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Everything in life has a learning curve. As an entrepreneur, however, this learning curve can be overwhelming and terrifying in the beginning. There are common mistakes made in the early years that can be avoided. As the founder of a venture capital firm, I’ve seen that many of those missteps can be chalked up to misconceptions about how things should go.
Entrepreneurs can find themselves in trouble when expectation clouds their decision making and they fail to adapt. I believe those who embrace the ever-shifting kaleidoscope of startup life will have the best chance of success.
Let’s explore a few of these common misconceptions (and how you can avoid them):
1. You have the idea and the money, but not the passion.
I’ve seen a number of entrepreneurs who think they can hire their way to success. But no one is going to build your business for you. I believe that only a founder is able to instill the vision and values a company needs, and only a founder can be the driving force to execute on that.
Don’t hire somebody solely because they previously worked at a large company. The company might be successful — and the person you’re considering hiring could have played a crucial role in that success — but don’t assume every previous employee can replicate that success in your startup.
Do hire people who passionately believe in your idea. Hire people who manifest that passion by working the way you work, and employ those who have something to prove and have compelling reasons to want to succeed.
2. You have to remain secretive, or someone will steal your idea.
In my opinion, an idea is nothing without the execution, and nobody can steal that. A secretive culture is fine at the beginning, but if it persists, you might be distancing your company from its market and the people who can help. In my experience, the more you share and battle-test your idea, the better it will become.
Don’t overdo the legal and intellectual property costs early on. I do believe you should consider having nondisclosure agreements and noncompetes in place for key people, and it’s important to figure out if parts of your idea can be copyrighted, trademarked or patented. But burning too much time and money on this isn’t always the most productive route to pursue.
Do find advisers and board members. More importantly, find as many users of your product or service as you can, and talk to them endlessly. Create ongoing dialogues with them, and never stop expanding this group. This is your market — the single most important entity in your company’s success.
3. The product isn’t ready to share with customers.
You might think your product’s debut will be your vision fully realized, but that’s not always true. Products do not develop in a vacuum. In my experience, there is a balance to developing a minimum viable product; you don’t want to release something unless there are customers ready to buy, and customers won’t buy unless it’s useful.
Don’t keep delaying a product because there’s “one more feature” that needs including, or a competitor is releasing a product that you want to wait to see. Last, don’t release a product if you don’t have a good sense of its business model. Yes, this model will likely change, but in my experience, putting something out for free to test the market, and then charging for it (with no previous indication) could cause you to lose goodwill and customers.
Do share your product when you have a crystal-clear value proposition that’s laser-focused on one very specific need, and you believe it is better than anything else available in the market.
4. The risk is over once there’s revenue.
Once you’re in the black, you might think you’re in the home stretch. But this is when the real risk sets in. Believing you’re managing the same company you created at your kitchen table is a gross misconception. As businesses evolve, so do the risks that can negatively affect profitability and continuing existence. It’s counterintuitive, but I believe success — without a willingness to adapt to the changes success brings — can mean the collapse of the entire enterprise.
Don’t rigidly stick with the same business processes, hierarchy or skill sets. Sales growth adds new requirements. For example, from a production standpoint, it can mean purchasing new equipment or hiring more employees to support your product.
Do consider pursuing new markets and distribution channels. You’ve started to see success, so now, how can you leverage and amplify it? In my experience, competitors will eye your product and market and want to take it away, so don’t sit back and let it happen.
5. It’s easy to raise funding.
Raising capital at any stage is difficult, but I’ve found that early-stage venture funding can be especially challenging. While angel investing is all about the relationships an entrepreneur has with family or friends, venture investors will be zeroed in on the metrics, not the dream. The more a startup has grown, the more it needs to prove.
Don’t assume you ever have enough cash, unless you’re profitable. Markets are volatile. Competitors emerge. Sentiment changes. Once you’ve raised seed funding, expect to be constantly fundraising.
Do treat your fundraising campaign as an operational process. I’ve observed that many entrepreneurs ignore this aspect, so they fail to raise enough money early in each cycle. Consider managing fundraising the same way you manage software development. Assign roles (owner, development, etc.). Hold planning and review meetings. Most importantly, reflect on the work done. In my experience, reviewing the wins and losses will help you continuously improve your pitch and prepare you to deliver the highest-quality presentation possible.
I believe a quote famously attributed to Thomas Edison sums it up nicely: “I have not failed. I’ve just found 10,000 ways that won’t work.” Take comfort knowing that even those who have achieved remarkable success likely have battle wounds to show for it. They never stopped trying. So keep learning, and keep trying.
April 1, 2019 at 08:08AM
Forbes – Entrepreneurs