Saturday, 23 June 2018

Medium/The Startup/Vidhya Ravi: 3 Mistakes Startup Founders Make

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Go to the profile of Vidhya Ravi
Vidhya Ravi
I'm a writer, dreamer, art teacher, and part time cellist. Marketing @ Facebook. Startup Advisor. Mom of Two.
Jun 13
Photo by NeONBRAND on Unsplash

3 Mistakes Startup Founders Make

You’re pouring blood, sweat, and tears into ensuring your startup beats the odds, but are you making one of these critical mistakes? As part of my job at Facebook running marketing for FbStart, Facebook’s global program for tech entrepreneurs, I listen to insights directly from startup founders everyday. Hindsight is 20/20, but here are a few missteps that several founders say they wish they could “re-do.”
Bringing on a co-founder.

This point is controversial, I know. One of the first pieces of advice wantrepreneurs get is to find a co-founder for their business or idea. And, of course, if you are a non-technical entrepreneur, you need to find someone that is technical. From what I’ve seen, don’t dwell on this. If you already have a great partner that is just as passionate about your idea as you are and you work well together, forming an official co-founding relationship can make sense. However, if you are adding a co-founder to your startup because:

    You don’t want to make decisions or be responsible for the business on your own.
    You feel like you have to have a co-founder to attract funding or investment.
    You are not technical, and you think the best way to move forward is to have a technical co-founder (or vice versa).

Don’t’ feel compelled to add a co-founder. Analysis by Techcrunch based on CrunchBase, “More than half of startups with an exit did so with just a single founder. The average is 1.72 founders.” But the team matters, right? It does — but your team doesn’t have to be cofounders. Your team can be comprised of several components including advisors, functional leads or even vendors providing a service. If you’re a non-technical founder, you can still bring on technical talent that’s committed to your mission even if they aren’t co-founders.
Taking money too early.

You may have an idea that’s so so awesome you’re able to secure funding even before you’ve built an MVP (minimum viable product) or solidified a functioning business model. Don’t do it — this can be a mistake.

Money doesn’t come without expectations, and investors usually have high ones. Accepting money from sources that expect a significant managing stake in your business early on can put pressure on your fledgling organization. One of the benefits of funding your own business — or relying on investments from friends, family, or sources that don’t have a direct influence in the running of your business — is that you can set the pace for your startup’s growth. That’s everything from your product roadmap, organizational growth, to market expansion, to partnerships.

This is a special time for your startup: it’s likely the only time you’ll have to think about or test where you want your product to go and how you want your organization to grow. Several startups that take Angel or VC investment early on face pressure to build, expand, and monetize rapidly, sometimes before the founders were able to test or iterate their products and ideas or before the company established an operational style.

So when should you consider accepting funding? The best gage is when you have some degree of traction in the market, and those funds would help you take advantage of the opportunity.
Not focusing on profitability.

Growth or profitability? It’s the question most entrepreneurs have to ask themselves. If you’re asking me, nearly all startups (yes, even tech startups) should focus on profitability. Why?

    Profitability = Freedom

We’ve all heard the phrase “Cash is King”, and for startup founders, it’s even more valid. Profitability gives you options when it comes to your business.

    You’re not dependent on anyone else’s money to build and grow your company. Less bureaucracy and full ownership of your startup at an early stage can help you be a more effective founder and leader.
    You may attract more investors. As mentioned before, don’t take money too early, but if you are going to take money, do it when your startup has some traction. If your startup has traction and is profitable (or at least an obvious path to profitability through growth), you’ll attract more high-quality interest. And since your company is already profitable or on a clear road to profitability, you may have more leverage and negotiation power with those investors.
    Minimal profitability early on takes pressure off you as a founder. If you can earn just $2,000 a month from your business, you’ll be able to take care of your living expenses, and can focus on making the best decisions for your company vs. decisions that are based on economic survival.

It’s ok to experiment with different business models and take time to identify your best path and spend your early days doing this. The later you take investment, the more time you have to figure out what’s the right model for you and your company.

Is there any time when a business should focus on growth instead of profitability? Yes, but this won’t’ be the case for most companies. If your business is genuinely based on scale or reach to a vast (meaning nearly global) user base, focusing on growth first may make sense as the growth and size of that base will be your unique proposition for profitability.

— — — — — — — — — —

About me

At work, I create startup education, programs, and curriculum to help entrepreneurs grow and scale their businesses while engaging global founder communities. At home, my husband and I have two wonderful children. I love music and am a cellist (formally trained for 14 years) who is learning to play again after an 18-year hiatus. Travel, meeting new people, writing, and spending time with my family makes me happy.

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Go to the profile of Vidhya Ravi
Vidhya Ravi
Medium member since May 2018

I'm a writer, dreamer, art teacher, and part time cellist. Marketing @ Facebook. Startup Advisor. Mom of Two.
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Responses
Applause from Vidhya Ravi (author)
Go to the profile of Paul Brown
Paul Brown
Jun 17

Thank you for writing this. I am just getting started with a F&F round of funding and I was going back and forth with finding a co-founder. But I don’t think I need to worry about it at this point anymore.
Applause from Vidhya Ravi (author)
Go to the profile of Saagar Gupta
Saagar Gupta
Jun 13

Excellent work! Thank you for sharing.
Applause from Vidhya Ravi (author)
Go to the profile of Ryan Hemphill
Ryan Hemphill
Jun 14

Great advice! Thank you for sharing.
Conversation with Vidhya Ravi.
Go to the profile of Edward Albe
Edward Albe
Jun 19

Vidya — nice article that I fundamentally agree with except for your point: “If you can earn just $2,000 a month from your business, you’ll be able to take care of your living expenses, and can focus on making the best decisions for your company vs. decisions that are based on economic survival.”
Go to the profile of Vidhya Ravi
Vidhya Ravi
Jun 19

Edward, Haha — maybe so, but sharing a room and living off Ramen — $2,000 a month seems possible (Likely $1,500 post taxes). I think I did it as a college student!
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