Five misunderstandings that lead to start-ups failing
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There are five common areas of misunderstanding that can lead to failure on the part of a start-up:
1 A good business plan is enough to guarantee product success
Traditional management learned at MBA level teaches us to write a business plan about planning and forecasting based on historical data. But for a start-up, the business needs a development process, an experimental process and a learning process designed especially for start-ups in order to change a product.
These principles focus on creating a very fast development cycle for releasing a new version of the product in a short time, and finding out what customers want without asking them but by learning through the experimental process.
2 Launching a product is akin to an Apollo mission to the Moon
Most start-ups think that the product that they want to release must be really cool and perfect from version 1.0. They are so concerned about every single detail, it’s as if they going to launch an Apollo spacecraft to the Moon. If there are any mistakes, the mission will fail – the product launch will fail.
They fear launching the product and therefore postpone the launch date again and again, until finally it destroys team energy – and the product is going to fail.
In reality, exactly the opposite mindset is what is needed, as launching a product is like when we start a journey to a destination by car. We just check if the car is ready to go, and then we start it up. We still have time enough to modify the car later on during the journey, or even changing to using a jet-plane to get us there.
Building half a product that works is better than building a complete product that fails.
3 Finding venture capital is the first mission for a start-up
We should not create a product to find venture capital, but should first create “the business” – so our first mission is to build a great product that can make revenue and grow in a big-enough market.
Venture capital should come after that, when we want to accelerate or rapidly expand a larger market. Finding venture capital at the initial stage is not a good situation for a start-up.
But, keep in mind the fact that nothing guarantees that the business will be a success, even if it has already attracted venture capital. Investment is just another first step for expansion.
We can develop a better product, team and marketing by the power of connection and change that comes with venture capital.
4 Being a start-up is really cool, and it doesn’t need much investment to get started
Wow, “start-up” is a very cool word that is very popular right now! It seems to many people that if they just have a cool idea with a beautiful presentation, then they can get the money needed from an investor.
However, to be a start-up, you need passion and must strongly believe that you are creating something that really matters to you. You have to overcome a lot of tough obstacles to prove that you are the one.
Most start-up creators leave their job, put aside earning a salary and work hard for months or years to get the thing done. But it’s your choice – you can be a start-up in your own style.
If you are a graduate student, you don’t need to hurry and start everything from the ground up. You’d do better by working for a tech company, and learning with them while you are building your product.
If you already have work, you don’t need to leave you career behind to be a start-up. Start it while you have a job and a salary, and leave when your product generates revenue.
5 Failure is such a very bad thing
“Failure is a secret sauce that makes success more delicious”, the saying goes.
Angry Birds is the 52nd game created by Rovio, while “Draw Something” is the 32nd game from OmgPop. Both these companies failed multiple times before they found successful products.
You have to be familiar with failure, and not fear it. People that never fail are those that never do anything.
Anyway, each failure uses up passion, vision and a certain amount of energy, so it’s better if you use the processes described above to give you the best chance of success.
Nakrin Lerdnamwong is chief executive officer and co-founder of Innovation Plus.
