid. Finally, my apologies for all the negativity. Next time I’ll try to find a more positive spin :-)
— Topi Järvinen (twitter.com/topij)