Thanks to the success of startups like Facebook, Instagram and Pinterest, droves of digitally savvy 20 and 30 somethings have been bitten by the entrepreneur bug. However, over 75% of them will fail.

Inspired by fantasies of venture capital and fat bank accounts, Apple’s App Store, for example, receives over 26,000 submission per week. This is evidence of the sheer volume of wide-eyed startups attempting to strike it rich as entrepreneurs.

A 2012 study by Harvard Senior Lecturer, Shikhar Ghosh, found that out of nearly 2,000 companies that received venture funding between 2004 and 2010, Almost 75% of them failed.

What are the reasons that so many entrepreneurs fall short? Let’s explore the 10 biggest mistakes startups make, and that you should avoid.

1. No proof of concept
Every new idea should be thoroughly vetted by the audience it’s targeted to. Keep up-front expenditures low by developing a prototype or splash page and marketing it to your desired end user. By monitoring overall interest, you can determine whether or not you have a potentially viable product. There is no reason to dump substantial amounts of money into an untested and unproven concept.

2. No View of ROI / Profitability
One of the first questions any experienced Venture Capitalist will want answered, is how will they make a Return on Investment? You should have a clear vision of how you will monetize your concept, otherwise, it’s just pie in the sky. For example, if your idea is for a mobile Application, will you rely on pay-per-download? What is your strategy for in-App advertising? These avenues should be carefully considered before approaching investors. Investors will give you a window to pay them back, and once the door is closed they will swiftly exercise an exist strategy which typically involves taking a large stake in your company.

3. Ignoring the competition
We’ve all been there. You come up with a brilliant idea and declare “this has never been done before !”, only to spend ten seconds on Google to realize your idea wasn’t as original as you had thought. Always spend significant time researching to find out if your concept is unique. If others are doing something similar, create a competitive advantage. You need differentiation in order to grab people’s attention. Otherwise, you’ll be swallowed up by those who have come before you.

4. Lack of niche focus
In a saturated market, one of the best ways to set your concept apart is to focus on a niche. This means avoiding general consumer targets, and focusing on offering a solution to a dedicated group of consumers. A great example is the startup, which allows San Francisco car owners to rent out their vehicles on an hourly basis. Getaround’s target market is car owners and drivers in San Francisco. They launched in a single city, rather than trying to spread themselves too thin. This concept has been successfully used by the likes of and Zipcar.

5.Thinking it’s easy
Far too many startup founders allow their emotions to drive their actions. While confidence and drive are fantastic qualities, don’t operate with blinders on. The chances of failure are very real, and you can’t allow your ego to tell you otherwise. Stay grounded and make sure you combine emotion with logic and reason.

6. Not having the skills needed to be an asset
Looking at the history of profoundly successful tech startups, one common denominator is most of the founders were direct contributors to the development of the products. From Facebook to Twitter to Instagram, coding and marketing of the initial product offering was (partially or fully) done directly by the founders themselves. If you expect to retain a large percentage of your startup, investor’s will need to see you as an indispensable asset.

Ask yourself this: if I ask an investor to pay me an annual salary, what will they be paying me to do? Perhaps you’d like to just sit back and serve as CEO? In that case you should have a track record of having done this before, otherwise, you’re asking for people to front you money in exchange for their trust that you know what you’re doing.

7. Lack of core user base
Even after you’ve completed your business plan, branding and product development, you’ll need to establish a core user base before going after venture capital. Why? Well, it’s much easier to convince an investor to give you money if you’ve already proven your concept by registering real users. Pinterest founder Ben Silbermann went so far as to personally write to the site’s first 5,000 users, even meeting in person with some of them. This aggressive and hands-on method of user acquisition paid off big time for Mr. Silbermann.

8. Lack of marketing budget
Pulling together enough resources to fully launch a tech startup is no easy task. However, what many fail to consider is that a new product is often only as good as its marketing. How will you reach consumers who have never heard of you? What message will you offer to convince them to use your product? A well-crafted marketing strategy will lay the groundwork for determining how you reach your target market, and get the most bang for your buck.

9. Taking risks that outweigh the consequences
I have seen young entrepreneurs quit their jobs and even sell their homes to finance their pipe dreams. Before taking such a monumental leap of faith, tackle the initial steps of establishing a sound proof of concept and determining the viability of your product. Most reward does not come without risk; however, logic must enter the equation at some point.

10. Being afraid to fail
Gloomy statistics and warnings aside, there is often more to gain from trying and failing than never trying at all. In fact, most successful entrepreneurs experiences a great deal of hardship before finally hitting it big. Always stay positive and realize that life’s biggest lessons are learned in the face of adversity.


by Fuze July 29, 2013