This question originally appeared on Quora: What are the common pitfalls that most startups fall into?
These 4 things are likely to kill a start up even though they sound helpful:
- Writing a step-by-step business plan that you then follow. If you just have a vague plan in your head, you are more likely to succeed.
- Retaining a lawyer. This is weird. Are lawyers so toxic that they can kill your start-up even if you don't actually ask them to do anything? Apparently so. (Note that this is Australian data; the legal system in the USA might cause a different effect.)
- Accessing a government service to help your startup other than the R&D tax incentive. This might be a phenomenon of the Australian government support services and might not generalise to other countries.
- Investigating the regulatory requirements of the new venture. Yes: it appears that if you want to success you should wait as long as possible to figure out what you legally have to do.
I'm drawing the four points above from the QUT CAUSEE study which tried to study startups scientifically. Their data is Australian only, which means that it might not be possible to extrapolate. There are many other interesting insights from their work:
- Being home-based is a trap which makes it more likely that the start-up fails. But owning your own home even if it has a mortgage is a predictor of success.
- There is no passive growth. The more time you spend on actual activities to make the start-up happen, the more likely it will succeed. This doesn't mean that you have to work 100 hour weeks, but if you only work on it 20 hours per week, it's going to take twice as long as if you work on it 40 hours per week. Growth doesn't happen without someone exerting some effort.
- Working with your spouse together on a startup is a positive, but just a weak one. Despite what you might read elsewhere, the data shows that teams are more likely to give up than solo founders.
- Having older founders generally makes a start-up more likely to succeed--a trap is that you need to have a young and dynamic team ... when actually this is probably detrimental.
- An ugly one: founders of non-European descent in Australia have a much harder time. I don't understand why the data shows this.
- Customer contact. Ideally, a start-up should have customers lined up wanting to buy before the venture starts.
- Higher education and work experience in large enterprises tends to slow things down. Perhaps this corresponds to the businesses and products being created being more complex, but it is a clear effect.
- Trying to fund via venture capital or angel investment is irrelevant. Apart from being incredibly difficult, it appears that going into debt is a much better predictor of start-up success. (If you take out a loan, you are more likely to succeed).
- Pivoting for the sake of pivoting is bad. Pivoting because you have succeeded with a customer and that causes you to change strategic direction--that is good.
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