Mistakes new startup founders should avoid – according to those who have made them

Last Christmas, Chet Kittleson was in the back of a van watching his start die in real time. His company, Tin Can — a reimagined home phone for kids — had shipped nearly 100,000 units over the holidays. Then the network went down. Support tickets range from 50 to 30,000 in one day. People who don’t know on Instagram are calling him a scam.

“Maybe I should fire myself,” he remembers thinking. “I might not be the right person for the job.”

He didn’t. Instead, at the Seattle Flow Startup Day last week, he shared how Tin Can survived the shutdown and has since sold hundreds of thousands of phones almost entirely through word of mouth.

Many startups fail, and according to CB Insights, 43% of venture-backed companies fold because they misjudged the product-market fit. The risks are emotional as well as financial, as 87% of founders feel lonely, and almost 60% worry every day about going out of business, according to a study published by Wilbur Labs published this year.

Kittleson and other veteran founders at Startup Day lived up to many of these statistics. They built and sold companies to Snapchat, Oracle, American Express and Palo Alto Networks for billions, combined. They also collected money for months with nothing to show for it, hired the wrong people, and saw their businesses almost collapse before recovering.

Here’s what new founders say they need to do it differently.

Build a company you care about

Kittleson’s previous startup, a housing marketplace called Homes Away, ticked all the boxes: an interesting problem, an experienced team, a sensible market. But when he started Tin Can, focusing on his childhood memories and watching his children struggle to maintain friendships, he couldn’t stop talking about it.

“If you get an opportunity to build a business, don’t do it unless you are ready to enter a burning building,” he said on Friday. “It’s really hard when you don’t care.”

When Tin Can’s business seemed to be on fire during the network shutdown, Kittleson lowered the cost of two-month subscriptions and wrote personal emails to customers. It was a bonding experience for the team, and a true way to connect with customers – physical letters of support came pouring in by post.

“I wouldn’t change a thing,” he said, “and I wouldn’t do it that way again.”

What begins with enthusiasm can lead to emotional decline and decline. It’s important to curb your emotional state in the day-to-day running of your company, says Ambika Singh.

He led his ten-year-old clothing rental subscription service Armoire to a whopping 300% growth, and the downturn of the COVID-19 pandemic nearly destroyed the business. His approach to building resilience is to continue to take “small risks” to learn how to deal with failure, not to “ride the waves” of disaster.

Overall, wins and losses don’t last long, says Maria Colacurcio, CEO of Syndio, a pay equity software company she has led for eight years.

“You get an amazing customer, you get funding, and the next day you still have to grind,” he said Friday. “Go ahead. It doesn’t matter, either way, as long as you’re focused.”

Raise money as a campaign – and ask if you need a VC

Marius Ciocirlan, founder and CEO of MarkOS, has raised capital in his companies and invested in more than 36 startups. His first promotion took six months to close $1 million. His second took 10 days to make $6 million, with no product and no money.

His first tip – don’t rush warm introductions. Whether it’s through LinkedIn Sales Navigator or cold emailing founders who have just closed seed rounds, they spend days to weeks nurturing connections before asking for an introduction.

The main indicator for early stage investors is whether other investors are interested, Ciocirlan said on Friday. Compress meetings into three- to four-week sprints. If an investor says, “that sounds good, let me send it,” don’t let them get away with it. Ask them directly how much they can commit to, depending on the lead. Write it down.

“That helps the intensity of your cycle,” she said. “And if you fill your entire circle, they probably won’t agree.”

Meanwhile, Rand Fishkin, who has launched three businesses since parting ways with Moz, challenges the overreliance on venture capital. He organized his company SparkToro as an LLC, and raised $1.3 million from about 35 friends and connections. In five years, the company recouped that initial investment, and investors now participate in profit sharing.

“The corporate asset class is wrong for most companies,” he said. “Failure rates are very high. They get a big portfolio. You get one company. That’s a terrible model.”

Describe your company from your first hire

David Shim sold his location analytics startup Placed to Snapchat for $200 million, served as CEO of Foursquare, and now runs Read AI. For him, hiring the first 10 people is the most underrated task in building a company.

Avoid employers, contractors and consultants early, he said Friday, and don’t make the mistake of a large company’s pedigree for quality. Operators with information from Google or Microsoft are generally rare, but they are used for unlimited resources.

What early-stage startups need is what Shim calls “super agency,” or people whose response to resource constraints is “I’ll get it.” Hire people who are hungry, have something to prove, and want to work with them for the next decade, he said.

When you’re ready to move in, says Shim, do more than you ask of the other person. At Place, he didn’t take a salary for 18 months.

“You have to live and breathe what you say,” he said. “You are a tradition.”

For Emily Choi-Greene, founder and CEO of Claly AI, ensuring that founders and early adopters are on the same page requires founders to know their “why,” whether that’s purpose, money or independence.

If founders don’t know their answer and aren’t ready to take the plunge, he said, they should consider becoming another founder’s first job. Also, risk-reward calculations can be in your favor.

Consider early adoption

Ian Swanson sold three companies for a combined $1 million and bought 16. His message to early-stage founders is one that most investors won’t give: start thinking about your exit on day one.

“Are you building a company, product, or feature?” he said on Friday.

Founders who skip that question often chase an IPO that never materializes. For many startups, well-timed acquisitions — achievable in three to five years — are highly probable and life-changing.

Research potential beneficiaries, know who is in charge of corporate development and build real relationships before you need them, he said. Swanson spent three years sharing market insights with the Palo Alto Networks team that eventually acquired Protect AI.

And forget the secret mode.

“Without talking a lot about what you’re doing,” he said, “the consumer won’t pay attention.”