Successful Startup 101 Magazine - Issue 6 Read online

  *** Editor’s Note: this article originally appeared here.

  10 Common Startup Flaws Leading to an Early Demise

  By Martin Zwilling

  Based on my experience as a mentor and an entrepreneur, if you fail on your first startup, you are about average. That’s not bad, but who wants to be average? Every young entrepreneur knows implicitly that startup success is a long, hard road. Statistics show that the failure rate for new startups within the first 5 years is higher than 50 percent. How can you improve your odds?

  Of course, a real entrepreneur always takes a failure as a milestone on the road to success. They count on learning from their mistakes, and use the experience to move to the next idea. But why not learn as well from the mistakes of others, without suffering their cost, time, and pain? In that context, I offer you my list of ten top startup failure causes, seen over and over again:

  No written plan. Don’t believe the old urban legend that a business plan isn’t worth the effort. The discipline of writing down a plan is the best way to make sure you actually understand how to transform your idea into a business. Take heed of the words of an old country song, “if you don’t know where you’re going, you might end up somewhere else.”

  Business model doesn’t make money. Even a non-profit has to generate revenue (or donations) to offset operating costs. If your product is free, or you lose money on every one, it’s hard to make it up in volume. You may have the solution to the world hunger problem, but if your customers have no money, your business won’t last long.

  Idea has limited business opportunity. Not every good idea is a good business. Just because you passionately believe that your technology is great, and everyone needs it, doesn’t mean that everyone will buy it. There is no substitute for market research, written by domain experts, to supplement your informal poll of friends and family.

  Execution skills are weak. When young entrepreneurs come to me with that “million dollar idea,” I have to tell them that an idea alone is really worth nothing. It’s all about the execution. If you are not comfortable making hard decisions, taking risk, and taking full responsibility, you won’t do well in this role. Remember, the buck always stops with you.

  The space is too crowded already. Having no competitors is a red flag (may mean no market), but finding ten or more with a simple Google search means this may be a crowded space. Remember that sleeping giants do wake up if you show traction, so don’t assume that Microsoft or Proctor & Gamble are too big and slow for you to worry about.

  No intellectual property. If you expect to seek investors, or you expect to have a sustainable competitive advantage against sleeping giants, you need to register all your patents, trademarks, copyrights, and trade secrets early. Intellectual property is also often the largest element of early-stage company valuations for professional investors.

  Inexperienced team. In reality, investors fund people, not ideas. They look for people with real experience in the business domain of the startup, and people with real experience running a startup. If this is your first time around, find a partner who has “been there and done that” to balance your passion and bring experience to the team.

  Resource requirements not understood. A major resource is cash funding, but other resources, such as industry contacts and access to marketing channels may be more important for certain products. Having too much cash, not managed wisely, can be just as devastating as too little cash. Don’t quit your day job until new revenue is flowing.

  Too little focus on marketing. Viral marketing and word-of-mouth are not enough these days to make your product and brand visible in the relentless onslaught of new media out there today. Even viral marketing costs real money and time. Without effective and innovative marketing across the range of media, you won’t have a business.

  Give up too easily or early. In my experience, the most common cause of startup failure is the entrepreneur just gets tired, gives up, and shuts down the company. Many successful entrepreneurs, like Steve Jobs and Thomas Edison, kept slugging away on their vision, despite setbacks, until they found the success they knew was possible.

  Note that the lack of a university degree or MBA is not even in the list of common failure causes. In fact, we can all point to examples of successful entrepreneurs who dropped out of college, like Mark Zuckerberg and Bill Gates, but still went on to be way above average. The most important thing you can learn in school is how to learn.

  The best entrepreneurs value “street smarts,” in addition to “book smarts,” to temper their passion with reality principles, like the ones listed here, to stay ahead of the crowd. It’s good to say you never make the same mistake twice, but success is even sweeter the first time around with no mistakes. Go for it.

