Mistakes of startup founders after raising seed investments, or how to quarrel with an investor

    Raised the investment? CONGRATULATIONS!



    Seed investments are one of the most risky for both investors and startup founders.

    Let's see what mistakes entrepreneurs make.

    Anna Dvornikova , Managing Partner, TEC-Ventures, believes that the biggest mistake is not to inform the investor about startup problems. “You can pull in order to inform the investor of your successes, but you cannot pull in informing about your failures and problems,” says Anna. “Talk to the investor before something bad happened, or if something unexpected happened, then right after. Do not pull, and do not try to hide, hoping that you yourself will solve all the problems. This is a big mistake. Sooner or later, investors will find out what happened, and you will lose investor confidence. And this is the worst that can happen. "

    Terence Young, an investor, founder of Yang Venture, highlighted the following reasons for the failure of startups that raised seed investment:

    - Change of thinking. Having received some money, the founders relax, lose their obsession, focus, move more slowly toward the goal, lose their motivation to create the product that the market really craves, and not the one that the founders themselves invented.

    - Company expansion before a real market-fit is found. This is the most common mistake. This includes hiring staff, advertising costs, sales and marketing expenses, office rent, salaries, employee benefits (free meals, medical insurance, etc.)

    - Scaling is too early.

    - Hiring technicians and sellers too early.

    - A waste of time on partnerships. Of course, it depends on the product, but in most cases partnership is not an option. What Gates did with IBM happens once in a lifetime. It’s important to just focus on what people really need.

    - Waste of time chasing transactions with large companies, the government or non-profit organizations. These people move very slowly, and require an individual approach. You have limited time until Round A. And during this time you need to prove that your product is needed by the market, and you can get real solvent customers.

    “A waste of time on vanity metrics — proving to others that you're doing great.”

    - Waste of time on the press and PR.

    - Weak leadership and managerial qualities.



    - Waste of time attending events and conferences.

    - Waste of time sorting out with the co-founders.

    - Costs of service providers, such as social media consultants, etc.

    - Avoiding personal conversations with customers, and the desire to hire magical sellers who will put up sales and sharply increase revenues.

    - Errors in hiring staff. Hiring at the wrong time and not those.

    - Inability to hire the right bright employees for salaries below the market, and inability to interest the future of the company with the idea.

    - Lack of modesty, inability to listen and learn.

    - High burn rate - too high costs to maintain the life of the company.

    - Office rental before it is really needed

    - Spending money and time on things that are not related to building a product, testing on direct users, monitoring their behavior and reaction, and building feedback from users.



    Thus, summarizing the above, a startup dies if:

    1) Costs are too high.
    2) The cost of the wrong things.
    3) The assumption that this will always continue - there will always be money to spend it.

    Mark Wesselink believes that startups fail to receive seed money because they start to scale without receiving confirmation from the market that their product is urgently needed. Mark recommends keeping costs low and not hiring staff until you are firmly convinced that you have found a product / market fit. How to find out?
    Ask your customers if they will have a problem if your product disappears from the market.



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