Startups are hard. 90% fail, with 10% within the first year itself. If you’re a startup founder, you already know these records and yet you are irrationally proceeding forward. Awesome! We did the same thing some years back, and having successfully sold the company, we’ve learnt a few hard lessons that I’ll share below in the hopes that you avoid them and improve your probability of success.
- Hiring full-time employees before product-market-fit.
As Marc Andressen said, getting to product-market-fit is the only thing that matters in the early years of your company. Simply put, do you have something that people really love and want. Until you get to this point you will be frantically trying many ideas, sometimes weekly. During this time anyone other than a co-founder will soon get frustrated by the changes in direction and eventually wonder if the compensation they are giving up on elsewhere is worth it.
I know some founders who made this mistake three times before learning this lesson.
- Deprioritizing offshore talent.
Saving money is crucial in the early days. No surprise that Google and many other great companies started out in garages. But the biggest expense is labor and given the quality of talent around the world, and tools to collaborate with them, hiring offshore is the best way to save money early on.
A start-up I know hired talented designers and engineers in Argentina for $35-50/hr. where the time zone overlap was pretty good with the US west coast. CEOs I know found similar impressive talent in Portugal, Spain, Ukraine, and Vietnam for $20/hr. or more. Occasionally, hired US and Canadian talent in rural towns, or working from cheaper areas abroad. And with a few exceptions, offshore talent is found to be reliable and easy to work with.
I should mention that while offshore talent is impressive, they will not solve problems for you. Like most other contractors, they will do as you ask them. So, use them for precise efforts rather than vaguely defined tasks.
- Holding on to the first idea far too long.
Your first idea is very likely going to fail. This may seem like a gross generalization, especially since you probably just quit a job to launch your startup based on an idea you think is very good. But success with startups, at least in consumer, usually comes from insights that no one else has. And such insights are seldom read or found in a survey but rather learned through failure. So, the key to success is to iterate fast through ideas and get those insights quickly.
A founder built a complete product for his first idea before finding out people wouldn’t use it. A simpler landing page test might have told him the same for far less money and time. It’s easy to think a landing page can’t possibly capture the product’s promise but if you can’t write it out in text and get users to sign-up then you don’t know what problem you’re solving and who you’re solving it for.
- Building a bigger MVP than necessary.
Most founders have a grand vision for the solution to a thorny problem and set out to build an expansive product, albeit in stages. But product form factors like a mobile app or website are far larger undertakings than people realize, even if you really try to minimize the feature set. Just standing up a site or app, getting reliable login/authentication, having useful onboarding, ensuring responsive layout etc. takes a ton of time and you haven’t even got a feature yet.
Instead, find the smallest product area you can test with. That may be a simple newsletter. And its built-in retention means you are building an audience first, which will be crucial when you do have a more robust product to test.
- Not having a marketing co-founder.
The number one thing investors look for in a startup is high growth, typically around 10% month-over-month or more. That’s because it’s an easy signal for product-market-fit and a business that scales. But getting to high growth is very difficult and requires constant experimentation with new marketing channels and strategies.
A marketing co-founder is essential so that he/she focuses on growth every day and is not distracted by other things. I also know of a startup who had a technical co-founder and a product co-founder/CEO. So, neither of them focused on growth exclusively and they never hit the 10% m-o-m growth rate consistently. When they finally hired their marketing co-founder (5 yrs. into the journey) it was late and had they done this earlier they would’ve likely have had more steady growth.