There are a few basic mistakes that entrepreneurs can avoid – while the nature of mistakes may differ depending on the type of startup.
- When you push for inorganic growth. Lot of times it is the founder that is over-rewarded and over-punished, because he is the face of it. Therefore, it’s important to build a strong backbone before hitting the paddle vis-a-vis buying growth and multiplying traction. Chances are that the company may crumble in the growth stage if in the early stage they’ve pushed for inorganic growth
- The inability of founders to re-invent themselves and attract required talent for various stages of the company is also another reason. So, it is sprint vs marathon. So, for early traction you need sprinters and scaling up you need marathon runners. So, in the sprint team not all sprinter will graduate into the marathon team. So how smoothly as a founder you can attract the new set of team without pissing off the early guys and reset the talent of the organization plays a very important role in scaling up. So, a good early start doesn’t necessarily imply and result in a successful scaling up. And every organization has to undergo this transition. Some founder are able to take the company through this transition very seamlessly, which needs the ability to attract a new set of team and the ability to manage this set of team as they have high emotions, because they are doing it more from the heart, these early guys joined you when you’re nobody. So, how a founder manages the expectations of the old and new team members is a leadership quality and a cultural issue.
- One thing that isn’t mentioned much, is the kind of board members a company has, it may involve the shareholders, the investors etc. At the end of it a lot of actions are a reflection of how the board is behaving. It is a serious red flag for the company if the board is misaligned. If one says go for growth, other says to go for cost cutting and if others says to exit and to go for a trade sale and other doesn’t want to go for an IPO for 10 years, everyone is sitting in the board with a different agenda the net outcome of the company is messed up at the growth stage. For instance, if a board member who wants to get a return for his investment in a successful company he’d want the return that he invested, seeking the dissolution of the company. And some other investor want a bigger return and wants the company to grow faster, to accelerate growth, all this only confuses the founder. So, the maturity and alignment of the board members is important for a company, the board members must also be like minded to better fulfill the purpose of the company. Plus, how well the founder is conducting the board room is also important as not everyone is like minded in the board room, so the ability to conduct the board meetings plays a very big role. If the input is we’re investing behind someone young, the truth is that he has no experience, he needs some adult supervision and hand-holding, which could be a great marriage of how his passion and energy is married with this. Investment world moves in sine-waves, which thrives and fails. So, it is very important to have a board, which is aligned and that takes a long term perspective, which is breeding these waves and not changing the direction of the company every quarter with change in environment outside. It is also necessary to be nimble and change if realities have changed, but this doesn’t necessitate having a compromised point of view and perseverance has to be present in tough times and exuberance must be there in good factors.
There is another factor which cannot be ignored – which is not in the execution side, but it is important and is a macro factor. It is the addressable market. Some businesses just choke up beyond a point. They boom and grow up and stay there. People don’t understand and get attracted by the initial growth of it and not realize that this plateau is not very fast. It’ll go up like a rocket and plateau at a point. Or there a business models which are fad. It is great to stumble upon a fad and as a management team and founder, one must have the ability to reinvent oneself.