1. The very first mistake is – Having the wrong people on board; Including friends as business partners just for the sake of enlarging the work force.
But friends and relatives can be a source of inexpensive labor and remember the three F’s (friends, family and fools) when it’s time for seed capital. A startup is like a marriage if you have a co-founder ( something has become increasingly imperative in tech startups especially because of the work loads). Having people who give you some comfort and trust is important in the early days. I agreed that it is very likely for close associates to take advantage, especially when there is some ‘dough’ floating around. For all intended purposes, frugality =start up.
2. Jumping on any sort of money/investor coming across.
By definition, startups are or should be boot-strappers. Incidentally, the more funding a startup gets, the more control and equity it potentially gives away. Avoid Vc’s as long as you possibly can. Angel investors may be the smart way to go initially. Self-funding is also an options if money is not a problem. For me personally, my brick-and-mortar ventures have always being self-funded-that gives me 100% equity. But giving that only 10% of startups make it through, one should not invest more than 10% of your net worth in a start-up-share the risk when ever possible.
3. Diversification of the business in the early stage. I believe in shrinking your niche, and creating a passionate following. The use of inbound marketing techniques to create evangelism is pivotal especially with the social networking paradigm shift.
4. Not creating and focusing on USP – companies should focus on their core competencies
5. Failure to make an employee owned company; ownership must be distributed so that the sense of responsibility grows, attrition rate remains minimum possible, expenses can be controlled. This can actually be tricky. Imagine convincing your first few hires to work for equity in an unproven idea(talk about Steve Job’s type salesmanship)
6. Trying to sell to anyone and everyone. Start ups often don’t segment their markets appropriately; hit and try is the strategy they follow.
Trying different ideas is not the antithesis of start ups. By default, start ups must be nimble. In fact, the original ideas almost always evolve during this process of trial and error (paypal, Hotmail, craiglslist) are all household names companies whose ideas evolve during that early startup phase.
7. Not spending enough time and money in the initial market research and analysis phase of your venture development instead too much spending on workforce and office settings.
9. Lack of a proper exit strategy and contingency plan. Investors are very keen on understanding how they can exit, in case the sales do not pick up.
10. Finally too much stress and lack of fun. You can choose the way you work and it’s always good to have harmonic environment in the company. Make work like play and you will see the difference.