Are These Startup Myths Holding You Back?
Beliefs that result in high startup failure rates
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Newspaper headlines scream about the next Unicorn in India, revealing the remarkable story of a young engineering graduate who scaled her company to giddying heights in only five years. As millions of youngsters consume this news, many will be drawn to the exciting world of startups in chase of fame and wealth; others will want to pursue their dreams of changing the world through entrepreneurship.
Myth #1: Getting Funded is the Ultimate Goal of a Startup
Startup success requires vision, customer-centricity, hard-work, an ample dose of ambition and just the right amount of money – at the right time. It is very tempting to think that money is the largest trigger, and Venture Capital or Angel Funding is the surest way to nirvana. We see many new founders suffer from inflated optimism about their game-changing idea and the ease of finding investors to propel their journey.
They look at external funding as a badge of honour. Sure, external validation of the idea is helpful as fund in moments of genuine need, but one must realize that external funding is only a means to an end, and not the end itself. The first, and foremost focus of founders must be how they are solving problems that their customers will care about and pay for. If they do this right, they would have uncovered customer revenues as an almost perennial supply of funds for their operations and expansion.
Frugal living and sharp customer focus build character, as does boot-strapping and leveraging your personal resources to the maximum. Just approach this cautiously, as merging business interest with family/friend relationships sometimes ends up hurting both. Often, by focusing on building a viable business one automatically becomes an attractive target of funds.
Also, remember that VC/Angel funding is not easy. Contrary to the image of investor sitting on piles of unused cash, ready to recklessly give it all away; these are smart people who do a careful analysis of the venture and its team before making commitments. Chasing external sources of money is an exhausting exercise, and takes precious time away from many other things. Is that truly your priority? Do you know what you need the funds for? Do you only want money or other value-adds from the investor relationship?
Myth #2: Build it And They Shall Come
Studies have shown that nine out of ten startups eventually fail, and eighty per cent of startups crash within the first eighteen months as entrepreneurs often under-estimate capabilities and effort required to nurture their ventures while they are in their early, and most vulnerable, phases. Many founders are convinced that their path to success requires them to merely develop a new and brilliant technology, which when introduced to the world, will open floodgates of money and customers.
To make matters worse, these founders are reluctant to show their product to anyone, including potential customers, until it is flawlessly finished. This product-first and "build it and they will come" approach to entrepreneurship creates enormous risks for startups.
Myth #3: Great Launch = Great Company
Surely, there can be no journey without a beginning, but the spotlight on starting-up is perhaps overemphasized in many entrepreneurial conversations and reports. We see many starry-eyed youngsters directing their energy in attracting funds while romanticizing about merely launching their services or products - without paying adequate attention to what awaits them post the launch. As a result, these startups face existential issues right after they enter the market; they scramble to acquire and retain mainstream customers and struggle to serve them well.
Leadership capabilities needed to launch a startup are significantly different from those required to scale the venture into a successful business - with more moving parts to manage, greater operating complexity and larger team sizes. On the behavioural side, founders are often uncomfortable with letting go and empowering others, as their identity evolves from a comfortably-chaotic startup an effective organization. Founders need to start thinking about building enduring companies and not a perpetual startup.
Myth #4: Startup Launch is a Chaotic and Unscientific Process
Startup launch is not a guessing game. On the contrary, there is ample science and discipline to guide founders through its ups and downs. While not completely deterministic, startup launches can do without repetitive false starts as there is no glory in repeating the mistakes of past founders, and no pride in showing injuries from battles that could have been avoided.
There are a vast number of roads that lead to the launch of high performing startups, each offering a unique advantage. While some paths emphasize product design, others focus on Design Thinking; some insist on understanding customers, others in engaging the hearts and minds of employees; some believe in Business Model Canvas, others in Lean Startups. While each of these approaches brings useful perspectives, no one approach is singly sufficient. In the absence of a clear blueprint, many startup founders either get distracted or pick somewhat random strategies for increasing their chances of success. As a result, they get lost in the din of operations and drown in an avalanche of cash burn while showing little or no improvement in internal efficiencies or market effectiveness.
Fortunately, the Startup Maturity Model serves as a guiding light in a startup's journey – one that provides an outside-in view of the venture while keeping a sharp focus on the few issues that are critical to the startup's current stage of maturity.
A breakthrough product or marketing brilliance does not govern the lasting success of startups. Contrary to what is conveyed by popular media, high valuations and charismatic leaders are also not sufficient. Wholesome triumph is achieved by implementing a disciplined approach that promotes customer-centricity, financial prudence, continuous innovation, and talent engagement.