There are multiple reasons that one established startup fail, some of the common issues I have noticed is inexperience entrepreneur, bad cash flow, failed to build team etc. Maybe you already know all this as multiple articles have already been written on such subjects.
Here I am going mention some usual pitfall which takes place in the first stage of startups such as finding angel investors or getting few early adopter customers etc. So let's go to the points....
High Salary
For people to be fully committed, they should be properly compensated.
A company does better the less it pays the CEO—that’s one of the single clearest patterns I’ve noticed in hundreds of startups.
In no case should a CEO of an early-stage, venture-backed startup receive more than €150,000 per year in salary. It doesn’t matter if he got used to making much more than that at Google or if he has a large mortgage and hefty private school tuition bills.
If a CEO collects €200,000 per year, he risks becoming more like a politician than a founder. High pay incentivizes him to defend the status quo along with his salary, not to work with everyone else to surface problems and fix them aggressively.
A cash-poor executive, by contrast, will focus on increasing the value of the company as a whole.
Outsourcing Recruitment
Recruiting is a core competency for any company. It should never be outsourced.
You need people who are not just skilled on paper but who will work together cohesively after they’re hired. The first four or five might be attracted by large equity stakes or high-profile responsibilities. More important than those obvious offerings is your answer to this question: Why should the 20th employee join your company?
Talented people don’t need to work for you; they have plenty of options. You should ask yourself a
more pointed version of the question such as
Why would someone join my company as its 20th engineer when he/she could go work at Google/Facebook/Microsoft (etc) for more money and more prestige?
Here are some bad answers: “Your stock options will be worth more here than elsewhere.”
“You’ll get to work with the smartest people in the world.” “You can help solve the world’s most
challenging problems.” "You will get employee benefits, vacations and holidays"
What’s wrong with valuable stock, smart people, or pressing problems?
Nothing—but every company makes these same claims, so they won’t help you stand out. General and undifferentiated pitches don’t say anything about why a recruit should join your company instead of many others.
The only good answers are specific to your company, so you won’t find them in this book. But
there are two general kinds of good answers: answers about your mission and answers about your
team.
You’ll attract the employees you need if you can explain why your mission is compelling: not
why it’s important in general, but why you’re doing something important that no one else is going to
get done.
That’s the only thing that can make its importance unique. However, even a great mission is not enough. The kind of recruit who would be most engaged as an employee will also wonder: “Are these the kind of people I want to work with?”
You should be able to explain why your company is a unique match for him personally. And if you can’t do that, he’s probably not the right match.
Above all, don’t fight the perk war. Anybody who would be more powerfully swayed by free
laundry pickup or pet day care would be a bad addition to your team.
Just cover the basics like health insurance and then promise what no others can: the opportunity to do irreplaceable work on a unique problem alongside great people. You probably can’t be the Google of 2018 in terms of compensation or perks, but you can be like the Google of 1999 if you already have good answers about your mission and team.
Team formation
On the inside, every individual should be sharply distinguished by his/her work.
When assigning responsibilities to employees in a startup, you could start by treating it as a simple
optimization problem to efficiently match talents with tasks. But even if you could somehow get this
perfectly right, any given solution would quickly break down.
Partly that’s because startups have to move fast, so individual roles can’t remain static for long. But it’s also because job assignments aren’t just about the relationships between workers and tasks; they’re also about relationships between employees.
Most fights inside a company happen when colleagues compete for the same responsibilities. Startups face an especially high risk of this since job roles are fluid at the early stages.
Eliminating competition makes it easier for everyone to build the kinds of long-term relationships that transcend mere professionalism. More than that, internal peace is what enables a startup to survive at all.
When a startup fails, I often imagine it as a succumbing to predatory rivals in a competitive ecosystem. But every company is also its own ecosystem, and factional strife makes it vulnerable to outside threats. Internal conflict is an autoimmune disease: the technical cause of death may be pneumonia, but the real cause remains hidden from plain view.
Family or labor?
In the most intense kind of organization, members hang out only with other members. They ignore their families and abandon the outside world. In exchange, they experience strong feelings of belonging, and maybe get access to esoteric “truths” denied to ordinary people.
Often we significance them as a cult. Cultures of total dedication look crazy from the outside.
But entrepreneurs should take cultures of extreme dedication seriously. Is a lukewarm attitude to
one’s work a sign of mental health? Is a merely professional attitude the only sane approach?
The extreme opposite of a family is a consulting firm like Accenture: not only does it lack a distinctive mission of its own, but individual consultants are regularly dropping in and out of companies to which they have no long-term connection whatsoever.
The best startups might be considered slightly less extreme kinds of family. The biggest difference is
that family tend to be fanatically wrong about something important. People at a successful startup are
fanatically right about something those outside it have missed.
Which kind of other unusual pitfalls you have noticed or experience?
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