Startups part 2 – Avoiding the common traps
Yesterday the regional finals of Venture Cup were held. Some of the winners are from this region
And regardless of which definition you personally use to describe Startups there are common pitfalls (or traps) that new ventures can fall into. The complete list of hardships that Startups can face is essentially endless, in this blog we discuss 3.
1) Funding vs Selling
Startups that fall into this pitfall get caught in the mentality that the end goal is to obtain funding to continue building or developing their technology. Resources are internally focused (pitch training, UX, roadmaps) and these projects do not focus on actually trying to sell or talk to the market the same way traditional customer focused organisation would. This mentality can be called “Field of Dreams” thinking (from the 1980’s movie staring Kevin Costner) where “If you build it they will come” customer acquisition strategies are practiced.
Is Unicorn hype affecting the way in which we develop companies? Instagram was acquired by Facebook for 1 Billion USD with 13 Employees in 2012 . This type of exit may not be possible for most new companies.
2) Launch Plans
In many cases Startups severely underestimate the resources required after the “platform” is launched.
There are very few actual launches, most projects simply have Go-Live Dates. The resources needed to launch and to keep momentum moving forward are often underestimated or completely forgotten about. A few common underdeveloped areas that can be seen:
- Launch Communication (how are people going to know that the platform is up and running)
- The anticipation and time needed to troubleshoot and fix bugs.
- Processes and channels to gather feedback from customers or users.
- Post launch sales targets
If the goal of every Startup is to scale and grow then having a scaleable business model is essential. In the simplest form, a scalable business model must have the capacity to grow sales while still being able to service or deliver. The problems that typically affect sales growth are: long sales times, limited local market, or limited brand reach. The problems typically seen on the execution side: long or resource heavy on-boarding, lack of clearly defined processes, and no clearly defined job titles.
The roadmap to startup success is challenging and constantly changing. Startups need to plan in order to receive funding and to use their limited resources most effectively while at the same time remaining flexible enough to reposition themselves as they grow and learn.
At the end of the day maybe the only way to properly classify a “real” start up is to grade how attractive the platform is to VC(Venture Capital) funding. After all, a VC(Venture Capital Firm) only invests in companies with high growth potential.
Next time we will look at how VC:s evaluate startups and why VC:s won’t invest in some fast growing companies.