Startup to Scaleup
By- Pardeep Bapat
Co-FounderCo-Founder
QuantAscend Consulting
Pitfalls to avoid
As an entrepreneur, starting a company seems like an exciting adventure. Having an innovative idea, a dedicated founding team and the motivation to build something revolutionary is every founder’s dream.
However, the harsh reality is that companies have 90% Mortality rates within the first 3 years, hence early-stage startups bear the highest risk of failure rates compared to a growth stage enterprise. The odds are stacked against you from the beginning, facing the harsh realities of why startups fail is necessary for the Founders. One needs to make a probability assessment of survival and reconcile with the reality every minute of their existence to GROW.
Here are a few TOP reasons why Early-stage Enterprises fail-
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Measuring the Product-Market fit (PMF):
Right after graduating from Seed to PMF validation stage, start-ups often fail to recognize the Blind spots they are in-
Is the current validated product/services scalable?
Is the customer value proposition seen by the buyer as much as the seller?
What unit economics can make this workable and scalable over time?
Study suggests that startups take 2-3 X the budgeted time horizon to cross this stage. The assumptions on Market scoping put in a business plan need to be debated within the team or with the mentors/advisors to criticize themselves and adapt. -
Financial management:
A Financial Health Check of any company can give an insight into the health of a company.
After the market understanding the startups find themselves in the pitfall of insufficient finance management. Without adequate planning and execution of cashflows, it can put the management under a tremendous amount of stress. Cash is the King! accrue internally to fuel the growth or raise Equity/Debt to do it, in line with the strategy. This should be a tailor-made plan than a standard copy-paste activity looking at other successful stories one comes across. Hence, financial control & management becomes a key activity in the evolution of such “Startups” to “Enterprises”. -
Human Resources:
It’s the people who build the business, not the business itself.
Startups that make poor hiring decisions may end up with employees who lack the skills, motivation, or even the purpose necessary for the company's growth. The skills and the requirements should be a match to avoid this pitfall. Hire people with a growth mindset and create incentivizing compensation mechanism to fuel the growth of the company as a priority. -
Pivot:
Startups that pivot 1-2 times have 3.6x better user growth and 2.5x more money flowing through their doors.
With the product/service development, filtering, and creating the correct team startups may need to pivot their core business model or strategy to stay relevant. Failing to recognize the need for a pivot or being resistant to change can lead to failure. Successful startups are willing to adapt to market changes. The crucial point here is to identify and understand which core strategies are negotiable and which are static to the enterprise. -
Focus & Priorities:
Starting a business requires a tremendous amount of perseverance as much as passion. But to sustain a business requires even more; it’s easy for startups to become distracted by newly found success & opportunities to lose sight of their core vision & mission. Simply put, fundraising success should add an extra pound of responsibility on every shoulder than just celebrating the external validations and basking on the glory of it. -
Competition:
Competition study is an elaborate and ever-evolving top-of-the-mind subject for successful companies of all scales. Today companies that don't share the competition landscape can potentially even replace the companies overnight. The Tech and level playing field market can be a double-edged sword.It is crucial to differentiate the offering and develop a competitive advantage to stand out in the market for any organization, especially the early stages.