6 Major Mistakes First-Time Startup Founders Make by Co-Founder Murli Ravi
Most first-time founders that get to Series A stage still make these mistakes.. (could be disastrous for them in the mid-term).
- Accepting just any investor into their cap table. You should assemble your cap table like you’re assembling the Avengers:
a. Select carefully
b. Weight compatibility
c. Be clear on what you want
Get aligned on whether you’re after passive or active investors along for the ride before committing. You have a choice- so choose wisely.
- Not adjusting to new information. At the rate of technological innovation in today’s age…you need to constantly adapt to new developments, not ignore them. I’ve seen startups that choose to ignore rapid tectonic shifts find themselves displaced quickly. Be nimble. Have conviction, but be open to changing your thesis.
- Giving out too much equity too early. Offering equity too generously to investors, and employees too early leaves you with very few bargaining chips left. Down the line, you might end up in stalemates on tough decisions. Remember that equity transfers are largely permanent. Distribute carefully.
- Delaying the data room and legal cleanliness till it festers. Leaving contracts and spreadsheets in a messy, haphazard state, for too long is a bad idea. These things acn really come back to bite you down the road. An incendiary clause from an investor blocking a new round… A last-minute scramble to clean up your numbers. All the distractions from what you should be doing - growing the company. Get it professionally done early.
- Hiring a VP of sales too early and not talking to customers. Getting a VP of sales on board too early can give founders false comfort. Someone experienced on the team means it’s time to stop talking to customers, right? Wrong. It’s not the time to drop everything yet. Keep building relationships with customers and maintain your hand on the pulse of the business.
- Too many chefs on the team. These might be investors, founding management, or even significant others. The best startup teams are aligned on their vision and path to achieving goals. Being pulled in multiple directions with invisible influencers is a recipe for disaster.
Summary of mistakes:
- X Accepting just any investor
- X Not adjusting to new info
- X Giving too much equity too early
- X Delay data room & legal cleanliness
- X Hiring VP of sales too early
- X Too many chefs of the team