“Never make the same mistake twice.” – Gus Fring, Breaking Bad.
I’ve been in Silicon Valley a little bit over a year, but already have seen plenty of failed early stage startups. Therefore, I decided to organize my thoughts on observing key factors which might decrease chances of success in such. They are not deal-breakers. There are many examples of people succeeding against some of these rules, but in general it’s tougher and harder.
This list of red flags, or litmus tests, could be used by potential future employees, founders, or angel investors when weighing the pros and cons of a particular startup to join / invest in. So if you want to fail, here are some ways to do it.
- Get a part-time founder or be a part-timer yourself. A startup is not a typical company. It’s a marathon (or series of sprints) but not a sprint. It’s important to maintain focus and not burn out.
- Hire remote employees. For a majority of people working from home translates into no work at all not only due to lack of discipline but also because of distractions. Discrepancies in time zones, especially large discrepancies, slow things down, and miscommunications can lead to mistrust later.
- Have too many business founders. Again, miscommunications between pure business people increase overhead and decrease runway time. In most cases there is no work for more than one pure business person in a team of less than 4–5 founders. Technical people can often perform a business task, but not vice versa.
- Hire interns. Usually it’s a waste of time for founders unless there are some monotonous and time-consuming tasks. These tasks could be easily taught to interns and supervised later. But don’t delegate important tasks which are essential to your business.
- Hire B- and C players. It’s the same thing as with part-timers, remote employees and interns. B- and C employees will drain resources (time, stipend money, salary and mental energy) to either learn basic stuff or by requiring constant supervision and micro-control. As a result, output has less in value than input. Beware, slackers bring down A players and inhibit idea-generating processes!
- Have no domain expertise. Founders who have little or no domain expertise, and no desire to learn the industry or niche are not serious entrepreneurs. This should be self-explanatory. :-)
- Work on the first idea which seems plausible. Intuition is a good thing only if and when propped up by good customer validation and market fit. Overly emotional attachment to an idea early in the game prevents looking at the data and pivoting when needed.
- Validate ideas by your family, friends or unpaid customers. This point piggybacks on the previous one, and involves poor judgment and lack of action. There is nothing wrong with using your intuition initially, but there’s no excuse for lack of reality check.
- Run a success theater. Spending lavishly on attending conferences, office space, chiefs, hacker house, cleaning, transportation, hotels while being far from profitable is border-line criminal due to the breach of founders’ fiduciary duties to the investors. In addition, it drains mental energy and distracts team and founders from more important things like growth, profitability and product development.
- Date your co-founder. Dating might seem like a good idea when a couple is in harmony, but more often than not, all things that could go wrong in a startup do go wrong. This puts strains on personal relationships and adds drama (Bravo TV’s Start-Ups: Silicon Valley new TV show anyone?) because most humans are bad at keeping professional and personal boundaries.
- Don’t work with your co-founders prior to starting a startup. Side projects, hackathons and just being pals in general (outside of work) could help greatly when/if bad times come during your venture together.
The average chances of failure in a startup are 90%. Founders should use any opportunity to improve the odds! Don’t make your work and life even harder, and look out for these early signs of trouble when dealing with startups.