To be successful, avoid these common first-time founder pitfalls

When I first learned to drive a car many years ago, my father would point out things to watch for, like a driver likely to swerve into my lane or a car in front of me about to hit their brakes.

After years of driving, you develop a 6th sense for danger, he told me. Although I was annoyed by his constant backseat driving, he was inevitably correct.

The same is true for running a startup. After building 5 startups over 25 years, the unexpected becomes expected. I’ve become so used to anticipating pitfalls, that I expect every founder is doing the same.

When working with first-time founders, though, I’m always surprised when they crash straight into a giant pothole in the road that’s visible from a mile away. Knowing what to expect, unfortunately, can only be learned from experience, which is why experienced investors gravitate towards experienced founders. And why an experienced board is critical from the start.

At the risk of backseat driving, here are the 7 pitfalls I see tripping up first-time founders, while experienced founders know to anticipate and evade.

1. 90% finished means the product is halfway to release

When the software is almost feature complete, first-time founders begin scheduling customer trials and ramp up the marketing engine. They’re surprised when release has to be delayed, then delayed again, and again. Testing and debugging is half the job. Making a UI intuitive to outsiders is more difficult than writing the functional code itself.

Experienced founders know there’s a huge gap between a prototype that works under controlled circumstances and a commercial product that can’t break under any usage. When the product is 90% finished, it’s only about halfway done.

2. Sales take forever to materialize

When the product is ready, customers may line up for a trial, but getting to a large purchase will take a long time. If it’s a B2B product, customers have to schedule a trial, test the product, write a report, budget for purchase, and push a purchase order through the procurement process. What ought to be done in 3 months usually takes a year. And that’s just to get to a small initial purchase.

Then they have to use it in a production environment for months and expand to wider usage for another year before even starting planning for full deployment.

Experienced founders know the time to get to a large purchase is not 3 months but 2–4 years, with many milestones and pitfalls along the way.

3. Sales is everyone’s job

The first hire of inexperienced founders is a head of sales. They think the solution to sales not materializing quickly is to hire a professional sales person. It never works out.

Experienced founders know that until the company reaches at least $2M ARR, sales remains an experiment in product-market fit. Everyone in the company, especially the CEO and CTO, needs to be talking directly to the customers to understand needs, usage, and constraints.

4. Vendors will promise the moon and fail to deliver

The naivety of inexperienced founders would be adorable if not so frustrating. They outsource product development and are shocked when it doesn’t work. They expect contract manufacturers to solder all the electronic parts correctly, and use the correct chips. They assume critical resources will be available when they need it without a six month delay and critical orders won’t get lost in shipping.

If being a founder sounds glamorous, you haven’t had the job. All of the day and most of the night is spent dealing with one emergency after another. I know I’m dealing with an experienced leader when the title on their business card is “chief firefighter” instead of CEO.

Experienced founders aren’t surprised or caught flat-footed when inevitable problems crop up. They are ready to deal with every contingency.

5. Hiring (and firing) is the toughest job of all

Employees are employees, not founders. They may believe in the company’s mission, but in the end it’s a job. If they find a better job, they’ll leave. And often at the worst time possible.

Culture and personality clashes can be fatal when there’s only 10 employees. A great coder may not be a great manager as the company grows. People used to working at big companies may not be able to wear many hats needed at a startup.

Many employees start as personal friends, and all will become friends soon. It’s gut-wrenching, but if they can’t do their job, there’s no choice but to politely ask them to leave.

First-time founders often have little experience managing employees and don’t realize how hard it is. Experienced founders usually have a network of people they’ve worked with in the past and know exactly who to recruit for each role.

6. Cutting corners will return to bite later

There’s a strong temptation to put out a good-enough version of the product as quickly as possible to generate revenue that will attract investors. To set up a corporate entity as an LLC because it’s cheaper and easier than a Delaware C-corp. To not bother putting a proprietary rights agreement in place, or filing for patents because lawyers are expensive.

Code can be patched, but the architecture needs to be right from the start or it will soon turn into a mess. Legal, accounting, and tax issues if not set up properly from the start can be nearly impossible to fix later. Patents have to be filed within a year of product release, if not sooner.

Experienced founders know that doing everything right from the start is well worth the cost of cleaning up messes later.

7. It’s a long, tough slog. Enjoy it.

All founders tell investors they expect an acquisition in 3–5 years. Inexperienced founders actually believe it.

Experienced founders know building a startup is a long, tough slog that will take at least 10 years. They’ve been on this roller coaster ride before and are doing it not for the promise of riches but because there’s absolutely nothing they’d rather be doing.

What happens when a brilliant but inexperienced founder raises $1 billion to develop teleportation? When one of the scientists disappears, his hacker friend, Ted Hara, has to find out before more people disappear.

Find out in my novel, To Kill a Unicorn, American Bookfest Awards finalist for Best Mystery Novel and Best Debut Novel of 2023.

Get your copy today! 
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