Over the course of my venture career, I have advised many founders on how to best build and scale their venture-backed companies. Unfortunately, over the last four months alone, I’ve seen founders make major, avoidable mistakes when executing against their venture strategy. These mistakes are highly damaging and oftentimes can cripple the venture (particularly in an economic downturn). They damage a startup’s ability to gain funding, build products, and work with customers. The startup should be achieving far more success.
Here they are in order from least common to most common:
Mistake 5: Leave a Contract’s Fine Print to the Lawyers
When a founder reaches the point of drawing up a significant contract with a customer, there is often the desire to move ahead quickly and leave the fine print to lawyers.
Don’t do it.
Instead of telling you about a recent contract interaction, let me tell you about an event that happened at SRI years ago. There was a dispute with a customer as to what intellectual property SRI would sell to the customer.
Here’s a fictional sentence that illustrates the dispute:
“We will provide customer X an exclusive license to intellectual property for video streaming, functioning in real-time interaction, with audio, and ….”
Are the phrases following the comma phrases that put restrictive limits on the intellectual property for video streaming to real-time interaction? Or is the phrase following the comma just descriptive of how video streaming might occur? SRI wanted the phrases to be restrictive.
In the SRI example, a judge determined that because the comma was there, the phrases were descriptive, and not restrictive. Therefore the terms “functioning in real-time interaction, with audio, “ were not restrictive. They were just descriptive.
SRI had to hand over to said customer X intellectual property worth tens of millions of dollars.
All because of a single, silly comma.
Ever since that happened, I have been religious when reading contracts - every phrase, every bit of grammar, and every last insertion of punctuation. I guarantee you that if you do this, one day, it will pay off a hundredfold.
Mistake 4: Build a Strategy and Execution for Your Product and Fail to Outline a Roadmap to Future Products
Many founders hope to build a great company, and they conceive of an initial product solution that serves their market. They present this solution to the investors, but they leave their full vision for the investors to figure out how the company will continue to develop new products and grow its market.
They won’t.
This is like driving a car while only looking ten feet ahead.
Why constrain your venture presentation to one product? Why not show the “basecamps” you are building as you climb your proverbial Mount Everest? Hell, why not show Mount Everest?
This is so important because sometimes the first product is insufficient to be compelling or doesn’t have the elements that will enable rapid exponential growth.
Below is a picture of the roadmap we initially discussed for Siri before it was sold to Apple. I challenge you to build a similar curve for your venture. It will be a powerful representation of your vision.
We didn’t just say what could be done with Siri when we began. We had a roadmap to the future. We started with the most doable functionality we knew we could do in the first product, within the limitations of time and dollars.
Ironically, we never advanced past the first part of the roadmap before Apple bought us. Afterward, they created their own roadmap for Siri.
Countless entrepreneurs have told me that several VCs have told them to only talk about their first product if they’re just seeking initial funding. It’s very hard for me to understand that advice. How could they not want to know/better understand/visualize “Mount Everest” as you climb to your basecamps?
Mistake 3: Fail to Keep Only the Best Team
When a startup is in its early stages, the team and the camaraderie among it are vital elements in helping the venture succeed. Building a venture can be a grueling task, and people are often putting the company ahead of all other obligations. It’s crucial that everyone – especially leadership - is laser-focused on executing their responsibilities. If not, everyone will know it.
Some obvious examples include:
Team members who are leaders, but constantly miss milestones on tasks they’ve been assigned by the CEO.
Team members who spend their time attempting to advance their own position in a company and focusing their activities on that instead of the customers.
Team members who are leaders and continuously propose multiple points of view, never converging on a strategy or plan.
Team members who are leaders and speak often, but never put pen to paper.
It may be hard, but the founders need to act and act quickly. This kind of team member damages the company and demoralizes the other team members who need to carry the weight. Even worse, more productive team members are pushed or pulled in multiple directions. If the issues run deeply, hoping that a team member will simply “change” is a formula for failure.
Beyond these points, this is an issue of corporate integrity. The founders must be fair, decisive, and caring for the whole team. To let “failing” team members stay is like collecting debts for your company.
Someday you will have to pay.
Mistake 2: Claim You Can Have a Small Percentage of a Large Market
Many founders are deeply motivated to create and build companies that solve an important unmet need in a large and rapidly growing market. This is a great start.
They usually point to a large market, say in the hundreds of billions, and offer a product solution. Then they estimate that even 1% of the market would make them a billion-dollar company. Then they estimate that they’ll reach 1% in at most three years. They believe that this is enough to raise venture capital funds.
It isn’t. It seriously damages their credibility. What VCs are most looking for is real customers with real needs who love the product, buy the product, and tell others about the product.
If you don’t yet have a product, then find a customer who loves the concept and will work with you to build the product. Sometimes we call these customers “teacher customers” because they are deeply experienced in the market and products.
Venture capitalists will often reach out to these potential customers when they are doing their diligence on the venture. Their positive comments will go a long way.
Mistake 1: Fail to Build a MAP. Yes, a MAP, not a MVP.
Much of the venture world has adopted the terminology that advises founders to start their venture, pivot until they find a product/market fit, and build a minimal viable product “MVP”.
Let’s modify this a bit: Start building your venture when you have a compelling unmet market need and customer pain point.
Have a “north star” where you believe you want to be.
Make sure you have a compelling and differentiated product solution to reach your north star.
As you build your venture, iterate based on real-world experience with real potential customers.
And develop a product that is the best you can build and bring to a market seeking your product, with the least cost and effort.
But here’s the point: it’s not good enough to launch an MVP. You need to launch a MAP. A Minimum Awesome Product. If you don’t, you risk your entire company.
In one venture, the CEO decided to launch a calendar product that would help the user plan for calendar events by scraping both email and the calendar. There were many opportunities to create an “OMG” moment, with new functionality that would have been truly a surprise and delight moment with the users. But he decided to offer the product as soon as he had a MVP. There was some initial takeup, but the rate of growth slowed, and other calendar startups surpassed us.
The CEO then pivoted to a new calendar and new functionality, again building a MVP. Again there was some initial takeup, and again the rate of growth slowed, and again other startups surpassed us.
This killed the company. The awesome vision that we had developed was never realized. To this day, I believe that our product could have been an incredible success.
Make sure that people who use your product love your product. Make sure that they have a feeling of surprise and delight. Make sure it is a MAP.
Only then will it rapidly and exponentially grow. Only then will you have great feedback from writers and reporters. Only then will customers tell others how great your product is. Only then will everyone who uses it say to everyone they can: this is awesome.
If you have a startup with a MAP, We’d like to see it! Come to https://os.platformstud.io/faq. And if you’ve seen other Founder’s mistakes you’d like to share, please reach out to me at norman@platformstud.io.
Happy Holidays!
Your Venture Coach,
Norman
