Tips for startups: Learn from my mistakes

Tips for Startups should help you avoid common misconceptions and get you ready for the questions investors are fond of asking when meeting you for the first time. I approached several consultants and business angels, who provide “smart money” to various businesses, and I’m going to share their views with you through this short blog series. 

This episode, we’re talking with David Kovalský, a seasoned entrepreneur, advisor and investor.

The last 5 years were truly remarkable for startups. Venture capital funds took the market by a storm. Both first-time founders and investors started working. And cheap money has filled the market. It has been such a ride that even the Czech state jumped in.

While it may seem like good news for startups, there’s actually more risk for first-time founders. If none of the top players show interest, it does send a strong signal about market and value proposition.

The most common startup mistake is building something nobody wants followed by hiring poorly. Great companies go to incredible lengths to get the smartest people on board. The story of Apple is a great example.

Startup founders like to believe that all they need is investors’ money for marketing. And boom! Sales go through the roof as stupid customers finally understand our genius minds. Been there, done that. Smart people can learn from their own mistakes. I just wish I was smarter to learn from other people’s, too.

Here are the entrepreneurial lessons I had to pay for:

Sell to customers first, work on the product second. Generate cash flow before you hire. And no amount of marketing can sell a product customers aren’t passionate about. No amount of money and incentives bring know-how on how to sell. Talking to customers does. Investors are suckers for startups which have all aspects of product and sales figured out. All the money goes into doing more of the stuff that works.

Building a killer strategy for a company to succeed is hard. If it was easy, everybody would have one. But you can start now in a few easy steps:

1. Start assembling your board of advisors. These are smart and experienced people who believe in your product. But instead of nodding to every statement, they challenge you with questions, data and own experience. If you’re the smartest person in the room, you’re in the wrong room. Often times it’s free, other times there are costs you need to cover. Still better than burning cash making the same mistakes thousands of entrepreneurs have already done. Over and over.
2. Look for the best people in the industry to consult in key topics of your business. Steve Jobs said: “with a taxicab driver, the difference between best and average is perhaps 50%. With engineers, the best provide 1000x more value than the average.” The same goes for investors, advisors and partners. Hire wisely, let go quickly.
3. Start being obsessed about the value your customers get. Have it in your daily routine to have hands on contact with the problems your customers are solving. Only happy customers share your product. Only customers who fix THEIR problems by your product (!) come back for open wallets.
4. Strategy is not a stream of miracles where one comes right after the other, but a connection of customers’ problems, a unique way to effectively solve those problems and a clear path how to accomplish that. Waiting with strategy creation is like standing in front of a fireplace saying that once you’ll be warm, you’ll get the wood to start the fire.
5. Check monthly if your product is a pain killer, not a vitamin. Startups are about redefining the experience, solving a problem. Providing 10% improvement is like selling Vitamin C to a person who just broke his leg.

COVID consequences

With the recent COVID crisis and the economic downturn, it’s going to take years before things will be back to good old optimistic times. Less travel means less key relationships. Insecurity about the future means more evaluation before spending. Less spending means longer return on investment.

Reminds me of 2010 when I jumped head on into entrepreneurship. A decade later, the key principles still stand solid.

Final advice

Do one thing and do it well. Focus on building a product your customers love paying for. Chasing investors, incentives and winning in startups competitions is nice for the ego. But great companies have strong cash flow fueled by sales. Everything else comes as a byproduct, sooner or later.

David has spent a decade in bringing FinTech innovations to the CEE market, through multiple companies. He loves to travel across Europe from west to east in search of startup talent. He’s also a huge space fan and still keeps his plans for outer space travel on the roadmap. Primarily, he’s working with CEE companies as a strategist and CEO coach.