Founder Confessions is a weekly series brought to you by StartupsAnonymous.com, a place where entrepreneurs can share stories, confess, and ask questions anonymously. This series features a collection of confessions from entrepreneurs in the trenches. Because their submissions are anonymous, it allowed them to speak freely without fear of retribution. To contribute a confession and be a part of this series, visit startupsanonymous.com; see the current confessional topic on the right side of the bar. You can also follow StartupsAnonymous on Twitter: @startupsspeak.
It's often said to entrepreneurs, If you're not making mistakes, you're not taking enough risks. The message is that making mistakes is how you grow as an entrepreneur.
This is why failure is worn as a badge of honor in Silicon Valley, and why investors are still willing to back those who have failed. Investors know that for their investments to pay off, the entrepreneurs they fund must be willing to take risks.
These seven entrepreneurs confess the biggest mistakes they've made while risking it all:
Trusting partners 100 percent
Two business partners (including one who was my best friend and best man at my wedding) betrayed me. It cost me two businesses and hundreds of thousands of dollars. No matter who your partner is, find a really good attorney and make sure you are protected.
Not letting go
The biggest mistake I made as an entrepreneur was not giving up control. I lost two phenomenal team members because they were bored and worried I was paying them for no reason. I have since learned to let others take the lead.
Not knowing when to stay quiet
I'm the founder of a large online community. We clear $180,000 a year. The biggest mistake I've made happened earlier this year. A media company had asked us to remove some content it owned. We complied. We did use the media company's name in explaining why that content was no longer available. That company sent a far-less-than-complimentary letter demanding we remove its name. I responded and said that company's tone was less than businesslike, and it could correspond with my attorney in the future. We had our Google AdSense pulled in days and went from $180,000 to $0 overnight.
The lesson: Know when to keep your mouth shut.
Not understanding market demand
I started a wholesale insurance business on the premise "if you build it, they will come."
I poured a ton of money into websites, employees, and marketing materials before ever landing a single customer.
I built it--and they did not come.
Waiting too long to raise money
When I founded a spice company with a first-mover product, proof of concept was too easy. We were in 3,000 stores in our first 12 months of sales. We were immediately creating private-label products for Target and Williams-Sonoma.
As experienced CEOs can tell you--myself now one of them--cash is king. My company was founded on $50,000 in April 2007. Because of our explosive growth, we needed capital much faster than we thought we would, but the recession was upon us and money was nowhere to be found.
Instead of building on our early success, we were forced to contract and take a defensive position through the recession.
The lesson? Never outrun your capital. Grow organically. Raise more money than you think you need, before you need it.
Giving away too much equity
We ended up making the rookie mistake of splitting equity 50-50 with our investors very early on. It not only jeopardized all chances of landing a future round, but it also made decision making painful. Everything was dependent on a consensus. At the same time, our investors had the urge to become too involved in the execution of the business, despite their not understanding the market and customers. It turned out to be the beginning of a very slow and painful death for our business.
Our biggest mistake was to not put a stop to this financial arrangement when we still had a chance to save the business.
Expanding too early
After starting two companies, the biggest mistake I've made has been expanding too quickly. Yes, you want to conquer the world, but the reality is, you may not have the capacity to do so. If you focus and provide an awesome experience for people regionally or locally, you'll naturally grow nationwide or worldwide.
In other words, be amazing in your own backyard, and the broader community will discover how you're awesome.