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Start-ups: Five common mistakes entrepreneurs make

Last updated on: November 12, 2012 14:05 IST

Start-ups: Five common mistakes entrepreneurs make

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Courtesy Yourstory.in

Most great ideas fail due to lack of vision and execution, writes Bharati Jacob, founder-partner, Seedfund, one of India's leading early stage investors.

The Mughal dynasty would have been a forgotten footnote of history if it was not for Jalal-Ud-Din Muhammad Akbar.

His genius lay in recognising that that it is easier to conquer lands than to hold onto them. Akbar had an important lesson for entrepreneurs, while unique ideas are important, executing on follow through is far more important to success.

And that is why venture investors spend more time assessing the team than obsessing about the idea itself.

Most start-ups don't reach their destiny despite having the right vision, a tight strategy and a great idea.

An idea doesn't make a company and is just the start of a journey in creating a valuable company.

With the benefit of hindsight, here are five execution mistakes commonly made by entrepreneurs.

Illustration: Dominic Xavier


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1. Choosing the founding team

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Building a company is like fighting a war made up of many skirmishes.

Most great kings realised the value of a deep bench -- Akbar had Man Singh, Todar Mal, Birbal, Tansen, etc and Ranjit Singh had Zorawar Singh, Hari Singh Nalwa, Fakeer Azizuddin and Dina Nath because no warrior can be everywhere and fight singlehanded.

An early test of an entrepreneur is her team;  they usually find true believers in the mission with the faith to persevere through the agony and ecstasy of a start-up.

They choose co-founders who believe in the same destination and have similar value systems.

They believe that it would be great to find a co-founder or team that complements your skills but it is far more important to choose the co-founder on congruence of beliefs and values.


Photographs: Courtesy Yourstory.in

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2. Changing founder as the CEO too soon

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In the early stages, a CEO is the most important sales person -- he has to sell his vision to investors, customers, and employees. Only passion and blind belief in the idea can sell it well.

And you can almost never hire passion and belief. Besides, the person who thrives in an unstructured environment of a start-up is very different from the person that thrives in a large company.

It is best to defer adult supervision and bring in the professional CEO when a company has found a business model for predictable cash flows.

Akbar ruled for 60 years -- long enough to establish order, a system of controls and taxes, and a system to defend his borders.

Illustration: Dominic Xavier




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3. Launching too late

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The Indian kings who opposed the Mughal invaders were often better equipped, richer and with larger armies.

But Babur won the Battle of Panipat because he had Mir Ali who brought gunpowder and artillery cannons from Turkey.

Almost always, the Mughals were quicker, more nimble and had the element of surprise.

As an entrepreneur, you have to be quick to the market so that you can accelerate your learning.

Launch early instead of spending months creating and perfecting a product or adding bells and whistles that you believe your customer will want.

Facebook was launched with the basic product ; photo sharing, apps, and timeline came much later. Launch as soon as the core product is ready, after that iterate, iterate, iterate.

Remember Babur wanted Samarkhand but got India because he started being king even though he wasn't fully ready.

Illustration: Uttam Ghosh




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4. Scaling too soon

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The most spectacular flame outs happen when a company that hasn't figured out its revenue or business model starts to expand to different geographies and customer segments.

Scale should come after the company knows which customer segment values the product, how to reach them, how much they are willing to pay, and how to get them to buy.

It is better to concentrate on a smaller geography or specific customer segment in the early days. Scaling without understanding these elements creates the risk of running out of money without results.

History is replete with instances of kings and despots who reached too far, Akbar's legacy was finally destroyed by Aurangzeb's obsession with the Deccan before he consolidated North India.

Illustration: Dominic Xavier




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5. Excessive spendthriftness or frugality

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Every start-up must strike a careful balance between being spendthrift and frugal.

Many expenses are investments, not all investments are physical assets. These expenses may be in understanding consumers, creating IP, business development, brand building, salaries of experienced people and much else.

But there are many expenses that often don't create value like huge founder salaries, founder perks, fancy offices, gizmos et al.

The spartan Mongols who were focussed only on conquest broke the backs of empires whose rulers were living the royal life. In the hard ground of battle, the royals neither had the stomach for the fight nor could they motivate their troops to stay the course.

Serial entrepreneurs and good investors learn early that the journey an idea to a company is often not one single marathon but a marathon made up of series of 100 mt dashes. It is a walk where bucketing the pond is more important than boiling the ocean.

Contrary to myth, execution is more important to early stage success than strategy or the idea, both of those can be copied easily.

In most ideas, it is execution that becomes the IP and sustainable advantage. To paraphrase politician Mario Cumo, entrepreneurs write business plans in poetry but execute them in prose.

Illustration: Uttam Ghosh




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