The 9 Common Pitfalls of Startup Founders

At Reinvently, we have developed and designed top-notch mobile products for over 8 years. One really successful product among our customers was probably Looksery — an Augmented Reality Video application, acquired by Snap Inc. back in 2016 for $150 million. Our talented design team created the entire user experience and product branding for Looksery. Unfortunately, not all of even the best-designed mobile applications go on to be a smashing success. We’ve seen our share of unsuccessful product launches and business ventures. There’s a lot that can be learned from them. So, I’d like to share what I’ve seen to be some of the common startup pitfalls.

Our headquarters is based in the middle of the tech venture Mecca. We’re situated on the world-famous University Avenue (#125) in the heart of Palo Alto, California. Stop by if you’re in the neighborhood, we’d love to meet you! One advantage that comes with this location is some truly remarkable neighbors. It gives us the opportunity to frequently talk to VC guys, incubators and accelerators — and to many of their participating startup founders. Their companies collectively span the full spectrum of development stages. We love to listen to their stories of successes and failures. Sometimes we live the stories together when they entrust us to bring their beloved products to life!

From time to time I’m so overwhelmed with their product idea, team or business approach that I have a hard time to not invest in them myself. I’d love to help every one of them. For now though, I’d like to share with you several findings that might help you to avoid some common pitfalls of startups, today. As a startup, I’d estimate that, in most cases you have only one shot.

1. Think twice before going into an industry you don’t know well.

We have an internal pre-qualification process for incoming projects. Basically, we decide if we want to move forward with a specific individual or company, or not. I won’t tell you all the details of this process, but one of the most important questions we ask early stage startup founders is:

Why this product?

The best answer, the one we like to hear:

Because I’ve been working in this industry for XX years, I have a lot of connections in it, and I know how to disrupt it with help of technology.

Beautiful, isn’t it? More often than not, founders see opportunities in markets they don’t know well. More importantly, they have few to no connections in the market and don’t understand their target audience well enough. Yet, they are still willing to pour hundreds of thousands of dollars of their own money, plus investor money, into their venture.

I won’t say that it’s impossible to win this fight, but it’s going to be tough. Over time, you can probably find and make some connections, understand the market dynamics, or even find a co-founder. These efforts require a lot of additional energy, money and time coming at the expense of your product where they’re needed most.

In most cases that I’ve seen, inexperienced founders who launch their MVPs sometimes do get some traction, but never reach the point where their product goes big. They usually run out of money before that.

2. Test as many hypotheses as you can before starting development

You can save a lot of time and money by testing most of your great ideas, and without investing tons of money. Be creative, find a way to talk to your target audience, marketplaces, marketing people, distributors, etc., in the very beginning of your journey. Even if you think that you know the main pain points, confirm that your product can solve them. Design mockups, build InVision clickable prototypes and test them with related user groups a few times. Pay them if needed. This is better than presuming your great idea will work only to realize you should’ve taken a different approach after burning half-a-mil and 11 months of your life.

Are there any risks associated with your product? Think how you can test them without delivering a fully functional MVP to the market.

We had a customer several years ago who wanted to build a game that bordered upon being a gambling app. It was very questionable from the very, very beginning whether the App Store Review Team was going to let the product go live without a very expensive gambling license. Our customer chose the worst-case scenario. He decided to develop the entire product, only to be rejected by the App Store Review Team. He spent the next six months talking to lawyers and trying to select the best residency for his gambling license. Eventually, he gave up, because he literally ran out of money.

When it comes to AI-first products I love this playbook by Zetta Venture Partners.

3. Budgeting your product for an MVP phase only? I have bad news for you…

Too frequently, startup founders do some pretty simple math for their capital requirements:

How much is MVP, $X? Okay, so I need $X + $Y for marketing and then I will:

a) understand its traction,

b) get users,

c) gain an sustainable growth rate,

d) start to generate revenue, and

e) get Round A funding.

Correct? No.

You will need $X for the MVP, and then $N on top of that. What is the budget for 12 months of continuous development afterwards? That development is intended to:

• update any functionality that was based on false hypothesis,
• add more features that were not included in the MVP,
• expand upon or try different monetization models,
• determine whether you’re on target with your audience or if it’s different,
• most importantly, improve primary product metrics to learn how you can leverage user data to constantly make your product better,

You can tell me, “But I can raise another seed round down the road that will help me to get to Round A.”

