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8 Poor Mistakes Startups Typically Make

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They say experience is the best teacher in life, but who says you have to learn from your own mistakes? People learn from their mistakes and document them for the sake of others who wish to toe the same path. Although there are some mistakes startups typically make that shouldn’t have happened at all, there’s no successful business today that did not have stories of failure and challenges they had to overcome in the early life of the business venture. For example, before finding success with LinkedIn, its founder Reid Hoffman had started another platform called SocialNet that failed spectacularly. According to Hoffman, the success of his second platform LinkedIn was built on the failure of SocialNet. 

Here are the 8 Mistakes Startups Typically Make

1. Bad Management/Leadership Crisis

startup mistakes
Credit: startup stock photos

The failure rates for start-ups are high. This is why it’s much better to learn from the mistakes of others by making some of your own.. Too often you see promising start-ups fail without taking flight. Some are killed by a hostile business environment, while others die from self-sabotage. Getting embroiled in a management or leadership crisis in the early life of the business is one of the mistakes startups typically make. 

For example, Beepi.com dealt with selling and buying of used cars. It looked like a promising venture and was able to raise about $60 million in a Series B funding. Within four years, however, the startup packed up. 

Bad leadership and incompetent management of resources contributed to its downfall. When the used car dealer DGDG tried to buy the startup in 2017, it pulled out when it realized that the management had rendered broke and non-viable. What the owners of the startup failed to realize was that startups run out of money very quickly with bad management. Nobody will trust bad management with millions in investment. 

Self-driving startup, Roadstar.ai is another famous victim of how bad management and leadership crisis can ruin a good thing. The startup was founded by three former employees of a US affiliate Baidu in 2017. CEO Xianqiao Tong, CTO Liang Heng and Chief Scientist Guang Zhou all had experience with industry giants like Apple, Google, and Tesla. 

In 2018, things fell out between the trio after Tong and Heng announced that they had fired Zhou for taking bribes, hiding codes, and putting false data in a Chinese government regulatory report. Investors kicked against this removal and asked that Zhou be reinstated at his position and fired Tong as CEO. The infighting within the company which was displayed in public discouraged investors and a number of them filed an arbitration requesting for the return of their seed funding. 

2. Failing to Connect With the Public 

startup mistakes
silent killers of productivity. Credit: Convergetechmedia.com

As a startup, you’re supposed to produce goods or services which will be useful to the public. It is the service that you offer that makes you stay relevant and able to raise seed funding and a way to avoid mistakes startups typically make. Many startups have gone into the ground simply because they failed to connect with their audience. They either failed to impress, refused to be consistent or the public simply did not trust what they had to offer. 

For example, an established digital company like Google has also had its share of failed startup products. In 2013, Google introduced a futuristic device called Google Glass. This shaped in the form of a glasses is a small lightweight wearable computer that comes with a transparent display for hand-free work. Think about the glasses Tony Stark (Iron Man) wears in the Avengers and Iron Man movies. 

Google Glass was supposed to replace the personal computer and become everyone’s favourite digital helper like Apple was in the 1970s. The invention, however, failed to appeal to the public. Many considered it a tech way ahead of its time, and too expensive. Many were also concerned with privacy issues around their personal data and simply did not think the product held much value. 

The lesson here is the fact that the final consumer of your products and services need to be considered from the beginning. Making your services too expensive, exclusive or complicated turns of public perception very quickly. 

Another relevant example here is Essential Products founded by Andy Rubin, a former Google employee in 2015. This smartphone startup shut down less than three years after it started operations. Funded by Redpoint Ventures, Playground Global and Tencent Holdings, the startup had a total declared funding of about $33million but folded up after its first signature mobile phone was released into the market. 

Its smartphone released in October 2019 received mixed reviews and was not really accepted by the general public. The device which took two years to develop came with a ceramic back and a titanium body, quite similar to the design of the iPhone 5. It, however, ran on pure Android instead of the usual UIs being used on smartphones at the time. However, while the smartphone was an innovative idea, cheaper devices with similar features and body design flooded the market, making the Essential PH-1 smartphone almost useless. 

People preferred to go for the cheaper versions than the rather expensive device. To make matters worse, the company announced that it would not be able to follow up with the delivery of hardware and software accessories for the device or improve on it. Thus $330 million and two years’ worth of development proved to be useless to the target market. 

