Bringing your business idea to life can be overwhelming. Having a great idea alone is not enough. Still, complex problems arise for startups regardless of the industry, such as handling finances and hiring employees on a budget. Due to the lack of experience, many startups undergo the misfortune of failure. Make sure not to add to their tales of disaster. Here are some of the 2020 typical startups' mistakes that we have gathered that you should avoid. Your 2020 Guide To Avoiding Startup Mistakes. Disclaimer - Avoiding these mistakes, may still put your company at risk of failing.
You've heard the saying that the most successful companies started from the basement and or garage; Amazon, Apple, Google, and etc. They may have started from there, however, their heads were in the market
Often, entrepreneurs try to build their products in the basement, what happens is that many founders think they know what problems their customers are facing but often do not validate such assumptions. They think that they have a great idea and should bring it directly to the market, and the result is spending lots of time and money, yet the product never works.
Solution: Startups should follow the practice of validating their assumptions by focusing on learning from potential customers themselves, once they’ve validated the main assumption, then they move on to the next.
As an entrepreneur, your riskiest assumptions take time, effort and patience. This is something many founders and managers of companies do not have. You can fix this by gathering as many insights and data as you can for the problem your expected customers' experience. You do that by talking to customers about their problems.
The second mistake is being too emotionally invested and attached to the solution, many startups fail to investigate the problem thoroughly and are too eager to start building the solution.
Solution: You have to accept that things change and the best thing we can do is embrace the changes. The best startups are the ones that analyze what their customers want and are able to pivot. You must be able to keep changing the product until you reach customer satisfaction. Validating your idea is about asking the right questions. Instead of asking if your product can be built, ask whether it should be built. In other words, is your solution the right fit for the problem you’re trying to solve?
One of the biggest mistakes you as a startup should not fall into is having the wrong mindset, this leads to not willing to sacrifice and not have the GRIT to continue.
Solution: All this can be avoided by finding/being someone who is passionate enough to lead the business. So, Embrace failure! The key is falling fast and figuring out what works and what does not.
Most founders start building the product and bloat it with so many features. They believe these features add value and with time they get lost. They lose the idea of the actual problem they were solving which confuses the customer. Here are some myths early-stage startups believe
Solution: Start with an MVP (Minimum Viable Product) which could be the most important feature that solves one or two problems at max for your customers. Let’s be frank, there’s no brand until you build it and there are billions of potential customers that can benefit from your solution, so start by making the company exist as soon as possible and then iterate and improve it based on real-life usage learnings.
Founders often think they are too early or late in entering the market, moreover, they tend to have excessive perfectionism which is also a problem.
Solution: Word of advice! throw away your business plan and start designing your experiment, start with your MVP, it should not take more than 3 months of development.
Hiring the right team is never easy! Early-stage startups’ hiring process lacks the evaluation of the cultural fit. Imagine having a team member that is very offbeat and not as motivated as the rest of the team, that would be terrible! Furthermore, entrepreneurs fear the idea of firing people and usually gravitate towards hiring new employees without signing legally binding agreements.
Solution: Hire slowly but fire quickly and sign vesting agreements with all founders. You need to understand that skills are overrated, so focus on bringing in talents with a similar mindset who believes in your vision.
Having too many cooks in the kitchen is never a good idea; below is a breakdown on how it might feel like with multiple founders
Solution: Save yourself and your company by finding a co-founder with complementary skills to yours (Business <> Technical) for example, if you’re a creative entrepreneur with a solid sales and marketing background it would make more sense to partner up with a technical person to take care of the product.
Let’s face it, realistically speaking, most of you in the early days will have negative cash flow, some early-stage startups don’t analyze the ins and outs of their cash properly, they fail to answer questions such as, how much cash this month is coming in / going out?
Solution: Begin to track your Burn rate & Runaway:
By having as many financial insights as you can and have it visually monitored you can keep track of your progress and what is needed from your team to succeed.
Most startups underestimate the time and effort that should be put to raise funds. They tend to raise funds too early or late or they focus on fundraising too much that it distracts them from building and improving the business
Solution: Treat fundraising as a process. Prepare pre/during and post requirements and follow the rule of thumb - Never raise on an empty stomach!
Venture funding is like a marriage. The wrong marriage can lead to an ugly divorce. Some startups are more focused on money than the VALUE, moreover, startups don’t do a proper due diligence on the investor which is another mistake.
Solution: Look for smart capital and know who the investor is by asking around for references, you can ask for 3-5 startups that the investor worked/invested in, just to have an idea, furthermore, in the beginning, your concerns should be the value the investor is bringing to the table over money.
Success is a journey and it requires patience and perseverance, many factors can lead to a successful startup that can later be valued at millions, learn from the success stories of similar startups in the industry.
We at AB Accelerator strive to help FinTech startups reach a level of understanding of the whole process and how to avoid the pitfalls that other FinTech startups fall into. We provide them with the mentorship they need as well as an opportunity to test solutions through a proof-of-concept which could potentially lead to a pilot agreement with Arab Bank. AB Accelerator invests in FinTech startups that have a product in the market with demonstrated customer traction. If you are a Fintech startup looking to accelerate your solution within the MENA region apply now.