- Founders think that if some investor gave them money it is a validation of their product
Founders are a better experts in their startup. Treat the investors as just one more data point.
- Hiring too quickly
If you have $1m in the bank it doesn't mean you have to hire 10 people. Focus on product-market fit and get traction first.
- Lack of focus
Trying to solve too many problems at once. Solve one and become indispensible at that. Expand from there.
- Announcing product market fit too early
Growth decisions like hiring and scaling are made based on a false assumption that there is enough prod-market fit. Don't convince yourself you have one until you see real growth.
- Not understanding your business model, specially CAC
A disconnect between what it costs to acquire a customer vs how much you are charging. E.g. selling a $2k ann subs via enterprise sales is a sure way to loose money.
- Not understanding the stage of your customer - should you sell to new companies or established companies?
Selling to a founder and being in early is different from selling to an exec of a mature company with established systems and processes.
- Don't expect your investors to help you
The best investor gives you money, signs paperwork when needed and is interested in follow up rounds.
- Investors focus on acquiring startups
They will promise you the earth just to close the round on the best terms quickly and move onto the next deal. Helping you becomes an additional cost center for them. Winning startups don't need help. It is more efficient for them to focus on the winners.
- Demonstrate success to attract more success
Once you are successful there are a lot more people willing to help you, even for free.
- Establish the best possible hiring process
Everything from the job application to onboarding should be enjoyable. You are in a competition for talent - be the best employer to win the best talent.
- Be clear about equity, roles and responsibilities
Deferring those decisions will only create more friction in the future when you least need it.
- Keep only essential employees
If you can remove an employee and the world doesn't come crashing then that role is not essential.
- Bad management practices kill
Consider one-on-ones, collective decisions, team buy-in, delegation from day one, not when you are a 50 people company.
- Transparency around runway
Employees will always suspect the worse and try to find another job if they think the money is running out. On the other hand, seeing the cashflow may motivate them to rally together to make the company profitable.
- Roles and responsibilities amongst founders
Collective decisions slow things down. Define who does what and accept that the other founders will make mistakes and so will you.
- Not resolving conflicts amongst founders
Establish a system for founders to meet, discuss and provide feedback in an environment that is non-confrontational. Resentment is like a mortgage - it compounds. Avoid at all cost.
- Raising Series A from a weak negotiation position
Founders use all the seed money to get to $1m revenue or whatever figure VCs demanded as a pre-condition for Ser-A talks. This gives VCs the best leverage because you have no runway left and will take whatever deal they offer you.
- Be careful who you get the advice from
What you hear about others raising a round is only part of the story. Fundraising is a game, not a precise science. Any advice is just one more data point and often a very biased one.
- Raising from people you know is easier
Make yourself known well ahead of the fundraising to build trust. Raising in your 30's is easier than in your 20's simply because you've been around for longer and know more people.
Last active
July 18, 2019 22:24
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