What constitutes a startup mistake?

Through a tweet from David Skok, I was reminded of a Paul Graham essay on the 18 mistakes that kill startups. Here they are:

1. Single Founder
2. Bad Location
3. Marginal Niche
4. Derivative Idea
5. Obstinacy
6. Hiring Bad Programmers
7. Choosing the Wrong Platform
8. Slowness in Launching
9. Launching Too Early
10. Having No Specific User in Mind
11. Raising Too Little Money
12. Spending Too Much
13. Raising Too Much Money
14. Poor Investor Management
15. Sacrificing Users to (Supposed) Profit
16. Not Wanting to Get Your Hands Dirty
17. Fights Between Founders
18. A Half-Hearted Effort

I was looking at the list and decided to do some playing around with it. Here is the list of what I’d consider the no-brainers if you are trying to build a significant company:

2. Bad Location
3. Marginal Niche
4. Derivative Idea
6. Hiring Bad Programmers
7. Choosing the Wrong Platform
10. Having No Specific User in Mind
12. Spending Too Much
15. Sacrificing Users to (Supposed) Profit
14. Poor Investor Management
16. Not Wanting to Get Your Hands Dirty

A smart startup should have reasonable control over items on the list above. The rest of the “mistakes” may only be identified in retrospect. As such, I’m not sure I’d consider them true mistakes. To me a true startup mistake is when you make a bad decision given available information or when you don’t accurately understand you need more information. Often startups make decisions which look great given available information but turn out to have been poor decisions as new information becomes available. This is life. The best remedy is a capable and flexible team and even that is not a guarantee. Flexibility is key, though, as what constitutes a “great” team today may not be what is required of greatness in the months ahead.

Here are the rest of the items from Paul’s list, with my own groupings

1. Single Founder
17. Fights Between Founders

Yes, getting the founding teams right is hard. I agree there are issues with single founders and there are plenty of issues in quickly-assembled founding teams. No, co-founders who’ve known each other for a decade are not a recipe for success either. I’m not sure one can label the general challenges people have with founding team formation a mistake. How much of that is really in the control of the lead founder at the time of making a founding team formation decision?

8. Slowness in Launching
9. Launching Too Early

Again, sometimes it is easy to know when’s the right time to launch but often we can only make that decision in retrospect. Too many exogenous factors: competitor behaviors, industry dynamics, customer adoption rates, etc.

11. Raising Too Little Money
13. Raising Too Much Money

Another example of determination that’s typically made ex-post. Just think about all the startups that got caught by the crash in 2008 with too little cash on hand. Had there been no crash, they may have done just fine. Should they be blamed for not seeing the crash? In good times, some of the companies whose CEOs always want plenty of money in the bank are blamed for raising too much money. In 2008 they were geniuses.

5. Obstinacy

The obstinacy point is about the delicate balance between vision and irrational belief in the face of solid data. Typically, only the future tells whether the entrepreneur is right. Statistically speaking, the obstinate entrepreneurs who don’t accept market feedback fail a lot but sometimes they also succeed wildly because they, after a long time, end up at the right place at the right time. After reading a post from Fred Wilson a few weeks ago, I tweeted: “perseverance is a strategy for success but also for slow, expensive failure.”

18. A Half-Hearted Effort

The last point is one I cannot argue with from the standpoint of any single startup idea. However, from the standpoint of an entrepreneur who has the ability of working with more than one idea and with multiple ideas over time, I’m not sure that being 100% focused on one idea at a time leads to the best outcome. Locking oneself into a startup has a significant opportunity cost, especially if you really try hard over time to make it work. Given the low startup success rate, one can argue that it is more important to pick the right startup as opposed to try really hard to make the current startup work. That’s particularly important in the very early days.

Consider an extreme example. If you were considering starting a client-server company in 1993, should you be doubling down in 1994 or perhaps consider waiting and seeing about this Web thing?

About Simeon Simeonov

I'm an entrepreneur, hacker, angel investor and reformed VC. I am currently Founder & CTO of Swoop, a search advertising platform. Through FastIgnite I invest in and work with a few great startups to get more done with less. Learn more, follow @simeons on Twitter and connect with me on LinkedIn.
This entry was posted in startups and tagged , , , , . Bookmark the permalink.

14 Responses to What constitutes a startup mistake?

  1. And that’s why start ups need strategic advisers who can slap the entrepreneurs around when needed, praise them when they do well and follow through on their ideas, and help supply them with the talent they need to complete the team as it grows. Interesting article – I see the “wear and tear” here – you’ve lived this stuff too. Congrats on boiling a lot of experience into your article.

  2. Paul Gomory says:

    Another classic mistake – not having the guts/self-confidence to hire great people (the ones even smarter than you, at least in their own domains) at the VP level and even as a founder-replacing CEO one day. Typically seen in control-freak founders.

  3. The best managers I’ve known always “overhire” – they’re never intimidated out of hiring people who are smarter and more experienced than themselves.

  4. Mark Landay says:

    Simeon, nice post. As an executive recruiter with over 20 years experience a majority of the potential issue would be avoided by hiring smart. Listening to your executive search consultant and experienced advisors.

  5. Pingback: What constitutes a startup mistake? « HighContrast | Agilis Energy | News & Analysis on the Changing Traditional and Renewable Energy Markets

  6. julespieri says:

    Love this post Sim, and the way you explicate these reasons with real insight.

  7. Jas says:

    Very nice article! Another point that I think is very important is having a clear vision for the exit strategy and working towards that.

  8. Pingback: When to fire your co-founders - Venture Hacks

  9. Pingback: Update on Earlier Post: 15 Common But Avoidable Mistakes | VC Deal Lawyer

  10. Pingback: When to fire your co-founders | Trep Rally

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s