It is challenging to start a business. 90% of them fail, and 10% within the first year. Entrepreneurs already know these statistics, yet they are irrationally moving forward. Bravo! After doing the same thing six years ago, I just sold my company. As a result, I’ve learned a few costly lessons that I’d like to share below so that you can avoid them and improve your chances of success.
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Before product-market fit, hire full-time employees.
In the early years of your company, getting product-market fit is all that matters. Simply put, do you have something that people love? After this, you’ll be frantically trying many ideas, sometimes weekly. Any person other than a co-founder will become frustrated during this period and eventually wonder if the compensation they are giving up elsewhere is worth it.
Before learning this lesson, I made this mistake three times. In addition to the money lost, I feel guilty for putting those early employees through this schizophrenic period.
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Prioritizing offshore talent
Early on, saving money is vital. Unsurprisingly, Google and other successful companies started out in garages. But labor is the most significant expense. Considering the quality of talent worldwide and the tools to collaborate with them, hiring offshore is the best way to save money.
During our time at The Factual, we hired designers and engineers for $35-50/hr in Argentina, where the time zone overlap was pretty compatible. CEOs I know have found similar talent for $20/hour or more in Portugal, Spain, Ukraine, and Vietnam. We sometimes hire US and Canadian talent in rural towns or cheaper locations abroad. Almost all of the offshore talent we worked with was reliable and easy to work with.
While offshore talent is impressive, it won’t solve your problems. As with most contractors, they will do what you ask. Don’t use them for vaguely defined tasks but for precise ones.
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Investing too much time and energy in the first idea
Your first idea will likely fail. Since you probably just quit a job to launch your startup based on an idea you think is worthwhile, this may seem like a gross generalization. However, startups usually succeed by coming up with insights no one else has. It is rare to find such wisdom in a study or survey, but rather through personal experience. So iteration and getting insights fast is the key to success.
After building a complete product for my first idea, I realized people would not use it. A simple landing page test would have given me the same information for far less money and effort. While it’s easy to think a landing page can’t capture the promise of the product, if you can’t articulate it in text and get users to sign up, you don’t know what problem you’re solving.
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Creating a much larger MVP than is necessary.
Founders have grand visions for solutions to thorny problems and set out to build an expansive product in stages. But even if you try to minimize the feature count, products like mobile apps and websites are far more complicated than people realize. Setting up a website or app, ensuring reliable login/authentication, having practical onboarding, ensuring a responsive layout, etc. It takes a lot of time. And you haven’t even got a feature yet.
Instead, select the smallest product area for testing. It may seem like a simple newsletter, but this was one of our first products to be successful. You build an audience first with its built-in retention, which will be crucial when you have a more robust product to test.
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Having no marketing co-founder
Investors look for startups with a high growth rate, usually 10% or more per month. Because it’s an easy indicator of product-market fit and a scalable business; however, getting to high growth requires constant experimentation with different marketing channels and strategies.
A marketing co-founder is essential so they can focus on growing every day without distractions. We had a product co-founder and a technical co-founder in our startup. Neither of us focused on developing, so we never consistently reached 10% m-o-m growth. It was late when we finally hired our marketing co-founder (5 years into the journey), and we would’ve likely grown steadily if we’d done so earlier.
