Most startups fail, but that’s no secret…

A reported two-thirds of startups never deliver a positive return on investment for investors. According to Forbes Magazine, 90% of startups fail, which is certainly a frightening statistic for new and first-time startup founders.

Which Mistakes Kill Startups?

It goes without saying that starting a new business in any industry is an exciting venture, but so too does it come with myriad challenges that founding teams need to overcome. While there is no single recipe for success, there is a long list of potentially fatal company-killing mistakes that a startup founding team can make.

As a general rule of thumb, avoid these 15 critical mistakes to increase your chances of success in your startup journey.

1. Not Doing Enough Research 

At Arcanum Ventures, research is a foundational aspect of everything we do, and we expect the same from our advisory clients and portfolio companies. It is abundantly clear to investors when a tech founder hasn’t done their homework, failing to understand the market they hope to operate in.

Lack of thorough market research can lead to a misunderstanding of customer needs, market dynamics, and competition, resulting in a product that fails to meet market demands.

2. Not Having a Clear Business Plan 

A solid business plan provides a roadmap to success. Without clear goals, objectives, and strategies, startups can lose direction and focus, leading to poor decision-making and missed opportunities.

Within the blockchain industry, it is even more important to show some semblance of a business model to would-be investors. A cryptocurrency is a tool and ecosystem asset, not a product.

3. Not Building the Right Team 

One of the first things a startup founder does is look for people who will aid them in their journey to build the next big unicorn company. A founding team should have complementary skills and similar goals. The right team should have the necessary skills, experience, and alignment with the company’s vision. Practicing healthy, respectful communication is crucial, even in disagreements.

Hiring professionals who aren’t a great cultural fit, or not having a balanced team can significantly impact a startup’s performance. You don’t want to surround yourself with the wrong people and doom your startup before it truly gets off the ground.

4. Failing to Define Your Target Audience 

This sort of falls in line with the failure to do adequate market research. At Arcanum Ventures, we’ve studied hundreds of startups and thousands of pitchdecks. One of the most common issues we see is a product without a user or a message without an audience. 

Understanding and defining your target audience is crucial

Without this clarity, your marketing efforts may not reach the right people, leading to low customer engagement and sales for a product without demand.

5. Trying to Do Too Much Too Quickly 

Don’t put the cart in front of the horse. Scaling before you have true traction or something of substance is one of the most oft-repeated mistakes.

Rapid expansion without a solid foundation can overwhelm a startup.

It is essential to scale operations gradually and ensure that systems and processes are in place to support growth. This means hiring only when the right time arises and putting in place operational structures that can support and nurture an influx of new hires and more complicated goals.

6. Failing to Pivot When Necessary 

Nobody wants to invest in a stubborn founder who thinks they know everything. Foolishly sticking to a failing plan can lead to missed opportunities and eventual failure. 

Knowing when to pivot and change course like a grizzled ship captain at sea is a hallmark of a great founder.

Remaining flexible and ready to adapt to market feedback, changing market conditions, or even customer input from your community is the least you can do as a startup founder.

On a side note, the cryptocurrency industry and web3 founders sometimes suffer from the opposite problem. Too many pivots and not sticking to a solid plan are signs of an erratic founder.

7. Focusing Too Much on One Area 

When Arcanum Ventures invests in a startup company, we look for resourcefulness. How much can you achieve as a startup founder with little to no funding and a small team? This lets investors know how far you can stretch a budget or keep your team focused.

A balanced approach is necessary for sustainable growth. All streams must be worked on concurrently, from marketing to tech development, or even go-to-market strategy.

8. Poor Financial Management 

Effective cash flow management is critical. Many startups fail due to running out of cash. Structuring a sensical budget with ample runway with a generous buffer to account for unforeseen circumstances is recommended.

Sound financial planning along with accurate, recording and cash-flow monitoring, are also essential. There is no substitute for spending wisely and budgeting correctly.

9. Underestimating the Importance of Marketing and Sales 

There is nothing quite so sad as a team with an incredible product or platform that nobody knows about. Bad products with great marketing can succeed, but a great product without any marketing or sales outreach will remain anonymous.

In order to avoid the fate of the 90% of startups that fail, a startup needs a robust marketing and sales strategy to succeed. Neglecting these aspects can result in poor customer acquisition and revenue generation.

10. Ignoring Customer Feedback 

This falls under the same umbrella as defining your target demographic and pivoting when needed.

Startup founders often think that marketing means shouting from the mountaintops about a product or service. Listening to your users is also a core pillar of marketing, and communication between a company and its customers should be a healthy, two-way street.

Customer feedback is invaluable for improving products and services. Ignoring it can lead to products that don’t meet customer needs, resulting in low satisfaction and retention. Never be afraid to ask your actual customers what they would like to use!

11. Launching Too Early or Too Late 

Timing is paramount. Nobody likes being early to the party. Being the first to spot and seize an opportunity in the market is great, but if you’re too early, you may run the risk of not having anyone understand what you’ve built. 

Conversely, we see lots of cheap, amateurish copy-cats anytime a new market narrative is established. Being the first or second major AI/Machine Learning startup to launch is exciting but try asking to pitch a VC or investment fund on your AI startup after they’ve been pitched by a hundred identical companies in the past few months.

Timing also goes with knowing your own team and product. Launching too early can damage reputation due to an incomplete product while launching too late can mean missed market opportunities and wasted resources.

Simply put, launch on your own timeline when it makes sense to do so.

12. Overdependence on Funding 

Yes, some companies indeed raised several rounds and tens of millions of dollars before ever making any true revenue. That is extremely rare.

You might see a theme here, but timing is everything, and knowing when to bring on more funding is challenging, to say the least.

Staying lean on the budget and doing what you can without giving up more equity in your company is vital. Relying heavily on external funding can lead to complacency and poor financial management. Building a sustainable business model that generates revenue is key to long-term success.

13. Poor Investor Management 

You won’t just be communicating with your community and your customers as a startup founder. Having an established channel for investor communication is also key. 

Knowing how to share news with your backers is an art and not an art that many are particularly great at.

Ignoring investor input can lead to missed opportunities, while excessive control by investors can stifle the startup’s vision and flexibility. Finding the balance between the two extremes is another task that founders should get accustomed to if they are to build a healthy startup company.

14. Not Having a Unique Value Proposition 

Without a unique value proposition, a startup struggles to differentiate itself from competitors. Clearly articulating what makes your product or service unique is essential for attracting customers.

If you cannot concisely describe what it is you are building and why it is mind-blowingly simple and innovative in 60 seconds or less, it will never be easy for you to raise funds or attract customers for your products or services.

There are thousands of startup founders launching new companies each day. How will you stand apart from the competition?

15. Lack of Adaptability

 The startup ecosystem is dynamic. A lack of adaptability to market changes, customer needs, and technological advancements can render a startup obsolete quickly.

By being aware of these common startup mistakes, founders can better navigate the complexities of launching and growing a new business. Prioritizing research, planning, team building, customer focus, and adaptability can significantly enhance the chances of startup success.

Avoiding Startup Mistakes

Startup founders pour countless hours into building the company of their dreams. A vision they are truly passionate about. 

Don’t let a simple mistake topple a promising startup company. Learn from the mistakes of others and be sure to follow Arcanum Ventures on all channels for helpful advice, tips, news, and other resources for founders and investors in the startup space.