  About the Author

  Martin is the CEO & Founder of Startup Professionals, Inc., a consultancy focused on assisting entrepreneurs with mentoring, business strategy and planning, and networking.

  Martin for years has provided entrepreneurs with first-hand advice, mentoring and business plan assistance as a startup consultant. He has a unique combination of business and high-tech experience, and executive mentoring and connecting startups with potential investors, board members, and service providers.

  Five Startup Lessons for Fast-Growing Companies

  By Kit Hickey

  Within our first month of publicly launching Ministry of Supply in June 2012, we sold more than 6,000 shirts and gained 4,000 customers. Our company grew fast because it had to. We were an adolescent trapped in a baby’s body — we had to learn how to sprint before we could learn how to walk, and we had some serious growing pains as we tried to scale production from 300 to 6,000 shirts a month.

  However, we quickly realized that by empowering our customers and empowering our company, we could truly grow the way we wanted. Everything we do comes down to empowering people to be their best.

  As a co-founder, I focus a lot on how we can scale our team, our operations and our distribution. We’re a startup, and face many of the same challenges that startups face. Here’s what we’ve learned along the way about managing fast growth.

  Championship vs. Ownership

  There are six members of our team, and we all champion different areas of the business. For example, co-founder Gihan Amarasiriwardena focuses on product development and technology. Devin Cook, head of Customer Advocacy, spends all day thinking about how we can make customers as happy as possible. Over the months, we realized that we worked better as a team when we moved away from ownership and moved towards championship.

  This philosophy ensures nobody feels possessive about his or her area of focus, while encouraging teamwork and collaboration. So while Devin may be focused on customer happiness, we all chip in with ideas and often have company-wide brainstorms about improving the customer experience. As champions, we’re all really proud of the areas we focus on and are encouraged to get others behind our initiatives.

  Holistic Views of the Business

  I love knowing what’s going on in all areas of the business, and we’ve found that everyone the team does too. We have an open office space and are constantly talking and bouncing ideas off of each other throughout the day. A few months ago, we realized that our communication wasn’t great despite the fact that we spent all day talking – some people didn’t know what was going on in various aspects of the business because decisions get made so quickly and a lot of decisions get made outside of the office.

  We’ve been trying to get better at making sure that everyone in the company knows what’s going on and has a holistic view of the business. Being transparent and giving everyone the opportunity to know as much as they can enables everyone on a team to be their best.

  Agile Problem-Solving

  We act fast whenever we see problems. When we realized that some of the shirts we were shipping were running too slim, we halted production, created a new pattern, trained our manufacturers, and got better-fitting shirts on the marke
t in three weeks.

  Being able to adapt quickly and iterate in real-time is a huge benefit of a startup and we will forever try to retain that ability. In this example, by acting quickly to solve a problem, we were able to minimize exchanges — and more importantly, make our customers happy.

  Technology Is in Our DNA

  As a fashion brand born out of MIT, we use technology to create the best products possible — from our use of thermal mapping to optimize venting in our Aero pants design to the NASA phase-change performance materials we use in our Apollo shirts.

  We truly believe that technology can improve everyone’s lives and we democratize technology through apparel. As such, we don’t stop at the use of technology in product development; we leverage technology in every touch point of our brand.

  Brand Is Culture

  At Ministry of Supply, we all live and breathe the mission. We are intentional about hiring people who fit both our brand and our culture. When we take company retreats, we challenge ourselves to be our best. Our last one included hiking and winter camping in negative degrees. We want our customers to be their best and our employees to be their best.  Everything we do comes down to that.

  Obviously a startup is a tremendous amount of work and nothing is certain. However, by staying true to our mission and empowering our customers and employees, we know that we’ll be here for the long haul.

  About the Article

  Kit Hickey is the co-founder of Ministry of Supply, a brand which is inventing the future of men's professional wear. The company has been featured in NYT, TechCrunch, Inc., Forbes and Elle Magazine. In addition, Kit is a lover of mountain sports and has half an MBA from MIT. Follow her: @kit_hickey