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Thursday, January 20, 2011

What Are The Key Challenges Faced By Start-Ups In The Launch Stage?

There are many obstacles, but most of these you can overcome by good preparation, or otherwise along the way. Preparation is key in the seed-phase, the phase before the launch stage .... in which you incorporate, write your business plan, get funding etc.

I would say there is one real key challenge in the launch stage: finding customers BEFORE you start your company.

The reason this is so important is twofold .... (1) having customers guarantees cash-flow, which is critical to survive, and (2) you are certain that there is demand for your product before you start. Many ideas that looked brilliant on paper have failed in the market because no one was willing to buy the product or service, no matter how great it might be.

To be more specific also consider these potential land mines .....

1. Homework - Often times start-up leadership is focused only on the technology or product and not with the business, financial, and marketing needed to make a viable long term business. It's the "build it and they will come" mentality of starting a business which doesn't fly well with today's VC community. Do your homework. If you can't, find help. But get it done before you go ask for money!

2. Focus - In order to do the homework, it takes focus. Too often again this conflicts or takes a back seat to the technology or product. The rationalization being that if the product or technology is awesome enough the rest of the boring business stuff "will just fall into place" later. Wrong again. Your starting a BUSINESS.. focus on that.

3. Mavericks - Its bound to happen in any start-up where experts are involved. While bringing incredible knowledge and experience to the venture, it generally comes at the cost of things like team cohesion and the ability to focus on business fundamentals. Mavericks tend devalue what they don't understand or feel is unimportant, this especially true when business or marketing tasks are involved.

4. Finance - Good pro forma financials are a must when pitching a VC or angel, yet many aren't willing to invest in a good financial consultant experienced in launch stage start-ups. This is a big huge mistake and could end up costing the company dearly down the road, assuming you even get funded in the first place. Be smart, find a good financial consultant. They are worth every penny.

5. Patents - Get that IP patent process going early and often. VC's like to see you have IP protection in the works. A company without IP is simply a reseller of other peoples ideas.

I would also recommend reading Venture Hack blog and checking out The Funded. Both are excellent sources of information for starting your own company and trying to raise capital.

Venture Hacks

The Funded

A final tip .... under promise and over deliver. Never promise a client something you cannot deliver. Manage their expectations and do your very best to exceed them.

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