18 mistakes that kill startups

If your spam filter works you probably should thank Paul Graham (if it does not work I am not sure who you should blame though). He not only contributed to the creation of the first anti spam technologies but also developed the very first web application, called Viaweb, which was acquired by Yahoo in 1998.

The deal made him a millionaire (50 times, to be precise) but instead of running to a sunny beach in Hawaii he decided to settle in Silicon Valley and start a new venture, called Y Combinator. The company basically provides early stage funding for startups, mainly software or web related.

The process is pretty simple. Candidates must submit their ideas (an idea is all they ask, no business plan required) inside one of the two yearly funding rounds. The most promising ideas then get interviewed and the winning teams receive $6000 per team member, without any conditions regarding how they should spend the money. Selected ventures also receive unlimited consultancy and advice from the Y Combinator partners (including Graham himself).

“We’re the right choice for a group of two or three young hackers (that is his definition for creative programmers) who have an idea, and want some money and advice to get it launched”.

Now, being in the middle of all those startups Paul Graham certainly has some clues regarding what work and what does not work in the early phases. In fact he recently wrote an article describing the 18 mistakes that kill startups. In his own words: “if you have a list of all the things you shouldn’t do, you can turn that into a recipe for succeeding just by negating. And this form of list may be more useful in practice. It’s easier to catch yourself doing something you shouldn’t than always to remember to do something you should”.

Below you will find the 18 mistakes:

  1. Single Founder – having one founder is a vote of no confidence, the fact that most successful companies have at least 2 founders is not a coincidence
  2. Bad Location – startups prosper in some places and not others, you can not change this
  3. Marginal Niche – choosing an obscure niche to avoid competition might be fatal
  4. Derivative Idea – imitations of existing companies do no go that far
  5. Obstinacy – you need to be flexible and willing to abandon the initial vision
  6. Hiring Bad Programmers – most of the e-commerce business in the 90s died because of bad programmers
  7. Choosing the Wrong Platform – scalability is a key factor, and choosing the right platform influences tremendously how fast you can scale
  8. Slowness in Launching – launching products quickly forces the company to face problems earlier
  9. Launching Too Early – there is also the danger of launching too fast, though
  10. Having No Specific User in Mind – sometimes startups assume that somewhere there must be someone interested in their product. Somewhere…
  11. Raising Too Little Money – too little money will make the startup not able to fully develop its potential
  12. Spending Too Much – another cause of failure is spending too much and running out of it before you are ready for another round of financing
  13. Raising Too Much Money – too much money will not force the startup to look for customers or solve small problems
  14. Poor Investor Management – it is hard to make investors happy and at the same time make sure that they stay away from the business operations
  15. Sacrificing Users to (Supposed) Profit – making something people want is arguably harder than making money
  16. Not Wanting to Get Your Hands Dirty – programmers love to program, but in a startup they will need to get involved with the business administration
  17. Fights Between Founders – about 20% of Y combinator startups had a founder to leave at some point
  18. A Half-Hearted Effort – the lack of commitment towards the startup is not that rare

You can read the full article here.

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