Startup entrepreneurs are always on the lookout for the next big thing. They have a lot of enthusiasm and energy, and they're always coming up with new ideas. However, startup killers can quickly put an end to all that passion. In fact, according to statistics, a company has only a 0.00006% chance to become a unicorn. According to the CB Insights tracker when a company successfully reaches a seed round the chance increases to 1%.
While the odds are not in your favour, making it big as a startup business is still possible. In this article, we'll look at some of the most common startup killers and attempt to define the signals that help you prepare for them.
Types of startup killers
One of the most common startup killers is the lack of market need for the product. If people don't need your product, they're not going to buy it, no matter how great it is.
Another common startup killer might be simply running out of money. Loss of money can happen if you're not planning your path carefully and wisely.
Not having the right team can also be a death sentence for a startup. It's essential to have people on board who are highly skilled and motivated. It is better to find partners than labourers. It is also better to cooperate with the external development company in partnership mode than slave mode.
Ignoring what the customer wants is another common startup killer. It is crucial to figure out what people desire and deliver it as quickly as possible.
Finally, one of the startup killers can be the founder's mind and its ability to overcome psychological barriers.
Do you want to learn more about common startup killers? Keep reading.
1. Not Having Enough Money to Run Your Business
Startup entrepreneurs often underestimate costs. Unfortunately, such an underestimation usually results in bankruptcy. The costs of building the startup are unavoidable. However, smart decisions could transform those costs into a long-term investment with a very high return.
If you asked a few development companies to prepare cost estimates for the development of your product and you think that what they say about the price is too expensive, you may fall into the cost estimation failure trap. You may believe that it could be done cheaper. Sure, you can even find someone who will claim that they will do it cheaper! However, does that mean that the work will be at the same level of quality? Are they experienced enough to provide accurate estimates? And finally - are they truly able to deliver it at this cost?
Would you like to build your business on weak foundations? Would you risk spending your money on something you would have to throw away? I guess you won’t!
On the other hand, how will you know that the price and skillset offered by the development company are suitable for the money? Is it possible to evaluate the contractor and ensure they won't shut your business down and leave you out there without a penny? It is not easy, but I believe that it is possible.
Do you want to recruit team members yourself? Bad idea!
Another path you can choose for reducing development costs is to hire a team on your own. You must then ask yourself if you know how to find a good specialist? How can you prove that their skills are suitable for your startup? Think about the time you have to create reasonable offers, maintain publication of job offers and ads, read resumes, and interview candidates. Do these kinds of actions disturb you from focusing on business strategy?
What happens when you choose a team with no optimal skills? What happens when people quit? All those risks and potentially huge costs fall on you when doing a pervasive and time-consuming business.
Maybe you already have a good team, and all I described above is not a problem. However, there is still a chance to make unwise decisions and lose your money. For example, do you want to jump into development without testing your hypnotizes against market needs? Or maybe you think you know which feature is the best for your customers without asking them? Perhaps you want to touch and approve each minor step the team accomplished, design, code, tests, marketing, etc.?
If the answer to at least one of such questions is yes, you are going to ruin your dreams. It will happen because you spend your money building not the right thing and not in the right way.
2. Lack of Market Need for your Product
If you don't prove that there is a need for your startup's product or service before you begin to develop it, you are on the highway to failure. When you start your own startup company, it is vital to validate a current and growing demand for what you're planning to sell.
How will your startup make money if there isn't any demand? How would people buy from your startup online store or use provided services? If you cannot answer these questions, then startup failure is inevitable.
Of course, you can create a need for their product by educating people about its benefits if you considered it when creating your business plan and cost structure. At least it gives you a chance to understand the customer needs and validate your business hypotheses.
Still, the best thing you can do is go outside, dive into the community of your potential customers, and find out, by interacting with them, the most critical problems they have.
3. Not The Right Team
When you are just starting, you may be so eager to build your product or service that you don't take the time to assess adequately who your business partners should be.
The problem with this is that if you partner with the wrong company, it can harm the startup's success.
The key is that team members/business partners need to feel responsible for product excellence and success. They need to believe that your success is their success. If their behaviour raises doubts, they won't be motivated to work hard enough to make the product successful. By the way, this is why we are so good at partnering with our startup’s clients - we succeed and make profits only in long term cooperation with you, and for that, we need you to be successful.
Even when you find passionate and highly skilled team members/external partners, the problem can arise when the team's composure is not balanced. The individual team members' focus should be equally distributed across the technical excellence, understanding the business needs and improving internal processes. An unbalanced team can achieve the goals, but there is a higher risk of getting stuck in any local problems and not delivering what they promised you on time. This is why for example, a major part of our developers' recruitment process is a culture check, where we verify if candidates are business-oriented.
4. Ignore Customers Needs / Ignore Feedback
Startup entrepreneurs must focus on their customers' needs and market feedback because these business factors are the keys to startup success. If you ignore them, you will fail indisputably.
Remember! Your customers are the ones who are going to be paying for your product or service, so you need to make sure that you're creating something they will want to use continuously. Even if you think you can gather data to analyze customer needs and behaviours, it could not be enough. It is extremely difficult to correctly collect data and draw conclusions on their basis. Only high skilled specialists can do it properly (f.e. UX/CX researchers).
Keep in mind that the analysis result often leads you to a new hypothesis. It would be best to resolve these hypotheses to ensure you are going in the right direction before you spend a lot of money on software development which is pretty expensive. Hence the process of building a startup is iterative.
5. Lying to yourself
In the end, the worst one. Building a company that scales requires a lot of effort and an excellent strategy to keep you on track when you face psychological barriers.
Unfortunately, founders tend to build things for themselves and hope that other people will like them as well. They assume that startup potential customers will have the same excitement when seeing the product as they are. This approach does not allow startup entrepreneurs to make something valid for customers but only for themselves. When you spot this killer, it sometimes is too late for help. Losing money, time, and customers' attention puts you in the position of failure.
Often, founders tend to be more focused on building a product that is way too complex. As a result, they fall into the build traps. When you are focused on building a complex product, the money you lose is usually in the development. It seems that in such a case, you do not have a good strategy that focuses on the outcomes, and instead, you aim at individual features. It can also mean that you are sticking too much to your product vision and delivering features that don't respond to customer needs. I know that it is challenging to change your mind about your dream product. By the end of the day, the plan can change. You and your team need to focus on the strategy, but don't be afraid to pivot in case the current goal doesn't make sense anymore.
The way ahead
Startup killers are unavoidable. As a startup entrepreneur, you may believe that you can avoid them with careful planning. The truth is that startup killers will always exist in some form or another. This is why it is crucial to know what those startup killers are and how to address them, so they don't derail your startup from its road to success.
You can begin with two easy steps. The first step is to identify areas of your business that may be exposed to startup killers. In the second step establish the continuous review routine of your current actions and plans. It is important because when something in your business environment changes you have to know that and adjust accordingly.
The first step addressed above is to know your business's susceptibility to described factors. The second step will be to actively review your business for signs of an impending disaster.
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