11 Startup Mistakes

The following startup mistakes were listed by Guy Kawasaki, Silicon Valley venture capitalist, author, marketing expert, ex Apple evangelist, chief evangelist for Canva and others. He has some strong words and may challenge traditional beliefs out there.

1. Multiplying big numbers by 1%

‘There are two fundamental flaws with this:
Getting 1% of any market is not that easy. No investors want to hear that you’re only going to get 1% (which sort of contradicts point above)’

2. Scaling too soon
‘I have never seen a company die because it didn’t scale fast enough. Usually what happens is you scale too fast in anticipation of a conservative 1% with the programs created by your rock star engineering staff, it doesn’t come through. You’re stuck with big overhead and you run out of money.’

3. Partnering

For Guy Kawasaki, “partnering is bullshit.”

‘There’s only one thing that counts in a start-up – its sales. Partnering means two organisations try to compensate for their weaknesses by partnering with another:
2 + 2 = 3 in this case.

Partnerships mean nothing. Start-ups should focus on sales. Sales fix everything.’

My Note: I have to disagree here – yes sales are key but there can DEFINITELY be great partnerships! Just about every product I’ve developed has involved a partnership. Don’t throw out the idea of partnerships – in my experience 2 +2 can equal 5 or higher. The world revolves around partnerships. But of course you need to pick the right partner and a capable partner. Don’t fall into the trap of accepting whatever partner comes along and agrees to partner – be very clear in your vision, goals and values and select accordingly. Don’t be afraid to turn a partnership down if it doesn’t feel right.

4. Pitching instead of prototyping

A lot of entrepreneurs are focusing on the pitching process. In the real world the key is not the pitch.
‘If someone gave me a choice of having a team come in with a great PowerPoint pitch or come in with a prototype that is working, I would pick the working prototype all day long.

Because in a few hours I could help most of you fix your pitch, I cannot, in a few hours, help anybody fix their prototype. Prototyping is the key.’

5. Using too many slides and too small a font

If you are going to pitch, use the Guy Kawasaki 10-20 rule of PowerPoint. The optimal number of slides on a PowerPoint presentation is 10.

The time you should be able to get those slides in is 20 minutes. Thus 10-20 rule. Ideal font size is 30pt or larger. This prevents you from putting too much detail and taking too long. So in summary, remember the 10-20-30 rule.

6. Doing things serially

Entrepreneurs believe they should do things serially which is to do things one at a time.
The serial world in entrepreneurship doesn’t exist.

‘Unfair as it may seem, if you are an entrepreneur, you are going to have to be raising money, writing software, prototyping, selling, recruiting, and collecting money ALL at the SAME TIME. It is all those paths moving down the road all at the same time. It is not a serial process.’

7. Believing 51% = control

Many, many entrepreneurs believe that as long as they and their buddies own 51 % of the company, they are in total control of the company. Because they believe that in board meetings, things come down to a vote and 51% wins.

‘I have never seen anything come down to a vote in a board meeting. It’s either everybody wants to do it or nobody wants to do it. The truth is, the moment you take outside money, you have lost control of the company. When you take outside money, you have a moral, ethical, and financial obligation to the outside money. If you cannot deal with that, then don’t take outside money.’

8. Believing Patents = defensibility

The ideal number of times you should use the P world in your presentation is once.
“We have filed patents” – that’s it.

‘If you say “We have filed patents and it is going to create a defensible position for us” that’s two and you’re wrong. You are deluding yourself if you believe that patenting something will make you defensible. Because it takes about 5-6 years to file a patent and get it done.

Don’t tell a sophisticated investor that the reason why you are defensible is because you filed a patent. In fact, that’s a very good test – if, when you say you filed a patent and the investor laughs and rolls his/her eyes, that is a smart investor. If the investor agrees to the idea of filling a patent, walk out of that room, that person is an idiot.’

9. Hiring in your own image

If you’re an engineering person, you need to balance out your engineering prowess. So an engineering person should hire a sales person. A sales person should hire an engineering person.
‘Many times companies like to all hire the same kind of people. And when that happens, you’ll have glaring weaknesses.’

‘You need to hire people who compliment your skills. Fundamentally for start-ups, what you need is someone to make it, someone to sell it, someone to collect it. Remember you need all three skills: make it, sell it, and collect it.’

My Note: when hiring use your vision and values in your job ad and interview to scare away the ones that don’t match and attract the ones that do. Make sure new hires match your values and culture – you can’t ‘teach’ these. Use trial periods – my recommendation is to give candidates a one day trial, then a week, then a month. Or you might give them a short project to complete/work on. Often one day is all it takes to identify if the person is a match. Hire slow, fire quick. Too many businesses do it the other way around, hire quickly and then keep the wrong people for way too long.

10. Befriending your VCs (Venture Capitals)

‘VCs and investors are not your friends. I’m not saying you should hate them. But I am saying that it is a business. They are in the business of making money; they’re not in the business of making friends. Angel investors’ maybe, but VCs are not.

The key to managing your VCs or investors is to just meet your projections. Guy’s advice is that you set projections that you are 80% confident you’ll make. 80% is the minimum confidence you should have. You need to under-promise and over-deliver.

‘What happens if a realistic projection doesn’t make the company interesting enough to get funded? That’s the real problem and I will tell you that VC is not for everybody. VC is playing a game. Every VC wants to find the next Google.’

11. Thinking VCs can add value

‘You shouldn’t think that VCs are going to do a lot of heavy lifting. Fundamentally what you want from a VC is money and you want 2-3 hours a month of their bandwidth. That’s about it.

The irony is that the more successful you are the more bandwidth you’ll get. Which is kind of unfortunate because the least successful you are, the more you might have needed the help. The VC game is a game of hindsight. Have a realistic expectation of venture capitalists. It’s a mistake many entrepreneurs make.’
Some very useful tips here, and yes, they can be challenged and yes, they are not the limit of mistakes made. Interested in your experience and thoughts and I’ve got my list of common mistakes I’ve made over the past 30yrs and seen clients make! Which I’m happy to share so you don’t make them too.

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