Building a startup? Here are 5 common mistakes to avoid

Avoid common startup pitfalls. Learn how to solve the right problem, raise funds wisely, and build a network. Download the Pre-Seed Playbook for expert insights.

If this is your first time starting up, the feeling can be overwhelming. And that’s only natural because it can feel like the odds are stacked up against you. But at the same time, there isn't a better time to think about starting up.

Startups have now become a cultural phenomenon in the country with shows like Shark Tank India making concepts like fundraising and venture capital ubiquitous for the masses.

However, while all those aspects are great for the ecosystem in general, it’s best to proceed with caution. Here are some common mistakes to avoid in your pathway to becoming an entrepreneur inspired by our Pre-Seed playbook with Eximius Ventures. You can download a free copy here.

1. Stop solving for the wrong problem

In the few years I’ve spent covering startups and tech, I've noticed that the one common thing between all startups that have failed is that they rushed to the market with a product that wasn’t ready for it. The easiest way to avoid this problem is to find a problem statement you agree with and are passionate about solving. Arvind Radhakrishnan, Head of WeWork Labs, has a unique perspective on how you can double down on this: “It’s more likely that you’ll start obsessing over something if it’s a problem that intensely bothers you! I think that is the easiest way to ensure that you will work towards finding the best solution, and build the hustle mindset to solve the problem holistically. You will find the team that resonates with that problem, and you will see the product come to life in a way that resonates meaningfully with you.”

1. Don’t rush to raise funds

It’s been a record year for fundraising in India. The country retained the position as the second-largest destination for VC and growth funding in Asia-Pacific, and thanks to a boost from pop culture phenomena like Shark Tank India, there was greater interest in seeking out venture capital. As early stage cheques grow larger in size, it’s only natural to feel like you’re missing out on the funding bandwagon. But this is where it’s critical to ask yourself if you really need the funds at all. The Pre-Seed playbook paints a great picture into how most founders fall into the Valley of Death: “With the rising cheque sizes at the seed stage, many founders face enormous pressure to scale quickly and justify high valuations, often resulting in missteps and the dreaded Valley of Death.”

1. Don’t rush to scale

Getting the timing right for your launch is crucial to ensuring that your startup doesn’t fail. The allure of reaching more markets, pushing your product out before its ready can drive you to bring your product to a market that isn’t ready for it or risk the resources you already have. Instead, take the first few months of your company’s growth into building a viable model, testing it out with your target audience, and finding product-market fit. According to the Pre-Seed playbook, this includes Startup India Seed Fund Scheme (SISFS) which provides financial assistance for proof of concept, prototype development, product trials, and market entry, Credit Guarantee Scheme for Startups (CGSS): Offers collateral-free loans to startups, Atal Innovation Mission which promotes innovation and entrepreneurship through various initiatives like incubators and research centers and Startup India Hub which offers mentorship, resources, and networking opportunities for startups.

1. Accessing the right network

Particularly at the early stages, it’s pivotal to make sure that you’re in the right room with the right people. Whether that’s showing up to your nearest networking events or pitching your idea at any startup conference, it’s critical to ensure that you’re networking as much as possible. Take it from Amit Kumar, the founder of Credit Wealth Technologies who spoke to us in the Pre-Seed playbook: “The importance of a strong network becomes more apparent during fundraising in pre-seed.”

1. Decode what a venture capitalist is looking for

Eventually, once you’re ready with your product and are confident of its prowess, there comes a time when you’re ready to venture out to raise funds. And it is always advisable to be prepared for that moment. Take a note from this piece of advice in the Pre-Seed Playbook on the prerequisite for how VCs evaluate businesses: “VCs focus on the founding team’s expertise, the innovation of the idea, market potential, and milestone progress. But at the core, investors aim to manage their risk-reward ratio, so it’s important to frame your value from their perspective. To effectively communicate this value, you can use valuation methods such as the Berkus Method, which assesses different aspects of the startup, and the Risk Factor Summation Method, which adjusts valuation based on identified risks.”

I hope this sets the foundation for the journey you’re about to embark on. To learn more about how you can scale your startup, download the Pre-Seed Play book HERE.

See you in the next WeWork Labs blog!