You Need To Avoid These 4 Fatal Mistakes If You Don’t Want Your Startup To Fail
Startups stand little chance of making it. Sadly, three out of four companies are doomed to fail. But not your company — you’re going to be one of the 25 percent that succeeds. That is, if you’re willing to listen to some advice and steer clear of fundamental fatal mistakes that many entrepreneurs make.
I’ve made my share of mistakes, but I’m glad to say I’ve learned from them. I’ve grown as an entrepreneur and business leader as my businesses have grown. I started my first Internet company as an eager and hardworking 16-year-old and sold it two years later for $40 million. My second company sold to Yahoo! for $300 million. My third company, RadiumOne, is already bigger than the previous two combined and I’m well on my way toward achieving my goal to run a billion-dollar enterprise.
I’m just as eager and hardworking today as I was when I was 16. You have to be, as well. You can’t afford to lose your passion. The main difference between me and my younger self is that today, I have a wealth of experience to draw upon. Each day, I witness the bright-eyed enthusiasm of Silicon Valley startup entrepreneurs hoping to make it. After reflecting on 2013, I want to share some ideas to help other entrepreneurs succeed. Here are some of the pitfalls to avoid:
Focus on managed growth over a hiring frenzy.
Ever heard of Clinkle? It’s a mobile payment startup founded by a 21-year-old Stanford University student. It’s famous for raising $25 million pre-launch, the largest seed round of capital in the history of Silicon Valley.
Even before launching its app, the company seems to have gone on a hiring spree. With so much money at its disposal, Clinkle spared no expense building out a high-profile executive team, including Barry McCarthy, former CFO of Netflix. But within months, according to news reports, it issued pink slips to 25 percent of its workforce and disgruntled employees went online to vent anger amid allegations of mismanagement.
There’s a cautionary lesson here: Always choose to manage growth over aggressive hiring. When I started my first company, there was only one employee for the longest time: me. I was cautious in recruiting new people, but I did learn as I expanded that it pays to hire the best and to reward them accordingly.
Innovate or die.
In the fall of 2012, most analysts were writing obituary reports for Netflix. The company had experienced an 88 percent plunge in third-quarter profits. It seemed to be drifting. But then it took a bold step and created its own content, the series “House of Cards.” The company’s turnaround strategy was to turn itself into a “premium television network,” like HBO.
It worked famously. Netflix’s own drama series quickly skyrocketed to become the most-streamed content in the US and 40 other countries. Netflix made history by becoming the first non-TV network to win Emmy awards. Its documentary movie, “The Square,” was nominated for an Oscar this year. Netflix took a chance, disrupted the traditional television industry forever and added $18 billion to its market cap in just 16 months
Of course, Netflix had a wealth of audience data at its fingertips and was confident that launching its own content would succeed. And therein lies the lesson: Take calculated risks as you adapt and innovate. In my case, I have always built a better mousetrap based on solid experience.
Shout it from the rooftops.
It’s always tempting to want to operate stealthily. You don’t want someone else to steal your brainchild, after all. But you can take secrecy too far, as reportedly happened to Preetam Mukherjee, who started online video-hosting site, Marcellus.tv. By the time he had launched, there were many other video platforms that had beaten him to the punch — with better features. He recovered and built a loyal customer base.
Conversely, Alex Turnbull, founder of Groove, repeatedly blogged last year about his company’s journey to reach $100,000 in revenue for its customer-support software. His posts were packed with insider detail. It looked like he was giving too much away. But his readers — fellow entrepreneurs, marketers and engineers — jumped in with useful, free advice.
If you’re open to being open, you may well find that customer feedback prevents you from making mistakes, or gives you ideas for features you had not considered. Once you’re visible, you may hear about potential competitors you never knew existed. You also need to know that being first to market isn’t what it’s all cracked up to be, as your competitors will learn from your pioneering screw-ups. And there are other good reasons for openly revealing your plans: You may unearth angel investors and being out there, revealing who you are to the world, lets your honesty shine through.
I engage in as many social media platforms as I can and as often as I can because I want to get my message out there and help as many budding entrepreneurs as I can.
Communicate with your customers.
Some companies assume that they — and not the customer — know best. But, successful companies have to learn how to listen. With social media, an unhappy customer (or anyone else, for that matter) can broadcast their discontent to the world, in a matter of seconds. Whether it’s true or not (often, it’s not) the damage is done, unless you can rapidly respond with real facts.
Southwest Airlines has a very active social media program with about 30 regular staff bloggers and many other occasional contributors. Southwest has a reputation for being a fun, people-oriented company and that shines through in the blog posts about what it’s like working for the company. It’s personalized and authentic. The company employs a social media staff of six, but allows the bloggers to speak in their own voices, for the most part.
Where Southwest’s social media communications really comes into its own is when there are challenges to address (flight delays, for instance), or controversies (for example, when they kicked an overweight passenger off a plane). They monitor and respond to comments, and get the company’s message out fast. Congratulations to them.
Startups can learn from these experiences. You might not yet have millions of customers to handle, but you should act and respond like you’re a big company. Hopefully, you don’t have too many employees, believe in openness and frequent communication and can adapt as needed. To paraphrase Charles Darwin, it is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.
*Original Article by Gurbaksh Chahal: http://elitedaily.com/money/avoid-top-four-fatal-startup-mistakes-2013/