Top 10 Start-up Mistakes & How to Avoid Them Justin Smithline, Entrepreneurs Roundtable Accelerator Most startups fail. Justin shares observations and lessons from the front lines as an entrepreneur and investor to help founders avoid this fate. He will also discuss accelerators.

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Top 10 reasons startups fail. Tales from
the Trenches
Justin Sm ithline | 6/27/18

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About me
Justin Smithline
Nearly 20 years experience in the start-up world
Started 3 companies: one exit, one still going and one failure
Investor in 165+ companies via ERA and a dozen as an angel
Fun Fact: I grew up on a farm upstate along the Canadian border
and had a pet goat named Petunia

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Petunia

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About ERA
First startup accelerator in NYC
Four month accelerator program. Semi-annually. Very hands on,
mentorship driven, and run out of our space in Midtown.
Over the past 7 years, invested in 165 companies, both consumer
and B2B, from all over the world. These include companies like
Triplelift, Scentbird, Bespoke Post and Seamless Docs.
Evaluate 2000+ companies per year, invest in 25.

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Top 10 Reasons Companies Fail

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#1 Don’t build something people actually want
If you don’t do this, you will never succeed regardless of how
much capital you raise.
This sounds blatantly obvious, but most don’t do it.
Examples of things people want: Money, companionship, safety

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#2 Build something people only kinda sorta want
How do you know if you have a product people want?
Push vs. Pull?
Boulder going up the hill or down?
Common value-proposition traps: saving time, incremental
monetary savings or productivity improvements.

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#3 Lack focus
How many lines of business is Amazon in today?
How many when they started?
Answer the question: Who is your one perfect customer?

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#4 Pick a bad market
Tailwinds vs. Headwinds
Avoid the macro slog
Examples of bad markets: Music, local reviews, social travel
Good markets: CRM, Insurance, Cybersecurity

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#5 Poor team chemistry
How long have you known each other / worked together?
Who is the decision-maker?
How do you resolve disagreements?
What is each founder’s personal runway?
Have founder vesting.

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#6 Overly complicate things.
Complexity Kills. Simplicity Wins. Every Time.
Identify friction and avoid it. Product friction, business model
friction, etc.

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#7 Don’t listen
If you do not listen to your stakeholders, you’re not going to
succeed
Remove the “rose-colored glasses”
Listening : Talking Ratio = 90:10

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#8 Don’t learn, adapt and change
“A Startup is a temporary organization used to search for a
repeatable and scalable business model” -- Steve Blank
The faster you learn, iterate and adapt, the higher the
probability you will succeed.

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#9 Prematurely try to scale
Don’t start really stepping on the gas pedal until you’ve got
product / market fit.
Understand payback period and rough CAC:LTV first
This is particularly true after companies raise capital and spend
VC dollars before they’re ready

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#10 Scale too late
When you’re truly on to something great, your time is limited
before competitors flood in.
Don’t be afraid to step on the gas when the time is right.
Most market value accrues to the top few players.

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Bonus Content: Top 5 mistakes
companies make when raising
capital

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#1 Not qualifying your investors
Stage?
Sector?
Recency?
Check size?
It’s OK to ask!

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#2 Not making it your #1 priority
If you don’t focus on it 100%, your probability of success
plummets
Lack of Persistence

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#3 Not putting together a compelling investor story
Pictures vs. Movies?
Momentum Matters!
Why are you doing this?
How are you uniquely suited to win?

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#4 Not pitching enough investors
It’s a numbers game.
Jeff Bezos had to pitch 60 people to raise his initial $1M.

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#5 Not following a process. Follow-up is key
The trick is to collapse time around the process. Time is not your
friend.
It’s a parallelized process, not serialized.
Keep following-up until you get the “no” (or the “yes”)
Goal #1: Get a term sheet
Goal #2: Get a competing term sheet. Leverage shifts.

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Additional Resources

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Other Resources
Books:
4 Steps to the Epiphany by Steve Blank
The Hard Thing About the Hard Things by Ben Horowitz
Other:
Google Design Sprint:
https://www.gv.com/sprint/

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Thank You & Questions?
justin@eranyc.com