Start-up mistakes

                      5 Startup Mistakes Owners Tend To Make

With the major rise in the startup ecosystem in India in the past decade, people tend to assume that a successful startup is also a well-funded one. Many startup owners reach out to venture capitalists in the hope that their company gets that million dollar investment. However, many of these owners do not have a product ready and end up leaving home disappointed.

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In this article, we will look at the five common mistakes made by start-up owners, and how they can avoid them in order to have a successful business.  

Mistake No 1: Not Everyone Needs an Angel Investor

Several new businesses are financed by the founders and not by venture capitalists. There are three main reasons for this:

Firstly, it is difficult to convince someone to part with their money. If you have watched an episode of the television show Shark Tank, you will know what we are talking about. Most venture capitalists will hear your pitch, ask you a dozen questions - most of which are number-oriented, and then nine out of 10 times say they won’t be investing in your idea. Notably, Shark Tank focuses on completed products, and not prototypes.

Secondly, many businesses particularly service companies, are not that capital-intensive, and it doesn’t make sense for owners to ask a venture capitalist to invest when the owner themselves can gather the initial funding

Finally, not all new businesses are scalable. Most VCs chase ideas that they know will give them good returns. A traditional business cannot reach a billion dollar valuation in less than a decade.

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Mistake Number 2: Trying to Raise Capital Too Quickly

One of the biggest mistakes a startup founder can make is their attempt to raise funds using an idea written on paper and nothing else. We’re not saying that it’s impossible, but you need to be  well-connected or have done something absolutely brilliant that disrupts the entire industry as we know it. As a company owner, it is your responsibility to validate the idea before even thinking of raising funds 

Mistake Number 3: Misreading the Fundraising Environment 

In order to develop your startup product and find your audience, you can always approach angel investors, incubators for pre-seed and seed rounds for capital. These rounds, which are called Series A, B, and C, provide you with the necessary capital that enable a startup to scale its growth 

Trying to pitch mid and late-stage investors (i.a. VCs) before your business is making money is a waste of time for both parties.

Mistake Number 4: Trying to Reach Investors Without Referrals

Investing in a startup involves a large dose of trust in a founder. Remember, an investor can opt out of a startup a few months after offering to be part of your company’s growth journey. 

Furthermore, if you’re thinking of starting your own company, be part of startup forums where you can interact with like-minded individuals, and share your thoughts and startup plans. This way, chances are you will eventually meet an angel investor or someone who shares the same dream as you do. 

Mistake No 5: Not Being Clear in Your Ideas

One thing you can learn on the show Shark Tank is the way the founders pitch their idea to the shark. Communication is an essential part and you need to believe in your product so that the investor is interested. The slightest doubt will be an immediate ‘no’ on part of the investor. Furthermore, you need to back it up with strong data, and what the next three-year plan for your company looks like. 

In summary, fundraising is hard, but it’s mostly hard because the wrong businesses are trying to chase investments at the wrong time. Make sure you’re not doing that, and with some effort and consistency you should increase your chances to attract investor interest exponentially.