Fundraising

7 Founding Sins Seed-Stage Startups Should Avoid

Over the past few years, I have been involved with and close to a number of both successful and unsuccessful startups. To me, the most exciting (and most perilous) times in a company’s lifecycle are the early first stages when it is just getting off the ground. At the seed stage, the founder’s or co-founders’ role in the company is essential and therefore carries a great deal of risk for missteps. Below, I’ve compiled what I’ve learned to be the seven “Founding Sins” – common mistakes which often divert entrepreneurs off the path towards success.

founding sins - nextview

Inauthenticity

While there are notable exceptions, most successful entrepreneurial endeavors are sprung from a genuine idea born from true experience or direct, tangible observation. A founding team should not only have relevant experience but should have an immediate and authentic understanding of the end-users’ or customers’ needs. Blank-slate, brainstormed, or white-boarded ideas rarely even deserve the material that they’re written on. Great ideas search for a great entrepreneur; great entrepreneurs don’t search for a great idea.

Sloth

It may seem obvious, but founding a company is not a full-time job. It’s a full-time life. And then some. And then some more. Only those who truly understand this notion have a shot.

Extravagance

A startup is just that – a startup. Without a full corporate infrastructure of support, and more importantly, without extensive monetary resources, founders and employees must spend wisely. Even if VC financing has been raised, extravagant and wasteful spending by a few founders or company leadership sets the tone for the entire organization. Jet-set lifestyles are perhaps appropriate after the liquidity event, but founders and executives must avoid them at all costs before that, as employees treat resources with the same respect (or lack thereof) as their leadership.

Taciturnity

Rapid progress and constant adjustment in a new endeavor requires continuous communication of these changes. Founders need to ensure that all of the constituents who are involved in making the company a success – co-founders, (prospective) investors, advisors, (potential) customers, employees, analysts, press, bloggers, professional service providers, etc. – are regularly updated with an accurate and realistic assessment of both developments and challenges that affect them specifically.

Greed

Holding too tightly to the percentage of ownership figure doesn’t allow room for a company to attract the leadership, employees, and investors that will maximize shareholder value – including for the founders. A flourishing startup requires investing equity in others to generate substantial return.

Arrogance

There is a fine line between a beneficial pride and confidence and a dangerous, arrogant hubris. Founders must realize the limits of their abilities and seek help and input when others on the team are more informed or in a better position to make decisions. Letting others control activities frees founders to contribute where they’re best able to do so – in whatever role that may be. Nobody, including a founder, is always right.

Indecisiveness

The beauty of a startup is that there are endless possibilities. The difficulty is to concentrate on one opportunity, not every opportunity. The sooner that a new company can find its focus and make strides, the better. Of course any new company necessitates flexibility, but there is greater risk in trying to be “all things to all people” than succumbing to rigidity. In the end, tough choices are indeed tough, founding entrepreneurs need to make them.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist.

As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by About.com where David served as Vice President of Marketing.

David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.