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VENTURE CAPITAL

Don't Ignore These 4 Start-up Lessons

A start-up can spring from an innovative idea, but founders often overlook key elements that can turn an idea into at nightmare.

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Entrepreneurs have innovative minds that can turn a crude idea into a great business opportunity. They tend to know more about their own product or service than anyone else, and they have the ambition that could lead the company to success. However, there are four lessons that they often dismiss.

1. The fact that you are a great innovator doesn't make you a great executor.

Many founders of start-ups possess a creative and progressive mind that constitutes the core of the new company. However, great execution is not always ensured by having an innovative mind.

2. Management that doesn't listen tends to fail.

Entrepreneurs who are passionate about their idea may ignore advice from board members, advisors, consultants, or many others in their start-up's ecosystem because they think they know more about the company or product than anyone else. However, listening to advice that is complementary, unbiased, and sometimes even critical of the founder's ideas is invaluable.

3. VC funding is not always good.

Partnering with an established venture capital fund can be critical to the growth of a start-up, in terms of access to both capital and insights. However, a VC investment could potentially disrupt management's authority and the founding culture of the start-up. Taking the time to research and find the right capital for the firm is important for your long-term success.

4. High valuation for an early stage start-up is not always good.

A high valuation for a young company is only good if the business can continue to meet market and investor expectations. If your next valuation is "down-round"--meaning it's less than the valuation placed by initial investors--you will have a hard time securing a new round of growth capital.

These are basic lessons, but ones that we see entrepreneurs ignore all too often. Avoiding these common mistakes will give you a better chance of turning your passion into a profitable business.

What lessons have you learned in launching your startup? Let us know your thoughts by emailing karlandbill@avondalestrategicpartners.com.

Avondale Associate Mingu Kang contributed to this article.

Last updated: Jul 30, 2012

KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.
@karlstark




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