Every tech startup founder experiences setbacks. From unsustainable customer acquisition rates and negative customer feedback to shifting markets and political environments, teams must constantly adapt to incoming information. When the time is right, teams can use this data and analysis to pivot.
According to Startup Genome, startups that change course once or twice will raise 2.5 times more money, achieve 3.5 times better user growth, and are 52 percent less likely to scale prematurely. To identify and unlock valuable growth opportunities, startup founders must routinely survey the field and change course.
"These reasons for changing course are often varied and there are many factors to take into consideration when making the decision," says Nicholas Thomas, contributor at Mashable. "Some companies have discovered that their products need to be significantly tweaked — or even scrapped altogether. Others found that they had the right products, but have marketed to the wrong audience. For some, the only thing they had right was their team."
With the right growth strategy and foresight needed to course correct, startup founders can achieve accelerated success. Read on to learn more about the common mistakes tech startup founders make on their path to greatness and what you can do to avoid making the same missteps.
4 Mistakes Tech Entrepreneurs Must Avoid
1. Scaling Prematurely
Unfortunately, entrepreneurs who spend capital before validating business models risk creating the wrong products. Additionally, as businesses grow, financial burdens and internal complexities increase. For the world's leading tech startup founders, success wasn't achieved overnight; instead, growth was more slow-going, deliberate, and well-planned.
"I define premature scaling as 'spending money beyond the essentials of growing the business (e.g., hiring sales personnel, expensive marketing, perfecting the product, leasing offices, etc.) before nailing the product/market fit,'" said Nathan Furr, contributor at Forbes.
To avoid making this mistake, founders must be patient and approach each aspect of the business with thoughtfulness and care. Founders who take the time to slow down, validate consumer behavior, and modify their approach will achieve long-term success.
Learn how the world's leading tech founders and entrepreneurs leverage community to scale responsibly in the Power of Ecosystem: How RocketSpace Fuels Tech Startup Growth.
2. Hiring the Wrong People
There's no shortage of talented tech candidates to choose from. However, it can be a challenge to find candidates that identify with the startup's core mission, values, and culture. Even Elon Musk faced these same challenges as he worked to build the Tesla and SpaceX teams:
"My biggest mistake is probably weighing too much on someone's talent and not someone's personality," said Musk in an interview with Business Insider. "I think it matters whether someone has a good heart."
As the startup scales, founders should prioritize applicants that clearly align with the startup's objectives and culture. Why? Recent studies indicate that happy employees — those who feel like they "belong — are 12 percent more productive. When an employee is more engaged and productive, he or she is creating more value for the startup and helping to drive revenue growth.
In 2017, RocketSpace invited leaders from Khosla Ventures, Lightspeed Venture Partners, and Redpoint Ventures to talk about the latest hiring tips. During the panel discussion, each emphasized the importance of hiring for cultural fit:
3. Failing to Get Investment
Without the right funding strategy in place, startups struggle to achieve significant traction. Unfortunately, fledging startups need much more than a minimum viable product to attract the world's top investors. Why? The tech industry's leading venture capitalists hear dozens of pitches every week.
"The bigger challenge for most startups is that it is much harder to get your startup funded than it was in the past, simply because there are far too many startups vying for the much-coveted funding," says Murray Newlands, entrepreneur and contributor at Forbes. "Inexorably, investors are setting higher benchmarks for every startup because they want to ensure that their money is parked in a concept that has a promising future."
To stand out from the competition, the best investor pitches include:
- Clear Objectives: Realistic, growth-oriented, and revenue-focused goals.
- Organization: Five-slide pitch deck presented in less than 20 minutes.
- Financial Data: Revenue projections, operational expenses, and cash flow analysis.
RocketSpace regularly invites some of the world's most influential venture capitalist to participate in open office hours, workshops, and networking events. Members use these valuable opportunities to connect with these business leaders and learn more about the world of fundraising.
4. Choosing the Wrong Location to Scale
From fundraising to validating product-market fit, founders must be prepared to pivot quickly. Unfortunately, the startups that lock into expensive commercial leases will struggle to change direction later on. In San Francisco, the average lease term is five to seven years and the average cost of rental space is $72.26 per square foot. In addition, startup teams must factor in the cost of furniture, renter's insurance, deposits, and utilities.
Today, an increasing number of work locations have begun to offer affordable, flexible, and customized solutions for growth-oriented startups. Major tech hubs including San Francisco and London offer coworking spaces that cater to tech-specific startups. The best coworking communities provide more than just high-speed internet and a quiet workplace. Instead, the world's top coworking spaces accelerate startup success through high-growth programs, networking events, and more.
In fact, RocketSpace offers Corporate Innovation Programs that match members with more than 170 global brands. As the intermediary, RocketSpace can help startups and corporates to create mutually beneficial outcomes. These types of offerings allow RocketSpace members to scale at a higher velocity.
Scale Responsibly With RocketSpace
From premature scaling to fundraising pitfalls, exceptional startup leaders identify industry hurdles and take the preventative measures needed to circumvent them. RocketSpace fuels startup success (and helps founders navigate these and other complex roadblocks) by providing access to growth-oriented amenities, programming, and mentorship opportunities. In fact, the RocketSpace community has helped industry-leading tech titans — Uber, Zappos, Spotify — to achieve billion-dollar valuations!
Is the RocketSpace community right for your growing tech startup?
