Looking at many startups that survive the first stage “Killers” that will have to face the second stage “Startup Killers” . Each one of them can kill a startup in the 2-5 years in the business. Most cases there are combinations of multiple killers that end a company.
Lose Focus– Typically when launching a startup the founders become laser focused and after a while, they might lose their focus and start running to all directions being influenced and being fascinated by daily opportunities. The company lost their “North Star” and stopped following their original vision.
Disharmony among team / investors– in the post launch after the excitement being displayed with challenges, breakdowns and issues, and they will show up, some companies tend to have the company culture go south. The team starts to deteriorate and misalign and excitement starts being replaced with dissatisfaction and resentments. Founders start to communicate less with their investors and stakeholders and the relationships start going downhill.
Pivot gone bad – It happens when the founders ignore market conditions, indicators, industry trends, economic conditions and customers feedback and are too slow to pivot at the right time. They will find themselves trailing behind and start to become irrelevant faster then they can count to10.
Follow vs. Lead – At some point a startup founder pays more attention to competitors and social media and the press white noise and stops focusing on making what they do the best possible and starts to follow vs. to lead their people, their customers and their stakeholders.
Failure to expand – Conservatism is a quality that most startup founders do not often have, yet it can be costly. In the same way that some founders are aggressively expanding too fast, failure to expand can be a fatal blow that can kill a startup. There is a point in time that you need to go all in, and if you will hesitate or be late, it will kill the future.
Lack of growth capital– cash flow is not a substitute for working capital. Cashflow is intended to support the operation of the company and can’t be used for investment in the future growth of the company. If you will burn your case flow in the future you will find yourself very quickly out of cash, no money for payroll, services etc.. You are dead. You need to plan your fundraising to make sure you have sufficient level capital to invest in the future, whild cashflow takes care of the present.
Legal Challenges– Not creating sufficient processes to manage the legal affairs of the company. It is OK in the beginning to do things on your own and use templates you can get online, yet at some point you need to create a process and turn to a legal professional to handle it to ensure you are as protected as possible. Remember one legal issue can take a company down, very fast. Investing in the right legal protection will save you a lot of headaches and money in the future.
No Social Capital Network – Building your customer base is key, yet building your social capital is your kingdom. Your social capital is what can support you and help you overcome challenges and in some cases may even save you. Social Capital is all about managing your relationship with all of the stakeholders that have a stake in your success, impeccability, transparency and honesty.
Burnout – Startup Fatigue – Hard work is expected and rewarded, yet burning the midnight candles endlessly, will lead to burnout which will lead to poor decision and ultimately to poor performance. You need to manage your and your team’s energy, and not the time. Working more does not mean you are more productive. You and your people need time outs, R&R and personal time to rest and reflect. If you slow down at times you will increase the velocity. I know it is contradictory in terms yet very true. Velocity and Speed are correlated, yet mutually exclusive.
Stop Learning & Developing– The “University of Life” is full of learning moments, failing to turn those learning moments into opportunities means you stop growing. If you stop growing, you start regressing and get slowly out of touch. As Eric Hoffer elegantly said; “In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” Stop learning, stop living.
Well my founders, here you have it, do with it as you wish, it was said before, I do not remember by who; “ Smart people learn from their own mistakes, wise people learn from other people’s mistakes.” Do not worry, you will make your own, yet you can minimize the impact.