Don't let common startup mistakes make your company go the way of the Titantic

“Titanic Sinking” by Willy Stöwer (1912)

If it had not struck an iceberg back in 1912, chances are pretty good that you would never have heard of RMS Titanic. But when it comes to startups, you don’t hear about the ones that slam into icebergs—you only hear about the tiny few that dodge them.

This shows you that the media always likes to focus on the rare interesting cases, rather than the most common—and more boring—ones.

That focus is harmful to entrepreneurs. It deludes them into thinking that startup success is far more common than it really is—and it clouds insight into the causes of failure.

I estimate that only one in 5 million unfunded startups end up being worth at least $1 billion. For every 1,000 startups that meet with a venture capitalist, only two get funding. And for every funded startup, only one in 10,000 ends up being worth $1 billion.

This month, I learned about a spreadsheet that documents startup failure called Based on my review of over 110 startup failures profiled there as of June 19, here are the seven most common “icebergs” that startups ram into and how to avoid them.

Startup Mistake #1: Failure to find unsolved customer pain.

Too many founders think that their idea is so brilliant that their best course of action is to build the product, show it to the world and wait for the money to roll in. However, that common delusion is a major startup killer.

In reality, people are reluctant to try a startup’s product because most of them fail. So they will only try the product if it promises to solve a painful problem that nobody is already helping with.

To steer clear of this iceberg, don’t start your company until many people are willing to pay now to get your product sooner.

Startup Mistake #2: Reluctance to get feedback on prototypes.

Plenty of founders refuse to let anyone see their product until it is perfect. There are plenty of reasons they make this mistake. They are afraid someone else will steal their idea so they want to get a big head start, they want to impress their peers, or they are afraid that unless it’s perfect, nobody will want to buy it.

Failing to get feedback from potential customers is usually fatal to a startup.

Avoid this by focusing your attention on building an inexpensive prototype, getting feedback on it and building a new prototype. Repeat this loop until your product is one that potential customers demand.

Startup Mistake #3: No passion for the market.

If your primary motivation for starting a company is to make money, save yourself the trouble and do something else. The reason is simple. To be successful, you will need to spend about 80 hours a week with very little pay to make your startup successful.

It is not possible to work that hard and be effective unless you believe that your life’s mission is to make life better for the potential customers who are depending on your company’s product.

Direct your startup at solving a problem that you care about deeply. In my research, I have found that the most common reason that people start companies is because the founder had a problem that nobody else had solved.

Startup Mistake #4: Lack of skills needed to survive.

If you think the job of the entrepreneur is to think big thoughts and hire other people to do the actual work, think again. One big reason that startups fail is that the founders can’t do the thing that the fledgling company needs most to get off the ground.

I have seen many tech startups flounder and fail because the CEO can’t code when coding better than almost anyone else is the thing that must happen to build the product and get customers.

If you are such a person, your odds of success will increase if you bring world-beating sales skills and knowledge of the market need that you are addressing. And you can only achieve success if you have already developed a strong relationship with a world-class coder.

Entrepreneurs boost their odds of success if they pick industries that value the skills at which they excel and love to practice.

Startup Mistake #5: Ignoring cash burn.

If you don’t like the idea of asking other people for money, don’t start a company. There are many people who found companies who are engineers at heart. They want to spend years building a perfect product and then dazzle the world with their brilliance. They eagerly read about how easy it has been for other startups to raise millions of dollars and think that they will be able to do the same.

So they ignore the rate at which they are burning through cash and assume that when the day comes to replenish their coffers, investors will break down the doors to write checks.

This leads us to another huge iceberg.

Startup Mistake #6: Inability to raise capital.

If you have never raised capital for a startup before, chances are you will be surprised by the amount of time and the number of rejections required before you succeed. Even if an entrepreneur realizes that cash will run out, too often he starts the process too late, goes after the wrong group of potential investors and does not present investors with information about the company that leads them to want to invest.

My advice on this boils down to matching your capital raising approach to the stage in your company’s development.

Startup Mistake #7: Weak team, poor leadership.

A final iceberg that sinks startups is a leader who cannot recruit the most talented people for the jobs on which the company’s success depends. The simple reality is that if you are not a great leader, it is hard to learn to become one. Moreover, the leadership skills you need to get a company to 10 employees are different from what a 100-person or a 1,000-person company requires.

At the startup stage, a great leader has the charisma and track record to conjure up a compelling vision for the company and recruit top talent to come along for the ride of realizing that vision.

Launching a startup is hard and if you can’t navigate your venture around these icebergs, yours will surely perish.

Editor’s note: The original version of this article also appeared at on on June 30, 2014.