3. Failing to keep up with the latest trend in your industry 

Mistakes startups typically make
Job industry. Stock photos via pixabay

One of the mistakes startups typically make is the failure to be consistent or keep abreast of the latest trends in the trend within their industry. Asides from start-ups, many well-developed companies have collapsed because they failed to evolve and adapt; they became overshadowed by their rivals or new startups. For example, the first-ever digital camera was developed by an employee of Kodak, Steve Sasson in 1975. Kodak’s management, however, refused to pursue the idea, believing that the technology would not catch on. They were wrong! Kodak lost 20 years of profits and development in the digital camera industry and slowly went into a decline. People hardly know what the company is up to these days. 

One of the ways you can keep up with the trends in your industry is by integrating an interactive website with your startup. Having an online presence helps your startup gain market stability pretty quickly. With an interactive website spiced with engaging content, you’re able to keep in touch directly with your customers, carry out market surveys and feel the pulse of the market. This enables you to make better business decisions for the benefit of your growing brand. These days you don’t have to be a techie to build and operate an interactive website for your startups.

There are specialized firms like Iconic Digital World that can help you set up your website, create engaging content and help your business grow with a bustling online presence. The example below will illustrate how important it is to keep up with the latest trend in your industry and avoid making the mistakes startups typically make. 

Do you remember how life was before Whatsapp? Well, I’ll give a quick background for the benefit of those who weren’t around back then. Before WhatsApp, there was Yik Yak. The smartphone industry was young and expanding really fast in 2013 and a few chatting social platforms like Hi5 Facebook and My Space were expanding really fast. Yik Yak was very popular among college students but started being relegated to the background as Snapchat became more popular; the company folded up rather quietly in 2017. 

What happened to Yik Yak was the failure to adapt through evolution. It was introduced into the market in an age where many innovative apps were being developed and high-tech gadgets being created. The company got too comfortable with its short-term solution to immediate problems and failed to develop its technology to rival its competitors. At the end of the day, the lack of creativity and foresight killed the startup. 

4. Don’t Mislead/Deceive Your Customers 

Mistakes startups typically make
Credit: Stock photos via Pixabay

The fake it till you make it attitude common among upcoming entrepreneurs is not a healthy ethos for your new business and one of the big mistakes startups typically make. It a bid to appear stronger and more legitimate than they are as an appeal to investors, some startups lie about their financial strength or having the necessary permits and papers to carry out the business. Asides from putting you out of business quickly, you can go to jail for breach of business rules and ethics. 

Canadadrugs.com is an example of a startup that failed due to misleading information to customers and regulators in the industry. The startup became popular because of its seemingly viable solution of providing mail-order drugs and medications to patients across Canada and the United States. For patients across the Canadian border, this online pharmacy provided a lifeline for cheap drugs. 

It was shut down by drug regulating agencies after misleading its customers about the drugs having FDA approvals. The company said further that the cheap drugs it sold to its customers were produced in FDA-approved facilities. US Federal prosecutors went after the founders of the online drugs store and charged them with the illegal importation and selling of misbranded and unapproved drugs. 

UBiome, another health care provider, went out of business after raising more than $100 million in investments. The startup promised better testing and prescription methods for certain chronic diseases but failed to do so. It failed to provide sufficient support to patients before prescribing medical testing. After prescribing the tests, the startup pressured its doctors to approve tests with little or no oversight and over-billed its customers without their consent. Investigators later discovered that the practices were part of a wider aggressive growth plan to increase the number of billable tests served.

After being raided by the FBI, the co-founders of the startup resigned amid investigations over its billing and medical practices. The company filed for bankruptcy shortly after. 

5. Don’t over-focus on the Metrics 

mistakes startups typically make
Snapshot: Photo Credit. Forbes.com

Putting so much focus on the positive market metrics is a move that is sure to leave you blindsided to your weaknesses and a part of mistakes startups typically make. You would not be able to tell when you need to change tactics or slow down growth when needed. Early mistakes like this hinder the growth potential of your start-up; you’re not going to be able to stabilize the growth before it falls like a pack of cards. A startup called Shyp recently collapsed due to this costly mistake. 

Shyp was founded as a global shipping startup quite similar to Amazon. Coverage by the New York Times brought on an overwhelming barrage of investors. The startup seemed to be flushed with so much cash that it was constantly compared to already established brands like Uber. According to its CEO, Kevin Gibbon, the numbers told a spectacular story which they chose to believe.

