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Chances are you’ve never heard of the Titanic if it hadn’t hit an iceberg in 1912.
But when it comes to startups, you don’t hear about the ones slamming in the icebergs – you only hear about the little ones who dodge them.
This shows you that the media always likes to draw attention to the rare interesting cases, rather than the most common – and boring – cases.
But this focus hurts entrepreneurs. This makes them believe that the success of startups is much more common than it actually is – and it prevents a better understanding of the causes of failure so that they can keep their startups away from these icebergs.
I estimate that only one in five million unfunded startups end up being worth $ 1 billion or more. For every 1,000 startups that meet a venture capitalist, only two get funding. A single startup funded out of 10,000 is ultimately worth $ 1 billion.
This month, I discovered a spreadsheet that documents the startup failure, called Autopsy.io. Based on my review of over 110 startup failures as of June 19, here are the seven most common icebergs that startups are rushing into and how to avoid them.
1. Inability to find unresolved client pain.
Too many founders think their idea is so brilliant that their best course of action is to build the product, show it to the world, and wait for the money to come. However, this common illusion is a major startup killer.
In reality, people are hesitant to try a startup product, so most of them fail. Customers will only try the product if it promises to solve a painful problem that no one else is trying to solve.
To avoid hitting this iceberg, don’t start your business until many people are ready to pay now to get your product sooner.
Related: Don’t Just Start a Business, Solve a Problem
2. Reluctance to get feedback on prototypes.
Many founders refuse to let anyone see their product until it is perfect. There are several reasons why they make this mistake. They are afraid that someone will steal their idea, they want to get a head start, they want to impress their peers, or they are afraid that unless it is perfect, no one will want to buy it.
Not getting feedback from potential customers is usually fatal to a startup. To avoid hitting this iceberg, build an inexpensive prototype of your product, get feedback on it, and use this entry to build a new one. Repeat this learning loop until potential customers request your product.
3. No passion for the market.
Do not start a business if your main motivation is to make money. The reason is simple. To be successful, you will need to spend approximately 80 hours a week on very little salary to successfully start up. It is not possible to work as hard and be effective unless you believe that the mission of your life is to improve the situation of potential customers by providing them with the product of your business.
To avoid hitting this iceberg, ask your startup to solve an issue that is close to your heart. My research for Hunger start-up strategy found that people start businesses more often because the founder had a problem that no one else had solved.
If many other people have the same problem, you’re off to a good start.
Related: Simple But Powerful Business Lessons From A Multi-Millionaire Bankrupt LikendisLike
4. Lack of skills necessary to win.
If you think the contractor’s job is to brainstorm big ideas and hire other people to do the actual work, think again. One of the main reasons for the failure of startups is that the founders cannot do everything that needs to be done to make it take off.
I have seen many tech startups flounder and fail because the CEO cannot code, while coding is better than almost anyone else is the thing that has to happen to build the product and attract customers. If you are such a person, your chances of success will increase if you bring world-class sales skills and knowledge of the market need you are targeting, but you still need a solid relationship with a world-class coder. .
More generally, entrepreneurs increase their chances of success if they choose sectors that value the skills in which they excel and like to practice.
5. Ignore the cash burn.
If you don’t like looking at the pennies, don’t start a business.
Many entrepreneurs are engineers at heart. They want to build a perfect product and then dazzle the world with their brilliance. They have read with eagerness how easy it has been for other startups to raise millions of dollars and think they will be able to do the same. They ignore the pace at which they spend cash and assume that when the day comes to replenish their cash, investors will open the doors to write checks.
This brings us to another huge iceberg.
6. Failure to raise capital.
If you have never raised capital for a startup, it is likely that you will be surprised by the time required and the number of refusals suffered before being successful.
Even if an entrepreneur realizes that liquidity is going to run out, he too often starts the process too late, attacks the wrong group of potential investors and does not present them with information about the company that persuades them investing. LikendisLikes can avoid these problems by adapting their approach to raising capital at the stage of developing their business.
A CEO I spoke with said capital raising is usually a full-time, six-month job that should start long before the money runs out.
7. Weak team, poor leadership.
A final iceberg flowing from startups is a leader who cannot recruit the most talented people for the jobs on which the success of the business depends.
The simple reality is that if you are not a great leader, learning to become one is difficult. In addition, the leadership skills you need for a business to have 10 employees are different from the skills that a business of 100 or 1,000 people need.
At the start-up stage, a great leader has the charisma and the background to create a convincing vision for the company and recruit the best talent to support the realization of this vision.
Getting started is hard to do and if you can’t navigate your adventure around these icebergs, yours will surely perish.
Related: How A Family Business Can Beat The Chances And Rotate