What mistakes do young founders often make that more experienced ones don't? - Part 2.
Thus post covers the topic from the other side of the coin
Non-Great Market Opportunity.
Experienced founders are more likely to identify a need that competitors are not meeting.
Inexperienced founders are more likely to pick a hot market everyone is piling into (Bitcoin 2014; VR, on demand delivery/fintech 2015; chatbots/insurance tech 2016; AI 2017).
No Great Differentiators.
Experienced founders are more likely to know customers will pay more when your product and service is highly differentiated from competitors and work on rapidly increasing differentiators customers will pay for until there are no direct competitors
Inexperienced founders don't have great differentiators paying customers care about.
Not Focused on What Matters.
Inexperienced founders tend to waste a lot of time on PR, social media, networking, speaking at events, etc.
Experienced founders tend to be more focused on the most important things — getting customer sales and finding product-market fit.
They do the latter by shipping, testing, iterating/pivoting and repeating the prior 3 steps in as tight and quick a loop as possible.
No In-Person Testing.
Make sure you are doing meaning live, face to face, in-person user testing combined with tracking usage using software).
Non-Targeted Approach.
Apple takes all the profit out of smartphones. Google and Facebook take all the new online ad profits. You’re not that big yet.
Experienced founders try to dominate a niche market first.
Inexperienced founders tend to bite off more than they can chew.
Wrong CEO.
As talent dispersion expands, more and more founders are CEOs. But can you sell employees, cofounders, investors on your vision? Are you a compelling communicator? Can you recruit and retain the best?
Not Committed.
If you and your cofounders are not totally committed to making the startup work, recruiting will be much harder. People can sense it.
Not Needed By Customers.
Inexperienced founders are more likely to work on things that are nice to have but not needed. Experienced founders are more likely to work on something someone needs. If you need something, you’ll pay a lot for it. You’ll even tell the founder what to make.
I do this with Amazon Prime and Google Express. I “need” online shopping and they are my two most-used choices by far. If I have a non-great customer experience, I tell them what to change, specifically, so they can fix it and I can have a better experience the next 5,000 times I shop there.
Yes I know Paul Graham said, “Make something people want.” His essays are consistently brilliant. And it was suboptimal in retrospect to use the word “people” instead of “customers” and “want” instead of “need”. Sam Altman has since revised that to “Make something people love.” I’ll go with “Make something customers need.”
Non-Great Product.
Your product needs to be great, from the standpoint of paying customers. Twitter is a great product for some users. Look at Trump. But Trump is not a paying customer. The paying customers are advertisers. Some are abandoning Twitter because they don’t want their brand associated with such a divisive product and experience for users.
Trump's constant tweeting is actually a negative for Twitter, top analyst says
Outsourcing Development.
Technical Development.
All business cofounders who can’t program often hire third party dev shops that then take the work they did for you and shop it to your competitors because they can repurpose the code (or not) and do the job much cheaper than dev shops that have to build the software from “scratch”.
Business Development.
All technical cofounders tend to rely on a magical salesperson or channel partners to distribute product. If you are the CEO, you need to be the salesperson, talk to customers and users in person. Many technical cofounder CEOs do not want to, and therefore do not, talk to users or customers in person. That almost never works.
Overcoding.
Why are you building online payments when you can just use Stripe (for now)? Why are you coding stuff at all when there’s no feedback that others want you’re making? That’s like writing a long blog on Medium no one reads because you picked a topic no one cares about. Maybe you should start by answering popular questions on Quora first that are related to your circle of competence.
Outside Circle of Competence.
Warren Buffett writes a lot about staying within his circle of competence.
You can succeed outside your circle of competence if you learn fast.
Inexperienced founders are more likely to start a startup outside their circle of competence. The problem is they generally continue to operate outside their circle of competence because they are not learning fast enough from paying customers. Exceptions include Jeff Bezos (Wall Street to Amazon).
If you are a 20 something grandkid who spent all of 8 hours taking care of an ailing grandparent by yourself, you have no circle of competence in caregiving. Any caregiver who has done this for a living for more than 2 weeks has 10X more experience than you. 2 years? 500X. 20 years? 5,000X. That doesn’t mean you can’t do it. So far I just see founders that continue to not have real relevant experience caregiving or hiring caregivers for their loved ones. In contrast, DoorDash makes all their employees delivery restaurant food when they start.
Of course, there are exceptions. As Linh Le notes in his comment below, “Uber, Netflix and Amazon had founders who didn't come from limo business, Hollywood or retailers respectively.” Shipping, testing, learning and iterating fast are particularly important for inexperienced founders starting a startup outside their circle of competence.
Mislead/Hide the Ball/Break the Law.
Someone should do a study but it seems Theranos, Zenefits, Zirtual, etc. all did this and all were first-time founders. Is this a pattern? Most investors and recruits want to know upfront what’s great about the market opportunity you identified, your team, your product, your idea, etc. Better investors and recruits also want to know what your weaknesses are. If you don’t address them upfront, you are wasting everyone’s time.
Not Concise.
If you can’t explain your idea simply and concisely, you are not persuasive. A lot of blockchain startups use a lot of jargon, don’t really understand it or, if they do (who knows), they can’t explain the idea simply.
Dealing with Investors. Inexperienced founders with no common sense make a lot of mistakes dealing with investors, including:
Not Compelling.
You have to tell us enough information concisely that we’d get very excited and prioritize you over everyone else.
Bad Lead.
Tell us what’s coolest, most impressive, most important or most exciting about you, your cofounder, your tech, your startup, your market or your product right away.
Sending The Wrong Things.
Don’t send us your prospectus, private placement memorandum, term sheet, etc. right away. I co-wrote those at Morgan Stanley. You’re not Morgan Stanley.
NDA-Happy.
Don’t ask for an NDA unless there is a truly exceptional circumstance such as your customer needs the investor to sign the NDA.
Short, Fake Deadlines.
Inexperienced Founder: “Sorry this is a cold email but we have great investor interest and are closing in 4 business days if you want in.”
Investor: “Congrats! I pass.”
Founder: “Oh, um, we actually have more time if you’d like? We think you’d be a real value-add!”
Investor: [Block/Report Spam or Phishing].
Contributor: Terence Yang
