I get questions and comments from readers all the time (please keep them coming!). A few weeks ago, a reader contacted me with this question: What’s the biggest mistake you see founders make?
I came up with not one mistake, but 19.
If you read our Mailbag article (sent to you every Sunday) from earlier this month, then you know the top mistake. Today I’m giving you the full list. Founders, take note…
1. Not thinking big enough. Yes, this is the top mistake. We’re including it here in case you don’t feel like going back and reading the original Mailbag item. Startups have the choice to go big or go small. Going big is much more difficult, so young, insecure companies tend to go small. It’s the wrong strategy. Even if their decisions lead to a successful outcome, they’ve progressed 10% as opposed to 100% or 1,000%, which is not how you become a market dominator.
2. Lacking a clear path to monetization. Founders too often assume if you build it, the money will come. It doesn’t work that way. Building a product is hard, but building a profitable company is harder. If you don’t have a clear-eyed vision early on of where your revenue will come from, you don’t care about the long-term sustainability of your enterprise. And you’re not really building a company.
3. Giving short shrift to short-term milestones. It takes more than your sparkling personality to attract investor money. The very least you’re asked to do is to achieve the milestones you’ve set for the next six to 12 months. If you can’t meet your six-month goals, how are you going to meet your exit-strategy goal six years down the road?
4. Running out of money. This is another reason to pay attention to short-term milestones. You should schedule your milestone road map with an eye on your cash reserves. Give yourself a generous cushion to achieve your milestones and launch your raise before the money runs dry.
5. Skipping steps. Move quickly, but don’t use that as an excuse to stop paying attention to the details. Things that seem small often make a big difference. Case in point…
6. Not iterating enough. You’re not smarter than your customers. You need constant feedback from the marketplace, especially early on. Do not skip this step. Use early feedback to refine, iterate and help determine price points. That said, keep in mind…
7. Falling into the “just one more feature” trap. Even the “refine and iterate” process has its limits. Be careful you’re not spending too much time (and money) on product development and not enough on marketing. A good founder understands that great marketing sells middling products. But middling marketing lets great products die on the vine.
8. Overestimating future revenues. You may attract some additional investment in the short term if you overestimate future revenues, but you’re risking serious damage to your reputation. If you’ve overestimated just a little, it’s no big deal. But if you’ve completely undershot your revenue projections, investors will take note.
9. Targeting niche markets. If you target a niche market, a small but viable company would be your ceiling. If you’re okay with that, so be it. But that’s not what excites investors. Ask yourself what kind of company you want to be. If it’s large, then you need to operate in big and fast-growing markets.
10. Trying to do everything. For the first five minutes, it works and is perfectly understandable. Money is scarce, and you haven’t begun hiring yet. But it’s also unsustainable and should be abandoned as soon as possible. Figure out what you’re best at and stick to it.
11. Selling instead of leading. You have a capable staff, and you’re still the company’s primary salesperson? If this is truly how you see your role, that’s one thing. But if not, you need to let go of the reins. Retain your role as closer, if necessary. Let someone else handle sales.
12. Taking your community for granted. Your community requires nurturing. Otherwise, its enthusiasm will eventually wane, and you’ll be left wondering what happened. Feed it reasons to support you and cheer you on. Thank those in your community for their support. And remember: You need them more than they need you.
13. Underestimating the difficulty of manufacturing. Hardware is hard. Dealing with manufacturers, supply chains, shipment and payment schedules, etc., is extremely challenging. Just ask Elon Musk if you don’t believe me. If you lack the expertise yourself (and you probably do), hire somebody with experience.
14. Indulging non-priority initiatives. Pet projects are a luxury that early-stage startups can’t afford. Attach a bottom line metric to every initiative/project that requires a budget. Eliminate the bottom half and spend your scarce resources on the best revenue-generating initiatives.
15. Mistaking early positive feedback for product/market fit. A thumbs-up from your sister-in-law on a minimum viable product she’s using for free is nice. But that doesn’t mean it’s a product/market fit, nor should it be trotted out to investors as such. There’s still lots of work to be done at that point.
16. Ignoring viral growth possibilities. Offer viral instigators, like referral incentives. It’s worth a shot. Viral growth is amazing, and investors love it.
17. Confusing average or above-average growth for success. Every founder knows that single-digit growth is a nonstarter. But so is 20% or 30% growth. You should aim to double sales or customers every year, and try to get as close as possible to actually doing it. Every company wants to be the leader of the pack. Hypergrowth gets you there.
18. Lacking a clear path to scale. Rolling out a product at a price that encourages demand, produces a profit, and can reach a large and growing customer base should be the goal of every startup. Successfully executing this plan separates the big winners from the rest.
19. Failing to execute at an extraordinary level. I like this quote from the head of Y Combinator, Sam Altman: “It’s easy to move fast or be obsessed with quality, but the trick is you have to do both at a startup.”
Co-Founder, Early Investing