There are so many common errors of the startup business. Poorly written shareholder agreements, over-estimating market demand, under-estimating competition, taking advice from people with limited company building experience, and failures to consult a CPA or lawyer on critical issues are just a few examples.
The best way to survive the potholes of business is to think like an investor and avoid common errors.
Most founders have excessive spirit of entrepreneurship. Company building gets confused with entrepreneurship. Most founders don’t know their weaknesses. Founders are overloaded with and confused by information from incubators, accelerators, mentors, angels, and job coaches.
Most founders do not have the executive skills needed to build a successful startup, they typically have technical or lower-level management backgrounds. Most founders are incapable of evaluating their ideas objectively. It takes 1o to 20 years to develop CEO level executive skills. No one can turn an inexperienced founder into a fundable CEO, as the results are always disappointing. Company building skills require additional experience.
About half the job opportunities are in small businesses. Millions of new jobs are created every year by new startup companies. Unfortunately, a very high percentage of these companies go bankrupt unnecessarily. They fail because something like 99% of Americans believe that starting a new business is easy. They see the success of Bill Gates, Mark Zuckerberg, Richard Branson, and the Shark Tank guys for example, and they think ‘that’s easy – I can do that!” These three entrepreneurs were wildly successful but they are, by far, the exception, not the rule. The dirty little secret known almost exclusively to venture capitalists who provide financing for new businesses is that most successful businesses are run by experienced CEOs. So what’s going on here? Why the gigantic misconception? And what to do about it? There is a very good answer for this question.
Business financing is a confused industry. Accelerators, incubators, job coaches, mentors, advisors, angels, SBDC, finders, brokers, and dealers all promise ideas and connections. Enormous amounts of wasted and ill-advised funding occurs. Seductive propositions that provide little value.