Good for you if you can, without putting all your operations on hold. Based on my experience I haven’t seen a product founder that got back from his search for a seed round after putting his operations on hold. I generally recommend having at least 2x your MVP budget to either get to the next funding round or start generating revenue to sustain your operations.

4. Consider engineering as a continuous cost of operations, or quit the technology business.

Are you watching your budget and thinking you can put engineering expenses on the chopping block? Maybe you want to reduce your burn rate. Maybe you want to re-allocate those funds for marketing, sales and wages. I have bad news for you again. The following reasons explain why I don’t think this will be a viable option for you:

1. Now you are in the technology business. Your product — software — is the core value of your company. If it’s your only source of revenue, you can’t stop maintaining it.
2. Your product will have bugs. Always. It’s inevitable. Someone should fix them!
3. If you stop improving your product, you’ll start losing to the competition.
4. Any product, especially a mobile one, gets outdated much faster than you may think (with new OS versions, new mobile devices, etc.).
5. You’ll most likely lose your existing team if you put engineering operations on hold. Restarting a project with a different team is painful.
6. Data-driven growth is impossible without an ongoing engineering team working next to a product team.

5. Your MVP functionality will change down the road. It’s normal.

Make sure that your delivery methodology allows you flexibility in terms of scope. You will add more features, change existing ones, be unhappy with current implementations and come up with different solutions after regular product demos. It’s normal.

Our customers find millions of reasons why one feature or another is suddenly needed. It could owe to a new investor, new business model, etc. However, the most popular (and honest) reason, is that they come to understand their product better the more they work on it.

That’s one great thing about MVPs. You don’t start out trying to make a perfect product — if anything, you’re looking to perfect the process that goes into defining your product. Perfect the process and you’ll always get a great result. Otherwise, by the time you perfect your product, your standards for perfection will have changed. It’s evolution and perfectly normal.

6. No Go-to-Market Strategy on Day One? Wait until you have it.

Here’s another important question that we ask during pre-qualification interviews:

What’s your go-to-market strategy?

We like to hear something like:

I’m planning to launch to a limited audience that we already have with a beta-testing phase for about 1 month. During the beta, we will collect their feedback and gather our initial analytical data. From there, I’m planning to roll the product out to one city for the next few months. At that point, if we see enough traction, we’ll go nationwide and start a massive marketing campaign.

It’s always easier to test your ideas on a limited audience, and go big after you’re ready. If your product has an offline workflow component, polish and optimize it before going big.

It may come as a surprise, but your feature set, development cost, MVP timeline and product roadmap entirely depend on your go-to-market strategy.

7. Go live with your product as soon as you can.

You will be tempted to add more and more features to your MVP, especially toward the end. Your perfectionism will make you think that your MVP is not polished or “good enough” to onboard your first users.

I recommend to go live as soon as your most important feature set is ready. Try to limit your go-live audience for your first launch. Start collecting user-data, start collecting their feedback, look at your conversion metrics, and use the AARRR-framework.

8. Think Numbers.

Define your primary product metrics before going live — and follow them. You need to understand how your design and product decisions affect your primary metrics. And you need to use those metrics to determine if your experiment was successful or not, i.e., was variant A better in the most recent A/B testing session? The sooner you teach yourself to think numbers the better.

9. And the last one — Your Idea is worth Nothing!

I always smile when some of our potential prospects demand to sign an NDA in order to disclose their product idea. They have no company, no product, and no team. They have a product idea that is entirely not validated by market, potential customers or even small focus-groups. They have no design and usually no intellectual property related to their idea.

But they are really scared that their idea could be stolen and implemented by a consulting company, and they will lose to competition. Funny, isn’t it?

An idea is worth zero dollars until it’s validated by market. It means before your product is live, you need to show traction. Therefore don’t be afraid that it can be stolen. Nobody needs it, because nobody cares.

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While I have more ideas to share, please let me know if you found any of the points helpful or useful to your plans. Please don’t hesitate to write your questions in the comments, especially if you don’t agree with something or want me to explain any of my thoughts. Feel free to submit more tech startup topics — I may be able to use them in in the second part of this article! Thank you for reading.