4 Big Mistakes Entrepreneurs Make That Push Start-ups To Failure
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Even as successful start-up stories across the world continue to get celebrated, there are several others—stories of failures—that often get pushed under the carpet. At a time when people willing to jump into the entrepreneurial wagon is multiplying, it has also become increasingly important for investors to ensure that they choose the right people and guide them the right way.
Here are some of the biggest mistakes entrepreneurs make that result in their start-up eventually failing.
Not Putting Together the Right Team
When a start-up needs to scale up, it is imperative that the entrepreneur builds an efficient team that can help him take the story forward.
Due to the difficulty to attract the right talent during the early stages, entrepreneurs often end up overleveraging themselves, according to Rahul Khanna, managing partner at venture debt firm Trifecta Capital.
“We have seen several cases in the wider ecosystem where they are not able to relinquish control, identify the right talent to take over some of their responsibilities, or retain senior talent by affording the right level of flexibility and autonomy to operate in,” he said.
Ruchira Shukla, head of venture capital (VC) in South Asia at International Finance Corp, is of a similar opinion.
“Sometimes they (entrepreneurs) believe in themselves so much that they will not have an equivalent challenging second level manager,” said Shukla.
While building a start-up, entrepreneurs tend to face multifaceted challenges. And along the way, they sometimes tend to do things that make them lose existing trust of shareholders.
According to Siddarth and Pranav Pai, founding partners at VC firm 3one4 Capital, irrespective of whether the start-up is a big return on investment for all shareholders, “trust once lost is often irrecoverable”.
Sprinting Faster Than One Can
Steep growth curves may look enticing, but it is important to take one step at a time, said VC firm Lightbox’ Sandeep Murthy.
“It is really one foot in front of the other,” Murthy said. “However, what I think often happens is people just start sprinting with both feet and then eventually fall.”
Even though people see where they want to be in the end, they tend to not know what to do the very next day, according to him.
“You only get a great endgame if every day leading up to the end game has been great. Make every day work and make every action focus on a very specific outcome. And I think people often lose track of that.”
For a start-up to achieve success takes more than just the founder and through the journey of growth, it becomes necessary for entrepreneurs to pick partners.
According to Sarath Naru, managing partner at VC firm Ventureast, one of the biggest reasons why start-ups fail is the failure of entrepreneurs to choose the right partners, operationally and for finance.