This article was initially posted by George
Deeb on Linkedin and I believe we can all learn from it. It contains 13
critical issues he identified in the over 500 start-ups he has consulted for
over the last few years that every entrepreneur must address for the business
to grow and remain a going concern.
Here is a summary of the
recurring problems I have seen in the flawed start-ups to avoid to maximize your odds of success:
1.
A
small or un-scalable idea.
Investors
tend to have bias against ideas that throw out the largest nets possible in
terms of potential customers. They would much rather back the next Google,
whose product appeals to everyone and anyone, than a small niche business that
only appeals to a very narrow market.
2.
Wrong
market positioning.
Often
times, entrepreneurs launch businesses they think are good ideas, but they
never took the time to properly research the market. As an example, investors
don’t want to back the 10th start-up in a space; they would much rather back
one of the first.
3.
No
go-to-market-strategy.
Entrepreneurs
are typically so focused on building their product, that they don’t think far
enough ahead to their go-to-market strategy, and how that will help them to
achieve a proof-of-concept to attract growth capital.
4.
No
focus.
It is
hard enough to launch one business, yet alone try to launch multiple businesses
at the same time. Don’t be a jack-of-all-trades — you’ll end up being a
master-of-none.
5.
Know
when to cut losses.
If you
are trying to paddle upstream, no matter how hard you paddle, the current is
going to take you backwards. Entrepreneurs need to know when a pivot is
required, while there is still enough capital in the bank and enough time to
implement the changes.
6.
No
passion or persistence.
If an
entrepreneur does not exude passion about their product, they will never love
their start-up enough to get through the good times and the bad. You need to
have a persistent mindset that regardless what hurdles get thrown your way, you
are going to figure out a way through them.
7.
Wrong
or incomplete leadership.
Never
try to put a Fortune 500 team inside a start-up, because they don’t typically
think like start-ups. Investors do not want to back a person, they want to back
a complete team – in case you get hit by a bus.
8.
An
unmotivated team.
The
management team needs to have the same incentives as the founder, and putting
15 to 20 percent of the company into the hands of your employees will be a lot
more motivating and loyalty instilling.
9.
No
mentors or advisers.
Entrepreneurs
should not be ‘lone wolves’. They need to understand they are not in this
battle themselves. Many cities have established start-up ecosystems for them to
tap into for mentors.
10. No revenue model.
OK, I
understand many start-ups may not have a revenue model day one. But there
better be a clearly communicated revenue plan for down the road. That revenue
plan needs to be material enough, based on credible assumptions, to make it
enticing for an investor to get excited and to justify your current valuation.
11. Less capital than needed.
First
of all, make sure you are raising enough money out of the gate. That means
raising enough to build your product and to achieve your proof of concept.
Preferably, that amount is large enough to at least carry you for the next 12
to 18 months. Whatever capital you think you will need, double it for a
cushion, as things always go wrong.
12. No long-term road-map to ROI.
Whether
you are investing in your own business, or raising capital from outside
investors, you need a clear road-map to at least a 10-time return on your
invested capital.
13. Bad luck or timing.
Sometimes,
businesses fail for no fault of their own (e.g., due to economy). During bad
times, it is often best to go into “hibernation,” waiting for conditions to
improve so you can live to fight another day
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