We love to hear about the latest startup success story. Knowing that someone was able to build something from nothing gives us hope that we can accomplish the dream as well. However, not every startup founder makes it to the finish line. More often than not, early stage startups fail before they even get off the ground -- most of the time, due to the same big mistake.
What I've noticed through my own experience and what I've seen at my startup studio, Coplex, is that, in general, there are three types of startup founders. First, there's the experienced entrepreneur who has been down the road before. They know what process works and their companies have a higher chance of success.
The other two types of entrepreneurs, however, make the wrong choices simply because they don't know what it really takes to get a startup running. Here's how they typically make startup-killing mistakes:
These are the startup founders who have just graduated college and are ready to try their hand at entrepreneurship. They've scrimped and saved, and with the help of their family and friends, have enough money to get started with their idea. At least they hope it's enough.
These entrepreneurs can't overspend. They have to work with the budget they've scraped together, which means getting things done as quickly and efficiently as possible. On the one hand, this encourages them to run a lean company. They know if they spend too much in the early stages, the startup will never survive.
However, they can also be scared to spend money on things that are ultimately very important to startup success. These inexperienced founders might have heard about the agile startup process, but they're skeptical of the methodology. To them, running repeated experiments through iteration seems unnecessary or wasteful. They don't understand that iteration is the difference between success and failure when a startup first starts out.
Instead, they work on producing one version of their product quickly and inexpensively. That means taking a huge gamble that their end product will have any market appeal.
What these entrepreneurs don't understand is that the agile process isn't really expensive and it pays much higher returns. With this process, small aspects of the product are developed and tested during each step of the process. You create, release, and see how the market responds. The results will either validate your product or help you adjust appropriately. Following this process increases the odds that the end product will have market fit.
The established business person
Over the past few years, we've seen more and more of this type of entrepreneur. These are the founders who have had a successful career -- typically in the corporate world -- and are now ready to create their own company. They've accumulated industry expertise and money to self-fund their startup.
These entrepreneurs have saved enough to have more flexibility in their budgets. However, their years working in a traditional company can play against them if they try to run their startup in the same manner. If they move at the same slow, bureaucratic pace, they'll get nowhere.
They spend time -- and a lot of money -- getting all their ducks in a row before developing their product. They focus on hiring the right team, creating a strategy, and countless other small details that aren't important for early stage startups. Then, when they're finally ready to begin developing, they're running low on money.
It's not uncommon for these entrepreneurs to waste half a year without ever getting a single line of code written. They end up with a "perfect" business plan, but with no product to take to market.
While this is how things work in the corporate world, it leads to failure when it comes to startups. Established companies have the luxury of moving slowly, early stage startups do not. They need to take product market fit into consideration while developing quickly. That means unlearning the process you're used to.
Avoid overthinking and overplanning. Focus on the lean startup process. From Day 1, develop your product one step at a time. Begin with the core assumptions of your idea and test those against the market. Look at the data you gather from those experiments and go from there. This process might feel unnatural, but I promise it'll increase the odds of survival for your startup.
Every entrepreneur wants their company to succeed. But it takes more than sheer will to make that happen. You need to understand the agile process and use it to get your startup going. If you don't, you'll never make it out of the early stages.
What are some other factors early stage startups need to consider in order to survive? Share in the comments below!