5 common mistakes by first-time startup founders and how to avoid them

Written By: Dharmesh Shah September 22, 2022

The following is a guest post by Arjun Moorthy, founder of The Factual. Arjun and I have known each other for a long time, originally when he was a member of the HubSpot leadership team.  He's one of the smartest people that have come through the halls of HubSpot. -Dharmesh

Startups are hard. 90% fail, 10% within the first year itself. If you’re a startup founder you already know these statistics and yet you are irrationally proceeding forward. Bravo! I did the same thing six years ago and having just successfully sold my company I’ve learned a few hard lessons that I’ll share below in the hopes that you avoid them and improve your probability of success.

  1. Hiring full-time employees before product-market-fit

    As Marc Andressen said, getting to product-market-fit is the only thing that matters in the early years of your company. Simply put, do you have something that people really love. Until this point you will be frantically trying many ideas, sometimes weekly. During this time any one other than a co-founder will soon get frustrated by the changes of direction and eventually wonder if the compensation they are giving up on elsewhere is worth it.

    I made this mistake three times before learning this lesson and more than the money lost I feel bad that I put those early employees through this very schizophrenic period.

  2. Deprioritizing offshore talent

    Saving money is crucial in the early days. No surprise that Google and many other great companies started out in garages. But the biggest expense is labor and given the quality of talent around the world, and tools to collaborate with them, hiring offshore is the best way to save money early on.

    At The Factual we hired talented designers and engineers in Argentina for $35-50/hr where the timezone overlap was pretty good with the US west coast. CEOs I know found similar impressive talent in Portugal, Spain, Ukraine, and Vietnam for $20/hr or more. Occasionally, we hired US and Canadian talent in rural towns, or working from cheaper areas abroad. And with few exceptions we found offshore talent to be reliable and easy to work with.

    I should mention that while offshore talent is impressive they will not solve problems for you. Like most other contractors, they will do as you ask them. So use them for precise efforts rather than vaguely defined tasks.

  3. Holding on to first idea far too long

    Your first idea is very likely going to fail. This may seem like a gross generalization, especially since you probably just quit a job to launch your startup based on an idea you think is very good. But success with startups, at least in consumer, usually comes from insights that no one else has. And such insights are seldom read or found in a survey but rather learned through failure. So the key to success is to iterate fast through ideas and get those insights quickly.

    I built a complete product for my first idea before finding out people wouldn’t use it. A simpler landing page test might have told me the same for far less money and time. It’s easy to think a landing page can’t possibly capture the product’s promise but if you can’t write it out in text and get users to sign-up then you don’t know what problem you’re solving and who you’re solving it for.

  4. Building a bigger MVP than necessary

    Most founders have a grand vision for the solution to a thorny problem and set out to build an expansive product, albeit in stages. But product form factors like a mobile app or website are far larger undertakings than people realize, even if you really try to minimize the feature set. Just standing up a site or app, getting reliable login/authentication, having useful onboarding, ensuring responsive layout etc takes a ton of time and you haven’t even got a feature yet.

    Instead, find the smallest product area you can test with. That may be a simple newsletter but this was our first hit product. And its built-in retention means you are building an audience first, which will be crucial when you do have a more robust product to test.

  5. Not having a marketing co-founder

    The number one thing investors look for in a startup is high growth, typically 10% month-over-month or more. That’s because it’s an easy signal for product-market-fit and a business that scales. But getting to high growth is very difficult and requires constant experimentation with new marketing channels and strategies.

    A marketing co-founder is essential so that he/she focuses on growth every day and is not distracted by other things. In our startup we had a technical co-founder and a product co-founder/CEO. So neither of us focused on growth exclusively and we never hit the 10% m-o-m growth rate consistently. When we finally hired our marketing co-founder (5 yrs into the journey) it was late and had we done this earlier we would’ve likely have had more steady growth.

    Bonus lesson:

    Some of the best ideas above came from other startup co-founders. Talking with other founders was often the best source of advice and I had a regular group of four founders who met every quarter for dinner. Beyond the tips, it was great to commiserate with them and realize that my mistakes are not unique. Hope you find your tribe during this incredible journey and drop me a line if you have any questions: arjun dot moorthy at gmail dot com.

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