In Typical Start-up Mistakes, Andrew Schrage mentions five typical entrepreneurial mistakes as: (1) lack of research, (2) lack of budget and money-saving plan, (3) too much reliance on outside funding, (4) inadequate use of social media, and (5) expanding too early.
If you ask 10 successful entrepreneurs their 5 top reasons for failure, they may come up with 11 different – and sometimes, contradicting – lists. All the reasons listed by Andrew are noteworthy, yet to some extent incomplete. Take for example, lack of research. Often, entrepreneurs suffer from BAD research and not lack of it! Man is, by nature, self-aggrandizing animal … we love our own ideas to the extent of being delusional. For the fear of proving ourselves wrong, we shut out all push-backs we receive from prospective investors, advisers, and well-wishers – or, even those we notice during our own research. An entrepreneur needs to seek critic – should be hungry to hear push-backs. But that rarely happens.
The most important – almost fundamental – reason for a start-up failure is lack of revenue focus. I have seen technocrats over-engineering their products without any sped-to-market issues touching their brilliant minds. Very few think of diluting their idea a bit to get to market early and putting some revenue dollars on the books. It is not all about the volume of dollars that flow in your pocket by hitting the market early. It is more about experiencing the process of selling and servicing customers! The pains revealed by that process teaches an entrepreneur many valuable lessons early on. Better incur cost of learning early on, rather than waiting to blow up the shuttle in the middle of your flight! Of course, it is also about locking in a market before the competition notices you.
Another frequent mistake that have brought down many a promising start-ups is an entrepreneur’s ego. When a founder becomes bigger than the venture, he loses the game! An entrepreneur needs to recognize the needs of a venture – be it cash or talent – and be ready to dilute herself/himself if it helps the venture (and as a result, her/his holding) grow.