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5 Startup Myths that Kill Companies

5 Startup Myths that Kill Companies

I started my first company back in 2010 since then I’ve had the chance to meet brilliant entrepreneurs with fantastic
businesses on their hands however 9 out of 10 startups fail and that’s just the hard truth the most common reasons according to founders
themselves are: No market need Run out of cash Not the right team Get out competed Pricing or cost issues Unfriendly product And finally no business model These are the most common reasons there are a few others and you can check this
article for more info Now this connects directly to the five startup myths we’re going to look into today Let’s do it Myth number one You can raise money on an idea this is 99% false You need traction to raise money Traction in the form of revenue ideally or at least traction in the way of users The notion that you can raise capital to build the first version
of your product or to recruit the team is really not the way things work these days The startup press paints a very different picture on the stage and the
requirements for companies to get funding one of our previous mentors at
500 Startups Elizabeth Yin has a fantastic blog on the VC perspective of
the start of fundraising model so you should take a look Myth number two: The CEO or the founder is the highest paid employee in the company Yeah no, I’m not the highest paid employee in the company If you look at it hourly I’m not even in the top three As a business co-founder you’re not only
the guy in charge but probably one of the biggest shareholders Check out our video on
Startup CEO and Responsibilities so share value is your motivation, not
salary Even if your company is not public the increasing value of those
shares and your ability to sell them at an acquisition event Myth number three fast growth comes first, profitability later and this is a classic all you read about is scale and scale and growth and SAS growth ratio and the fact that you
need to grow faster That’s all great as long as you have money in the bank and new investors are continuing to fund your operation For the most part if your
company is growing fast you will be able to raise more funding Fast has different definitions depending on the industry but you’re probably looking at tripling
or quadrupling your revenue year over year but what happens if you are growing at say 50%
year-over-year that’s not gonna get investors excited and probably
won’t get you that Series A or Series B funding So what to do? Well two paths: Path A: keep going full steam ahead until
you win or you die or plan B: Take a step
back and get your company to a profitable state If you’re noticing how
familiar I am with this Is because I’m speaking from experience we were in the same situation back in 2017 we’ve made a video about it too The point is the purpose of a company is to make money A slow-growing company is better than a
dead one A challenge for many startups comes when they’ve raised too much money in that case the pressure from investors to get an ROI on their capital might put you in a tight spot in our case our switch to
profitability while it slowed down our growth has given us a quite unique
position of choosing whether we want to raise more capital or not Myth number four You can pursue an acquisition I remember discussing acquisition clauses with our investors during our round negotiations more than often some of
them have come to us saying hey we should look to sell the company that’s not something you can do the best insight I’ve heard on the matter was on
the start of therapy podcast hosted by the guys from they do a deep dive into the circumstances that need to line up for a company to decide
to acquire another As a founder you can’t really operate for an acquisition you need to run your business period too many variables need to line up for a
purchase to happen and you don’t have control over any of them I’ve been in a couple meetings with large companies that could buy Slidebean out and I’ve had the word acquisition thrown around It Hasn’t happened and I’ve
learned not to be distracted by it The best you can do to increase your chances
of selling the company is just growing the company which is what you should be
doing anyway Finally myth number five That [insert name here] founder is successful insert name here for any role model startup founder All of us need to be growing our companies which means getting customers and/or talking to investors for both of those the company needs to project success which makes it really hard to talk about struggles, issues or burnout Projecting any frustration can hurt the company itself so you end up faking it until you make it when my first company went out of business we delayed the
announcement for months until I could get back on my feet with a new business we founders all know this and only expose these vulnerabilities in closed circles often with other founders who also understand that frustration even in these videos in this channel when we talk about past failures at Slidebean we always acknowledge what we did wrong But focus on the solution and the
story goes around how we overcame that issue Talking about a problem that
doesn’t have an answer yet is something you’ll rarely come across in the open Now as always, if you want to sign up for Slidebean and try our product for free you can do so with the code that we’ll
leave in the description that will give you three months free on any of our plans if you enjoy our content hit that subscribe button and we’ll see you next week

  • Case question: You have the MVBP. What are the chances of getting an investment from VCs when the only traction you can provide are LOI?

  • Here you can pitch just ur ideas, some VCs here accept that and fun fact : one of our unicorn tech company in our country began with ideas only pitch while fundraising seed investment ??

  • Some very good wisdom here. The only thing I would modify is that not all startups are created equal especially when it comes to market segment and funding. Traction has different meaning depending on scope and overall model. From my own perspective and experience from being in FinTech, the plans tend to be on the larger side so traction metrics tend to be less on revenue or users in the early stages and more on product development, proof of concept arrangements, and market validation. Angel, pre-seed, and even to an extent seed can be raised on ideas and vision, but series A is where the metal meets the road with concrete numbers defining unit economics, revenue, and adoption of at least the MVP.

  • Very true, some start-up founders are just after fund raising, and highly influenced by social media news, on the hand most of the online journals only write about glorious part of start-up fundraising, no one write about the dark side of real journey!

  • 99% myth for myth one? Its either true or false, it cant be both. Sorry, I disagree with myth one. There are investors who are looking to invest in ideas at the early stage as long as the idea has a sound business model and the founder has a road to profitable. So here is the 1% truth for starters.

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