How Not to Start a Startup

10/11/11Follow @joechung

Startups can be a lot like first girlfriends (or boyfriends). You fall madly, passionately in love, think of them 24/7, talk, walk, eat, drink, breathe them, put everything into them and beyond, but sometimes, despite the passion, it just doesn’t work out. And, actually if you’re willing be to be brutally honest, in retrospect the person was often a serious pain in the ass.

So given that you’re going to start a startup, despite the risks of financial ruin, public humiliation, and watching years of your prime swirl down the drain, here are a few things you should consider NOT doing along the way! I realize of course, that these thoughts are going to be totally useless if that glint of love is already shining in your eye—nothing is going to stop you from trying your idea, and nothing should, least of all a blog post! But maybe if it doesn’t quite pan out and you’re still one startup away from being the next Zuck, then you might dust this posting off when you’re looking for that next big idea.

1. Don’t start a company in an ebbing tide.

Startups are inherently risky. Just look at the companies that seemed to have everything right—dream team management, great technology, plenty of money, etc. etc., and they still go belly up at an alarming rate. So given the risks involved, I think it makes a lot more sense to start a company in an industry that is clearly going to grow over the next few years than one in a flat or even falling sector. Can you build a great, successful startup in the print magazine business today? I’m sure you can. But it’s probably going to be an uphill battle, considering circulation is in a free-fall and most magazines look more like leaflets than the former thick glossy phonebooks of our salad days. The point is that in a robustly growing market, you can deliver a less-than-perfect product or service and STILL get traction. Customers tend to be a lot more patient with startups that only solve half their problem if the alternative is solving none of it.

2. Don’t do something you know 20 other startups are already doing.

This is just simple math. In virtually any startup arena, there are only 2 or 3 companies that have happy endings to their stories. The rest get pretty quickly forgotten, but believe me, they were there plugging away just as hard as the winners. If you already know there are several other teams pursuing more or less the same idea, you should ask yourself if there isn’t another sector that isn’t quite so crowded. This is especially true if there’s been some sort of catalyzing event that got “everyone” buzzing in startup world, for example, the advent of Groupon. One reasonable litmus test: if you find yourself continually defending the differentiation of your idea by narrowing it to smaller and smaller markets and use cases, you’re probably in an overcrowded space.

3. Don’t think too small.

Basic math again. Startups with small ideas are probably about as likely to fail or succeed as startups with big ideas. So all things being equal, you may as well choose a startup with … Next Page »

Joe Chung is Managing Director at Redstar Ventures, a company that creates companies, taking them from the earliest stages of ideation and growing them through their first institutional funding rounds and beyond. Joe tweets from @joechung. Follow @joechung

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