5 Mistakes start-ups do all the time

"What is your exit plan?" I asked a start up co-founder recently at a pitch discussion. He said "Umm..Why? We are not looking in that (negative) direction at all, we are very focused towards what we are building".

"Oh! So there is no Exit strategy?" I asked back.
"Nope."
"Interesting. What if this does not work?"

Don't remember but I heard a long "Hmmmmmm....".

The word "Start-up" definitely has a terrific impression on the youth today, and quite rightly so. After all, people in their teens are coming up with billion dollar ideas & execution. But (there is always a 'But'), this must be taken with a pinch of salt. Building a start up is like going into a serious relationship. You need to be very sure where you are putting yourself into, because if you are not sure then the break-up ends up very ugly.

1. No direction  - you don't need to create formal in-class MBA type business plans but definitely there must be a clear direction. What is the problem the start up is solving? Why is it a problem? For whom is it a problem? For how many? Is there anyone else solving the problem? If yes, how are you doing it better with your solution than the rest? Don't get caught up in your vision so much that you rule out the customer completely.

2. Handling money - this is a grave concern. Money/funding is your oxygen. This aspect decides your start-up's age. If you don't manage it well, then basically you are playing with fire with your eyes closed. You will start getting the feel of the burn, but you won't be able to do anything really to stop it. You must know how much money you have? What is your burn rate? By when you will need the next round? Where will the money be spent on? How will you judge your progress? Is it #Orders, GMV, Customer satisfaction, user experience, Returning customers/users, average order value, average basket size & so on.

I was recently talking to one of the co-founders of an on-rent furniture provider start-up. They were looking for a round of funding just to buy new furniture inventory, but were not able to convince any VC/investor. "Its pretty obvious", I thought from an investor's point of view. Why would I put money into something that I know is to be used to buy stuff that will get depreciated by 30% the second it gets out my pocket? 

3. "I-am-the-CEO" tussle - yea, this happens quite often. A lot of start-ups actually don't even take off and bite the dust because of this never ending argument. There is only 1 way to solve this - toss a coin. Sorry, I am kidding. Well, it has to be talked through. The person who brings in the idea and has a well thought out plan to execute it across the functions must be ideally associated as the CEO.

There must be ideally more than 1 person to brain storm the execution plan, the fall out options, back up plans & so on but the final shot stays with the top guy. However, if the argument seems to stay on forever, then stay with Co-CEOs titles and let the business flourish. Don't let the idea rub the dust for this tussle. Business, any day, is much bigger than an individual or two.

4. Launching a perfect product - I strongly believe there is nothing called perfect in business. There is always a room to improve. So unless you are God, don't wait for your product to go perfect. Follow an agile approach, launch an MVP (minimum viable product) and keep improvising - all the time. If you get stuck in the perfect product model theory, then either somebody else will launch a similar solution or the market/consumer will find a substitute for itself. More on this is explained here.

5. No Exit Strategy - yes, this is important. This shows how clearly you understand the dynamics as well as the limitations of your solutions or the eco-system your solution is fitting itself into. If you don't have an exit strategy, your investors will nonetheless have it. And yea, it comes with a timeline obviously. An exit plan or an exit strategy is a crucial aspect of your direction. If you hit a wall, you will have 4 options:
i. Pivot - Requires additional funding and a strong direction.

Snapdeal, for instance, even as the title suggests started as a deals site. It offered all kinds of deals in Indian cities as Groupon used to offer in the US. However, by time, the founders realized that the supplier side is not ready yet to get going with the idea; they transitioned into an e-commerce site. Plus, eCommerce segment was untapped & had a much lucrative opportunity.

ii. Restart - Requires additional funding (super tough in this choice). Rarest of options to choose from.
iii. Abandon - obviously super easy and happens most of the time.
iv. Sell out - you will need a strong case for this.

Lots of niche tech solutions start-ups in the US are born with an intent to be dissolved into bigger fish in the industry.  

Keep loving start-ups, stay enthralled, stay focused but keep an eye on some of these common mistakes. Life is good, anyway!

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