Every entrepreneur desires growth more than anything in this world. While hustling hard is not always enough to reach new heights in business, many people tend to avoid crucial precautions. We need to understand that just simply having a great product idea is not enough, execution matters too. It is this execution which determines the multifactor to help examine the growth of any business. Without causing any delay, here are the 5 biggest mistakes that an early-stage startup usually make (based on almost 100 case studies) which tend to kill them.
Underprice Their Solution
Pricing is a very crucial and under-appreciated factor of any product, but it can be one that delays your progress or instantly kills it. My experience says that usually, B2B startups underprice their offering. There might be many reasons to do so, but let me help you focus on the outcomes it could bring. On the other end, if you are underpriced, you’ll get more logos in the short-term to your experience basket, but the other side of the ledger is larger and too problematic. The 4 undesirable effects of underpricing your product or service include:-
You will gain less attention from the target audience
You would need to be a prominent solution for your early customers, that’s why you want to startup in the first place. You want them to sing your praises and recommend your product or services to others. If a customer is paying you $100K annually for your SaaS solution, it’s important to them. They are making a real investment and will put the right players on the project. You’ve got their attention. If a customer is throwing $10K annually for it, they may have snuck it under some procurement rules. It’s a nice-to-have and may not get the focus it needs.
You will struggle for meaningful revenue.
This actually doesn’t need further explanation.
Underpricing your offering attracts the wrong type of salespeople.
It’s uncommon to have a B2B offering that is marketing-driven, i.e., prospects come to your site, learn, and buy with little to no sales involvement. Most B2B offerings require some form of sales outreach. On the people front, good salespeople are financially driven. They’ll look for opportunities to sell at a high price point. That’s how they make their numbers.
You will decrease your stickiness.
They say that B2B apps tend to be sticky. That’s true, except in two circumstances. First, if the app was never put into production or rolled out to a wide number of users. And second, if you ask for a significant price increase. Nothing is sticky when the customer values the solution at $10K and then can’t explain why the new price is $75K.
Further, all these 4 aspects can hurt your ability to fundraise for your company, which means your flywheel won’t start spinning soon.
Failed To Talk to The Customer
This one seems obvious, but I can’t emphasize much on how many early-stage startups fail due to this reason. Founders perceive an idea, talk to a couple of buddies (mostly, people who are close to them) who work in the space, and start building the idea. Most likely, they soon find themselves wondering why they can’t get more than a handful of early customers and that’s it.
A smart founder will have a wealth of conversations with decision-makers, users or influencers at high ranked companies that may be in his target audience. He will ask plenty of open-ended questions about a “PAIN” in the focus area where the product is solving the issue. He will listen, take notes, deduce result, ideate and look for patterns to equip.
You need a connection to understand the deep sense of the problem. You cannot short-circuit this step. Otherwise, your message won’t resonate with your target prospects, your product won’t fit in the needs of your users, and you’ll fail to answer potential questions from potential investors because they would bet on more than just your gut.
Too Slow to Follow-Up
Most startups are formed by techies who like things which they can control. Coding, for most of it, is controllable with a single line of code. If they control the input (a certain set of commands), then they will get output (the desired outcome) which is what brings satisfaction to their heart. Actually, most of the rest of an early-stage startup doesn’t work that way. As a founder, you’ll need to have a target market or prospects, you need to work with customers to implement it, you’ll hire-fire multiple people, and in the end, fundraise would consume you to the bottom. These are asynchronous communications requiring multiple threads, inevitable obstacles to confront, and the ability to influence other people and at times, situations. My experience shows that techie founders are pretty good at the initial outreach. But eventually something doesn’t go along with their plan and the engine goes off to a halt.
Accelerate Without Intent to Grow
This one might be a little too much controversial. Accelerators are popular among startups and every other entrepreneur desire to get into the basket. Whether it is YCombinator, 500 Startups, Angelpad, or one of the many others, you can find an accelerator that will accept you and your idea, if it’s good enough. It’s a nice ego stroke when you get the acceptance, but beware as it could cost you as well. Think about who you are, who you want to be, where you are in the startup process, what you need, will be you be able to bootstrap and what you are willing to give up in order to succeed. If everything aligns nicely with your vision, plans & mission, then accelerator, GO FOR IT. But let’s look at a case where it might not. Imagine you are a team of 4 people in Delhi. You’ve raised enough money to last you a year at a current run rate, and you expect to have your beta ready in two months down the line. Let’s consider the take that your target market is oil and gas companies. What are the things you need at this stage and does this stage needs you to really fit in with what the accelerator offers? The accelerator folks may bring big enterprise sales experience, but do they understand oil and gas and have good contacts throughout this industry? If they have a great demo day in 3 months, but you’ll just be deploying your first customers at that time, so your focus should be there.
They are located in Silicon Valley, which brings you into a great tech network, but away from your customers and your team (and increases your burn out ratio as well). Given what you need, ask yourself if that accelerator will truly increase your chances of success or would it decrease it.
Underperform in Fundraising
I’m not going to shock anyone by saying that fundraising is difficult and takes more time than you would ever expect. Fundraising requires the right people, right inputs, the right plan, the right effort, a precise vision and follow-up, and most important of all, the right attitude towards the commitment. Of course, you need a good deck with the right story/message (no business plan or fancy projections here, please!). You’ll want some level of a financial model and a strong set of backup slides to show your understanding of the pain problem that you tend to solve with your product or service. Further, the market opportunity, your go-to-market approach, and your use of funds, etc are also an important part of your deck. On the planning side, you must pick the right set of investors likely to be attracted to your deal. A firm with a $1B current fund isn’t going to invest in a $500K round, that’s completely impossible. Likewise, you would be unable to raise an amount of $4M from your friends and family. Also, a biotech VC or angel won’t often (or ever in time) do an enterprise apps deal. Once you have a good set of potential investors, treat it like a sales funnel. Reach out, have early meetings over coffee, follow-up quickly on questions, and when you are ready, ask for concrete steps to a term sheet.
Lastly, attitude does play a part. My tip to you would be to become confident without being arrogant. Investors know that confidence will help you in customer conversations and hiring early employees on board of the company. If you aren’t confident here, you won’t be successful out there.