'It's A Trap!' ' 3 Ways to Avoid Startup Pitfalls

Ryan wrote this on April 20, 2012 in . Add a comment

One thing that's stuck with me since interviewing Robert Scoble during his soapbox earlier this month was when he said entrepreneurs have to be crazy. Or as he put it:

It's like jumping off a cliff and building a parachute on the way down and assuming that you're going to figure it out while you're falling.

Building a company takes wild-eyed commitment to not knowing what's around the corner, over the next horizon. You're in a constant plummet. Will you hit the ground hard or will you land safely? Will you have the parachute fully sewn before you slam into the ground, avoiding any pitfalls at the bottom?

3 Startup Pitfalls

What really got me thinking again about what Robert said was reading Harvard Business School professor Noam Wasserman's take on startup pitfalls. He's even written a book on them. He outlines the pitfalls as:

  • People problems — working with people you don't like or choosing the wrong co-founder.
  • Dividing the stock too soon — splitting the equity of the company within a few months and setting it in stone can cause tension between founders later on, says Wasserman.
  • Borrowing from friends and family — or as Wasserman puts it, borrowing from Aunt Sally instead of VCs to invest in the company.

Wassmerman suggests iron-clad contracts and prenups as one solution to deal with these pitfalls. But is that the only way? Can eager entrepreneurs do something else to stop from falling into these traps?

Don't Fall Into the Trap!

Wasserman's pitfalls all really seem to steam from people problems. We think there are three other ways that startups can avoid these pitfalls.

  1. Team Culture. We're pretty big on culture fit here at ZURB. Even Wasserman agrees that entrepreneurs should work with people they like. It's also hard to argue with Wasserman's point that co-founders should know each other professionally rather than socially. But you still have to like the people you work with, be friends as well as colleagues. Know that they got your back when the stuff hits the fan.
  2. Complementary Skills. Wasserman suggests that co-founders not have the same skill set. But the same can be said about the rest of the team. As Bryan put it once, not everyone can be an entrepreneur. Startups have to surround themselves with people with complementary skills. They have to be T-shaped — someone with a deep, specific skill set that can learn about and work with other skills and disciplines in the business.
  3. Persistence is Key. One way to avoid having to borrow from Aunt Sally, as Wasserman puts it, is to be persistant. You're going to hear "no" a lot as an entrepreneur. Overstock CEO Patrick Byrne was turned down by 55 VCs when he originally pitched the idea of a discount online shop. Airbnb is another example. Co-founders Brian Chesky and Joe Gebbia didn't give up on their idea, even after the first few launches failed to get traction and eventually getting seeded by Y Combinator. Three years later, Airbnb raised $112 million in funding.

Don't get us wrong. There are going to be failures along the way. That's a given. That's how you learn. But you don't have to slam into the ground hard once you jump off the cliff without a parachute. Not if you surround yourself with good people that can help you build that parachute on the way down and don't give up until it's built.



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