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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.
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.
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.
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.
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.
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.
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.
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.