Errors of the founders of startups after raising seed investments, or how to quarrel with an investor
Raised investment? CONGRATULATIONS!
Seed investment is one of the most risky for both investors and the founders of startups.
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Let's see what mistakes entrepreneurs make.
Anna Dvornikova , managing partner of TEC-Ventures , believes that the biggest mistake is not to inform the investor about the problems of a startup. “You can pull in order to inform the investor about your successes, but you cannot pull in informing about your failures and problems,” says Anna. “Talk to the investor before something bad happens, or if something unexpected happens, immediately after. Do not pull, and do not try to hide, hoping that you yourself will solve all the problems. This is a big mistake. Investors will sooner or later find out about what happened, and you will lose investor confidence. And this is the worst that can happen. ”
Terence Young, the investor, founder of Yang Venture, highlighted the following reasons for the failure of startups to raise seed investments:
- Changing attitudes. Having received some money, the founders relax, lose their obsession, focus, move slowly toward the goal, lose their motivation to create a product that the market really longs for, and not the one that the founders invented for themselves.
- Expansion of the company before the real market-fit is found. This is the most common mistake. This includes hiring staff, advertising costs, sales and marketing expenses, office rent, salaries, employee benefits (free meals, medical insurance, etc.)
- Scaling too early.
- Hiring technicians and salesmen too early.
- A waste of time for partnerships. Of course, it depends on the product, but in most cases partnership is not the answer. What Gates did with IBM happens once in a lifetime. It is important to just focus on what people really need.
- A waste of time chasing trades with large companies, government or non-profit organizations. These people move very slowly, and require an individual approach. You have limited time before the round A. And during this time you have to prove that your product is needed by the market, and you can get real paying customers.
“A waste of time on vanity metrics — proving to others that your business is going cool.”
- A waste of time on the press and PR.
- Weak leadership and managerial skills.
- A waste of time attending events and conferences.
- A waste of time for dismantling with the co-founders.
- Expenses for service providers, such as social network consultants, and so on.
- Avoiding personal conversations with customers, and the desire to hire magic sellers, who put the sale and dramatically increase revenues.
- Errors in hiring staff. Hiring is not on time and not those.
- The inability to hire the right bright employees for a salary below the market, and the inability to interest the future of the company and the idea.
- Lack of modesty, inability to listen and learn.
- High burn rate - too high costs of maintaining the company's livelihoods.
- Office rent before it is really needed
- A waste of money and time on things that are not related to building a product, testing for direct users, monitoring their behavior and reactions, and building feedback from users.
Thus, summarizing the above, a startup dies if:
1) Excessive expenses.
2) The cost of the wrong things.
3) The assumption that this will continue forever - there will always be money to waste it.
Mark Vesselink believes that the failure of startups after receiving seed money occurs because they start to scale without receiving confirmation from the market that their product is urgently needed. Mark recommends keeping costs low and not hiring staff until you are firmly sure that you have found the product / market fit. How to find out?
Seed investment is one of the most risky for both investors and the founders of startups.
')
Let's see what mistakes entrepreneurs make.
Anna Dvornikova , managing partner of TEC-Ventures , believes that the biggest mistake is not to inform the investor about the problems of a startup. “You can pull in order to inform the investor about your successes, but you cannot pull in informing about your failures and problems,” says Anna. “Talk to the investor before something bad happens, or if something unexpected happens, immediately after. Do not pull, and do not try to hide, hoping that you yourself will solve all the problems. This is a big mistake. Investors will sooner or later find out about what happened, and you will lose investor confidence. And this is the worst that can happen. ”
Terence Young, the investor, founder of Yang Venture, highlighted the following reasons for the failure of startups to raise seed investments:
- Changing attitudes. Having received some money, the founders relax, lose their obsession, focus, move slowly toward the goal, lose their motivation to create a product that the market really longs for, and not the one that the founders invented for themselves.
- Expansion of the company before the real market-fit is found. This is the most common mistake. This includes hiring staff, advertising costs, sales and marketing expenses, office rent, salaries, employee benefits (free meals, medical insurance, etc.)
- Scaling too early.
- Hiring technicians and salesmen too early.
- A waste of time for partnerships. Of course, it depends on the product, but in most cases partnership is not the answer. What Gates did with IBM happens once in a lifetime. It is important to just focus on what people really need.
- A waste of time chasing trades with large companies, government or non-profit organizations. These people move very slowly, and require an individual approach. You have limited time before the round A. And during this time you have to prove that your product is needed by the market, and you can get real paying customers.
“A waste of time on vanity metrics — proving to others that your business is going cool.”
- A waste of time on the press and PR.
- Weak leadership and managerial skills.
- A waste of time attending events and conferences.
- A waste of time for dismantling with the co-founders.
- Expenses for service providers, such as social network consultants, and so on.
- Avoiding personal conversations with customers, and the desire to hire magic sellers, who put the sale and dramatically increase revenues.
- Errors in hiring staff. Hiring is not on time and not those.
- The inability to hire the right bright employees for a salary below the market, and the inability to interest the future of the company and the idea.
- Lack of modesty, inability to listen and learn.
- High burn rate - too high costs of maintaining the company's livelihoods.
- Office rent before it is really needed
- A waste of money and time on things that are not related to building a product, testing for direct users, monitoring their behavior and reactions, and building feedback from users.
Thus, summarizing the above, a startup dies if:
1) Excessive expenses.
2) The cost of the wrong things.
3) The assumption that this will continue forever - there will always be money to waste it.
Mark Vesselink believes that the failure of startups after receiving seed money occurs because they start to scale without receiving confirmation from the market that their product is urgently needed. Mark recommends keeping costs low and not hiring staff until you are firmly sure that you have found the product / market fit. How to find out?
Ask your customers if they have any problems if your product disappears from the market.
Source: https://habr.com/ru/post/246633/
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