How startups succeed and role of early-stage investors (up to Series A) to assess entrepreneur development
Reasons for failure
1.??????? Don't compare with other startups.
2.????? Not making monthly performance reports - Not reflecting on work, progress, and challenges
3.????? Customer focus?
4.????? Overconfidence?
5.????? Right Priorities?
6.????? Product timing?
7.????? Product design and development problems?
8.????? Founder speed of learning?
9.????? Weakness of selling and distribution?
10. Small market size
11. Initial undercapitalization
12. Quality of teams
13. Lack of cofounder teams?
14. Human errors
Refrain from comparing with other startups/businesses.?
?Why? No diversions - Do not lose focus and control …. Don't spend "time" experimenting with ideas suggested by "other" people.
?On a startup journey, problems will arise. Manage emotions and not "react" to problems. Go back to basics. Remain calm and reflect - make reasoned assessments and conclusions in all situations.
?To solve problems – don't throw money (and resources) to solve problems – especially after fundraising.
?Importance of monthly reports
?Time to step back from daily work and reflect on issues, execution, and meaning of numbers.?
?They help in building emotional control - figuring things out – and cultivating patience.
?Customer focus:
?"Perceived" customer problems versus "Real" customer problems. Don't confuse "your" perception of customer problem versus "real" customer problem.
?Execution priorities - "customer" acquisition/understanding problem priorities are more important than solving an "engineering" problem.
?Overoptimism or overconfidence?
?Leading to scaling failure – the customer acquisition rate is slower than desired.??
?Prioritize not-yet-tested issues (uncertainty) versus managed (and controllable) issues.
?Fear is good. Manage uncertainty. Customer engagement.
?Right (not mistaken) priorities
?Product Timing?
?It can be early or late.?
?Is the market ready to absorb technology??
?A startup's success is associated with a rate of acquisition of loyal and profitable clients.?
?Too early – the market is not ready.?
?It is too late – difficulty acquiring loyal and profitable customers.?
?Product Design and Development problems
?Organize "product" and "technology" teams to build innovative products with agile development techniques and tools.?
?Product design delays and problems can lead to the failure of startups associated with the lack of product knowledge and experience in their development.?
?Founders of high-tech startups build their products and services from scratch and develop them through a learning process: they learn and perfect their products and services through mistakes. These errors and corrections lead to delays and financial costs.?
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Founder speed of learning?
?Founder's learning speed - founders compromise some features – react – don't have a proper way to determine products or features to solve critical customer problems.?
?Weakness of Selling Strategy/ Distribution Channels
?Products do not sell themselves.
Test – whether founders can connect their products to potential users correctly.?
?Wrong distribution - failure to get the products in front of the appropriate consumers inhibits the ability to get the feedback needed.??
?It is essential to align the product with the ideal consumers quickly.
?To achieve sustainable growth.?
?Small Market Size – misread and becomes challenging to adapt.?
?Some startups get a few "big customers." They need help expanding beyond the initial customers.?
?Some startups develop products and services that are useful to a few customers.?
?Startups have low budgets and need the elbow room to adapt by redesigning the product and selling in the market.?
Undercapitalization
?Initial funding is needed to start, learn, adapt (product and/or market), grow, and operate smoothly.?
?Sometimes, investors who invest in startups expecting "financial returns" in the short term may inadvertently nudge a startup to grow without sharpening the product, leading to customer churn.?
?Undercapitalization contributes to failure because founders of startups spend time raising funds to manage short-term cash flow challenges, shifting their focus from product design and development to worrying about the sources of capital.?
?Quality of team
?The lack of competent teams can lead to their failures.?
Multi-tasking leads to mistakes (unskilled people doing work for which they need to be trained/experienced) and can cost a startup a lot of money.?
?Human Errors
?Founders and employees in startups learn by doing things through their actions. They develop their products and services through trial and error until the intended results are achieved.?
?The most significant risk of startups is the lack of prior knowledge that can lead to misallocating capital and people, scarce startup resources, and not yielding desired/intended financial outcomes.?
?Part-time employees do not have time and cognitive attention to review and scrutinize startup work (conduct interviews, capital use, review employees' performance, etc.)
?Misallocating founder time to appropriate startup priorities (e.g., balancing product development, customer development/acquisition, capital use prudence, misdirection of goals influenced investors seeking growth, etc.)??
The post-funding role of investors in assessing startup founders development.?
?1 Their ability to track technological trends?
?Technological/market surveillance – the capability of the entrepreneurial team to keep track of what is happening (understand and use knowledge external to the company to predict its potential market and create or improve products and/or services.?
?Difference between knowing (awareness), understanding, absorbing, and using (actionable intelligence).?
?2 Knowledge absorption capacity
The learning orientation of founders, as demonstrated in actionable insights, identifying and implementing business strategies, and maximizing intellectual know-how/Innovation in product or organizational assets.
?Innovating during implementation, developing ways to cope with emerging situations (personal capability muscle), and increasing customer stickiness and growth (organization muscle).??
?3 Perceived and actual performance?
The potential of a startup to learn (generate new knowledge) by doing - creating, improving, and expanding knowledge that impacts user acquisition, experience/satisfaction, and retention/repeat purchase based on the product and/or service quality.?
?4 Role of stage-by-stage financing??
?As startups repeatedly raise capital based on step-by-step performance, they are scrutinized by different people, increasing the probability of success.?Investors need to assess preparation (data, documents, uncertainties, etc.) for the next raise. Startups take time to realize the differences of how investors of different stages look at startups.
?5 Support of a business incubator/Advisers/Board
?The support of a business incubator increases the likelihood of a startup's success. The role of Advisors and the Board makes a big difference in a startup progress/success.??
?6 Engagement with an entrepreneurship ecosystem?
The entrepreneurship ecosystem creates the financial conditions (reduced cost, speed of access to resources, and accelerated awareness of innovative products/services leading to trial and growth.?
?7 Dynamic capability (speed of response to unforeseen changes)?
?Dynamic capability, i.e., responding (not reacting) quickly and effectively to different emerging unforeseen situations.
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Founder & CEO at Bookingjini | TEDx Speaker | Hospitality Industry Visionary | Expert in Hotel Booking Solutions | Influential Business Leader | Innovator in Travel Technology.
1 年Great insight