Six Ways To Kill a Startup

It isn’t difficult to get online and find tips for startup success. What often isn’t discussed are the unforced errors founders often make when running and scaling a startup. There are six deadly sins that will kill any startup regardless of industry, client-type, size, tenure, or founder skill set.

Commit one or more of these mistakes, and it often marks the beginning of the end for a startup. These are extremely difficult to recover from and make the chances of long-term success slim.

  1. Failing to establish your startup’s culture and values from the start

Successful startups create an engaging culture for all employees from day one. A company culture based on a definable set of values often sets it apart from the companies that will scale up and attract talent and investment from the ones that flounder.

Employees will take a pay cut to join your startup if they know their needs and values are consistent with your company’s culture.

A small team that works together makes it easier to keep employees engaged and motivated in the early days of your startup. As your company grows, keeping your team on track will become much more challenging. Think strategically and set up your startup’s mission, culture, and values from the beginning.

Not only does your startup’s culture define you internally to employees, it also helps establish your brand, your presence. It defines who you are to media, potential investors, curious customers.

Your company’s core values will direct how you conduct business, manage workflow, interact as a team, and treat your customers. Your culture is the sum of your startup’s beliefs implemented into action. Be intentional and consistent about your startup’s culture. Empty words will come back to bite you as people realize your stated values are not an authentic reflection of what you’re trying to build.

  1. Hiring the Wrong People

Successful founders will tell you choosing the right people to join your team takes up so much time and effort. Recruiting, onboarding, training all sucks up resources you don’t have to spare, even though you need the help. Make the wrong choice, and you’ll soon find yourself dealing with someone who is not a good fit for your startup, someone who eats up precious time and energy that could be better used to build your company.

Add in the potential for damage to your company’s reputation, productivity, and lost deals from one bad employee, and it becomes clear why hiring the wrong people for your startup can torpedo it.

Over the past decade, one ploy to gain an air of credibility has been to hire famous people as consultants. In some cases, this worked since many investors only move on an investment once a famous person is working for a new startup. However, this did not work for many startups, as high-cost people tend to provide no tangible benefit to the company’s productivity at a time when early revenue could be better spent on building capacity and capability.

One struggling Austin-based venture capital firm hired a 19-year-old to build and run their research department because his father was a popular figure in the Austin business scene. Within a few months, the founders realized their new R&D department head was in way over his head and let him go.

Small business owners spend around 40 percent of their working hours on tasks that do not generate income, such as hiring. Don’t add to that number by making poor hiring decisions. 

  1. Spending money heedlessly to keep up appearances

 In Central Texas alone, so many startups have closed their doors simply because they spent hard-won early-stage revenue on an expensive downtown office before they could afford it.

Financial discipline communicates to potential investors that you are a smart steward of the company’s money. Creating a valuable company means waiting until the revenue stream supports the purchase of luxury offices, décor, and employee amenities. Be smart and stay lean.

  1. Not understanding the difference between ‘fans’ and ‘customers’

Starting a disruptive business can be lonely work, so creating and cultivating a fan base for your startup often provides a supportive network. Founders need to recognize how to interact with fans differently from customers.

One CEO of a failing fintech startup posted a status update about a recent success and bragged to his staff that the post had gotten over 500 likes. He then instructed a member of his sales team to reach out to all 500 who liked the post and pursue them as sales leads.

Most did not respond, and those who did either responded negatively or were not interested. The CEO was shocked when his next social media post only received 75 likes. That CEO inadvertently showed his fans that he valued their money over their support with his decision to pursue them as potential customers.

Your fans are already aware of the products you offer. If they were interested in your market, they would have already bought your product or service. Trying to convert them to customers with tone-deaf moves like this will only alienate your fan base.

  1. Attending events without a plan

You only have one opportunity to make a great first impression. Making a bad impression at events can kill a startup before it even gets off the ground.

Before sending a team to any event, founders should think intentionally how your company’s presence will make a difference for your mission. Being prepared can range from having business cards or printed marketing material on hand to delivering concise answers and a well-rehearsed pitch for both potential customers and investors.

Think critically about the impression you and your team will make at any public event. A group of friendly, polite employees wearing clean clothes, name tags, and matching company shirts who can easily answer questions and connect with people will reflect well on your startup. Show up unprepared, and you’ve blown your chance to shine as a promising startup. Those missed opportunities add up fast in an ecosystem where everyone knows everyone else. 

  1. Not taking job titles seriously

Many startups communicate a lack of professionalism by using ridiculous job titles to attract applicants. According to a report from Business Insider, the most common terms used were “guru,” “ninja,” and “rockstar.” This trend (particularly from 2010 to late 2015) signaled a lack of business acumen in job descriptions from thousands of failed startups.

Startup job descriptions like “Social Media Ninja,”  “Innovation Alchemist,” or “Full Stack Magician” (for a Full Stack developer) are not doing your company any favors.

What message does this send to an investor looking to invest million dollars or to a high-demand developer looking for their next opportunity? More than likely, it’s going to tell them the company doesn’t take their own business seriously.

It’s already hard enough to attract high-caliber talent and high-dollar investors. Play it safe and stick to professional, industry-standard job titles within your company.

These six deadly sins are meant to remind founders what to focus on when launching a new company. Develop your core idea into a startup on a compelling mission. Think carefully about what your business needs to be successful, and how you want your startup to be perceived for the best chances of growing your company.

Guest author Jarod Angehr is a finance professional from Texas State University, a start-up consultant and mentor, and entrepreneurially-focused writer on venture capital, start-up growth strategies, and start-up financing. Angehr is also a Venture Associate with Austin-based global accelerator, Newchip

Featured image is of a startup founder struggling over a laptop. Photo by Tim Gouw on Unsplash.

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