5 Startup Myths that Kill Companies

by birtanpublished on August 25, 2020

I started my first company back in 2010 since then I've had the chance to meet brilliant entrepreneurs with fantastic businesses on their hands however 9 out of 10 startups fail and that's just the hard truth the most common reasons according to founders

Themselves are no market need run out of cash not the right team get out competed pricing or cost issues unfriendly product and finally no business model these are the most common reasons there are a few others and you can check this

Article for more info now this connects directly to the five startup myths we're going to look into today let's do it myth number one you can raise money on

An idea this is 99% false you need traction to raise money traction in the form of revenue ideally or at least traction in the way of users the notion that you can raise capital to build the first version

Of your product or to recruit the team is really not the way things work these days the startup press paints a very different picture on the stage and the requirements for companies to get funding one of our previous mentors at

Five instead of Elizabeth Ian has a fantastic blog on the VC perspective of the start of fundraising model so you should take a look myth number two the CEO or the founder is the highest paid employee in the

Company yeah no I'm not the highest paid employee in the company if you look at it hourly I'm not even in the top three as a business co-founder you're not only the guy in charge but probably one of the biggest shareholders check out our

Video on startup CEO responsibilities so share value is your motivation not salary even if your company is not public the increasing value of those shares and your ability to sell them at an acquisition event myth number three

Fast growth comes first profitability later and this is a classic all you read about is scale and scale and growth and SAS growth ratio and the fact that you need to grow faster that's all great as long as you have money in the bank and

New investors are continuing to fund your operation for the most part if your company is growing fast you will be able to raise more funding fast has different definitions depending on the industry but you're probably looking at tripling

Or quadrupling your revenue year over year but what happens if you are growing at say 50% year-over-year that's not gonna get investors excited and probably won't get you that Series A or Series B funding so what to do well two paths

Path a keep going full steam ahead until you win or you die or plan B take a step back and get your company to a profitable state if you're noticing how familiar I am with this is because I'm speaking from experience we were in the

Same situation back in 2017 we've made a video about it to the point is the purpose of a company is to make money a slow-growing company is better than a dead one a challenge for many startups comes when they've raised too much money

In that case the pressure from investors to get an hour their capital might put you in a tight spot in our case our switch to profitability while it slowed down our growth has given us a quite unique

Position of choosing whether we want to raise more capital or not myth number four you can pursue an acquisition I remember discussing acquisition clauses with our investors during our round negotiations more than often some of

Them have come to us saying hey we should look to sell the company that's not something you can do the best insight I've heard on the matter was on the start of therapy podcast hosted by the guys from startups calm they do a

Deep dive into the circumstances that need to line up for a company to decide to acquire another as a founder you can't really operate for an acquisition you need to run your business period too many variables need to line up for a

Purchase to happen and you don't have control over any of them I've been in a couple meetings with large companies that could buy sliding out and I've had the word acquisition thrown around it hasn't happened and I've learned not to

Be distracted by it the best you can do to increase your chances of selling the company is just growing the company which is what you should be doing anyway finally myth number five that insert name here founder is successful insert

Name here for any role model startup founder all of us need to be growing our companies which means getting customers and or talking to investors for both of those the company needs to project success which makes it really hard to

Talk about struggles issues or burnout projecting any frustration can hurt the company itself so you end up faking it until you make it when my first company went out of business we delayed the announcement for months until I could

Get back on my feet with a new business we founders all know this and only expose these vulnerabilities in closed circles often with other founders who also understand that frustration even in these videos in this channel when we

Talk about past failures at sleight bean we always acknowledge what we did wrong but focus on the solution and the story goes around how we overcame that issue talking about a problem that doesn't have an answer yet is something you'll

Rarely come across in the open now as always if you want to sign up for slack bean and try our product for free you can do so with the code that we'll leave in the description that will give you three months free on any of our plans

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