So instead of trying to slow down and stabilize growth when consumer growth stalled, the managers decided to continue with an aggressive growth strategy that doomed the startup. When it decided to consolidate growth and change strategy, the startup was already in a hole too deep to dig out of.

6. Test Your Pricing and Product before Setting up Shop

As a startup, your primary aim should be to provide a solution to an existing problem. This means, your goods or service has to be needed by a section of the society, otherwise there would be no need for your startup. Before you go about solving problems, however, you should test the waters. You’ll need to find out if the public needs your product. You’ll also need to find out if there are alternatives to your product out there that would render yours obsolete when rolled out. If such alternatives exist, you need to find a way to make yours much better than your competitors. 

Acting as a Siamese twin with alternatives is the pricing of your product. A company like Google has repeatedly discovered over time that you should not produce goods your customers cannot afford. To put this in a better light, to succeed as a startup, your goods/service has to be needed, it has to be useful and it must not be too pricey. To cover these milestones, you’d need to test the acceptability of your product and the price people will be willing to pay for it. Carrying out this simple task will save your startup foundational problems. The example below should shed more light on this. 

Juicero was very popular in 2013 for its luxury juicer that had Wi-Fi capabilities, required proprietary juice packs and sold for a very expensive $699. The founder of the company wanted the public to see the bulky machine as much more than a juicer, once stating that the machine had enough force to lift two Teslas.

A report by Bloomberg that showed that the company’s juice packets could be squeezed faster by hand damaged the public reputation of the startup. People literally stopped buying the product, and the major investors claimed they had no idea that the final product of the machine would be so bulky. The negative press resulted in the company slashing the price of the juice presser to $399. Less than 10 months later, the startup shut down after an investment of $118.5 million.  

7. Don’t Go About it Alone or Bring Too Many People Along 

mistakes startups typically make
Photo credit: United Technologies

Just before the inauguration of the current President of the United States, Joe Biden, immediate past president Trump made his final address to the American people outlining his achievements as President of the United States over the last four years. Asides from listing his achievements, supporters and critics alike noticed that Donald Trump was the first US President in recent history that left office without looking worn-out, tired or fatigued.

Despite surviving Covid-19 as a 74-year-old, Trump looked refreshed and energetic unlike his own predecessor, Barrack Obama who came into the White House with black hair and left eight years later with grey hairs. Many people attributed this to the fact that Trump delegated a lot and had a lot of consultations with his staff before making major decisions. 

The little story above shows that even the most powerful office in the world cannot be managed alone, this is why departments exist within organizations because one person cannot carry the burden of managing an organization alone; irrespective of the size. The complex nature of businesses in the 21st century does not favor lone entrepreneurs; having at least one partner allows you to concentrate on other aspects of the businesses without losing yourself. A partner or several partners help with important aspects of the startup-like finance, marketing, and the management of finances. Having partners make it easier to recover after a failure. 

On the flip side, having too many cooks in the kitchen often ruins the meal. Too many people having to agree on major business decisions often kill the soul of the business. Too many egos and opinions will easily bring down the business as everyone wants to be heard and allowed to operate freely. 

8. Profitability is Good, But Don’t Be Greedy

mistakes startups typically make
Is Google Trying to deceive you. Stock photos via pixabay

They say the love of money is the root of all evil, and this is probably true for business owners who want to make profits too quickly. The push to make as many profits as possible should not push you to adopt unsustainable business models, which may put you out of business eventually with a lot of bad debts hanging around your neck. This is one of the many mistakes startups typically make that never ends well for them. The example below illustrates this point in clear terms. 

Wonga was a UK based company that specialized in offering payday loans to workers. The startup was backed by private equity investors and offered short-term credit at very high interest. Business went on very well for a while but before long, the company started to acquire loads of bad debt. Most of its customers could not pay back the high-interest loans which led to the government regulating the company as a financial entity and injection about £10 million to keep it afloat. According to officials, high-interest loans were offered to customers whom they knew could not payback. 

Conclusion

On a final note, you need to prepare for the good and the bad when starting a new venture. You should be prepared to fail and start again when you do. Without failures, the tech giants you admire so much today will not be here. Often, failure tests the viability and durability of what you have to offer. The more battles you’re able to overcome, the stronger your foundation becomes. 

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