Avoid typical founder traps (Part I)

There are many things you can avoid when starting a start-up if you consider different aspects. We share the most important findings with you so that you don’t have to make any mistakes.

1. One idea alone does not make a successful startup

Having a good idea is a major prerequisite for starting a business. But how do you know what a good idea is?

Basically, many founders adhere to the motto: “Make something that people WANT”. In fact, this is not enough for a successful business model. The challenge you actually have to face is called “Make something that people WANT TO PAY FOR”. Every idea must be translated into a concept for which potential customers are willing to spend money. Without this approach you might have a good product, but not a really good business model. The first, resource-saving prototype should therefore iteratively test customer acceptance and corresponding satisfaction of needs in advance with limited functionalities (according to the methods of Eric Ries’ Lean Startup).

Note: An idea alone does not make a successful startup. It depends much more on the combination of idea, implementation and the team. As so often in life, a certain amount of luck always plays a role.

1st advice: “Good Feedback Is the Key to Improvement”

Good feedback is important if success is not to depend solely on luck. Feedback, however, should not only be captured from customers, but also from various stakeholders. These can provide helpful tips, suggestions or further contacts. Don’t be afraid your idea could be stolen immediately – if someone is more successful with your idea than you are, then you haven’t done it well.

2nd advice: The idea – a real “painkiller” or just a “nice to have”?

The following values can be used as an indicator of success: You are on the right track if you get a third of potential users to pay money for your product or service within a month of the first contact. This, however, does not apply to B2B business models.

It is also helpful to keep up to date with the latest industry-specific and cross-industry technology developments, because every new technology is an opportunity: looking for gaps in the way things have been done and how they could be done. In this context, find out which (added) value can really be created with your idea! Is it a real “painkiller” or just a “nice to have”?

3rd advice: Competition is GOOD for now.

With regard to the competitive situation, it is fair to say that competition is good in itself. The absence of competition is rather bad, as competitive advantages are not clearly presented and potential customers may misjudge the added value of the solution. For the subjective price sensibility this situation also supports the decision. Accordingly, the claim should be: Simply try to always have at least one unique selling point compared to your competitors – in the majority of the dimensions of your business model.

2. “Great things in business are never done by one person. They´re done by a team of people.” – Steve Jobs

When putting together a successful team, it is particularly important to combine interdisciplinary competencies. A triangular relationship of the following competences usually proves to be successful:

  • Design
  • Development/Software Developer
  • Sales

Founder teams of three people with different competencies can only rarely be realized. However, the rule of thumb is that founders should have strengths in at least two disciplines. Ideally, the co-founder should be strong in at least one other discipline. A famous example of this combination are Steve Jobs and Steve Wozniak: Steve Jobs was a strong salesman and had a very strong sense of design. Steve Wozniak, on the other hand, had great technical expertise.

1st advice: Design Tools

Nowadays it is possible for every layman to develop a design with tools like Sketch or Adobe Illustrator. This is especially important for the development of a first prototype or clickdummy to provide the potential customer with an appropriate “look & feel” of the service or product.

2nd advice: Learn “Development”

If you have no technical background as a founder, you should have at least one co-founder on board who has this knowledge. Our advice for you: In this day and age it can never hurt to learn simple HTML on the side. Therefore there is already a large selection of private providers like the CodeAcademy. Furthermore it is helpful to have knowledge of “Ruby on Rails” and “Technical Dept”. Technical Dept means additional development effort in programming. This can occur when code that is easy to implement is used at short notice instead of using the best overall solution.

3rd advice: Know your sales terminology

This is about selling, selling, selling! You should understand your own “product/market-fit”, growth (5%-7% per week; over 10% is very unusual) and the analogy of related business models. From a marketing point of view it is logical to have knowledge about the corresponding market (B2B, B2C), distribution channels (online, social, classical communication) and market dynamics.

In this context, you will always come across technical terms and abbreviations that (for Starters) are explained below:

  • CAC = Customer Acquisition Costs: How much money do I have to put into marketing until someone buys my product?

  • CLV = Customer Lifetime Value: How long will a customer pay me money before they change their mind and go to another provider?

  • Retention = How addictive is your product or service?

  • DAU/WAU/MAU = Daily/Weekly/Monthly Active user: How many daily, weekly, monthly permanent users do you have?

  • Understand your traffic sources: Where do your users come from?

  • CR = Conversion Rate: How many of your users become customers?

  • ROI = Return on Investment: Ratio between the net profit and the investment costs resulting from the investment of some resources.

No matter what tips and recommendations you may find useful or not in this article, Campus Founders is always there for personal advice and can also refer you to other experts. With us you can meet like-minded people of the startup scene in the Heilbronn area and you can network with each other, ask questions, profit from the expertise in our network, look for reinforcement for your own startup team, and and and!

To be continued…

Next week in the second part there will be more about typical founder traps that will help you and your business not to do the same mistakes. Stay tuned!