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The Five Mistakes Tech Startups Make in The First Five Years

Updated: Jul 9

Nine out of ten start-ups fail.


Yes, you read correctly. 10%-20% of startups fail within the first year. About 30% fall in the second year, 40% are out by the third year, and if you make it to the fifth year, your startup graduating class has lost 50% of its peers.


I do not wish to discourage you with these statistics. On the contrary, the more knowledge you gain, the more likely your company will achieve greatness. Failure is a part of the business. Success as a startup means navigating through and around failure.



Neglecting the importance of core values and beliefs; hiring the wrong team; general planning, weak preparation, and little research; unrealistic expectations; and Lack of promotion and marketing are five mistakes that lead to startup failure.


Don’t worry; I will teach you how to navigate the five mistakes most startups make in their first five years that lead to failure.


As a member or founder of a tech startup, you need to know what NOT to do. So how do you remain in the top 50%? What did these failed startups fail to do?


Chances are, you have been scouring the internet for the past few hours, days, or even weeks, for advice on keeping your budding startup from dying out before it gets the chance to bloom.


Good job!


By reading this article, you have taken the first step towards a successful startup.


Researching, preparing, and ransacking the internet for advice and tools is EXACTLY what you need to be doing. Gathering information and implementing techniques of other startups and successful businesses is wise. Internalizing the common mistakes failed startups made is equally as intelligent.



Mistake Number One: Neglecting the Importance of Core Values and Beliefs.

  • Failure to acknowledge social media checks and balances


Say a key employee is deciding between two different suppliers for a product. You can use the company’s core values to determine who to hire. For example, one supplier may be more sustainable while others may focus on using materials sourced from areas worldwide. Depending on what values your company vows to uphold, hard decisions become easier to make.


As a founder, the foundation of your company is you. The values and morals that guide you in day-to-day life should also play a significant role in running your company. The values and beliefs of your company will determine who you hire, how you train and treat employees, financial management, and the kind of customers you attract.


With a set of values to guide your decisions, your company will be able to allure like-minded customers, partners, and employees.



“Dedicate yourself to a core set of values. Without them, you will never be able to find personal fulfillment, and you will never be able to lead effectively.” — Kenneth Chenault.

(Kenneth I. Chenault was the CEO of American Express for 17 years (2001-2018) and is the third African American ever to lead a Fortune 500 company. )


IT IS OUT OF CORE VALUES that you find fulfillment.


First, think about how you define success. Then instill in your employees the company’s definition of success. The more specific you are, the more organized your company will be. The more organized your company is, the easier it will be for employees to follow and for you to lead effectively.



Social media has created unofficial checks and balances for companies.


For example, if your company fails to conduct business under the values you have set, the public will take action and react without hesitation.





Similarly, if you do not have any core values, the company’s actions can become contingent on who the company is speaking to at any given point.



The problem with neglecting core values with a business comes down to authenticity. You will not be able to please everyone. People will find a reason to object to your company no matter what you do. So instead of worrying about who likes you, worry about the values for which you want to be known.


Companies that bend to the will of the masses and sacrifice morals for gain fail in the end.


When the public takes notice, social media can demolish your company. Keeping to a mission statement and vision statement assists in keeping your company aligned with the values you find most important by holding the company accountable.



Values drive actions and decisions. This is less about business and more about how the mind works. If a person’s ultimate goal is to be liked, then the person will say what they believe the other person wants to hear. Depending on the audience, the person will swap their values and personality like a salad for fries at a diner.



These kinds of people are afraid of being themselves because their core values are skewed. As a result, a person with skewed or no core values will appear devious or “fake” in the social media world.





Diversity, equality, sustainability, passion, accountability, integrity, honesty, service and dependability, are positive core values.


Successful business such as Coca-Cola, Walmart, and Trader Joe’s run their companies with the core values listed above.



Mistake Number Two: Hiring The Wrong Team

  • Founders

  • finding the right people

  • Keeping A Healthy Work Environment

  • Hiring

  • Hiring

  • Hiring


“Team” is another word for “company,” which is another word for “house,” which is another word for the building that shelters a family. Alternatively stated, the people you hire to form your team will become your family.



Startups face a multitude of problems. One of the most profound problems a startup tech company will have is its founders, management, and employees; yes, everyone involved.


Founders


Founders have a special connection to the company as they are the ones who have nurtured it from idea to fruition. Founders who have been the sole provider for their company may have difficulty accepting help and advice from others. This difficulty will result in bias and a limited perspective.


Leaning on others and seeing things from different perspectives will only help the company grow in new yet welcome ways.


“Without community, there is no liberation…but community must not mean a shedding of our differences, nor the pathetic pretense that these differences do not exist." Audre Lorde

(Audre Lorde was a feminist, writer, and civil rights, activist. Her Papers were incredibly influential during the 2nd wave feminist movement).


Finding The Right People


No one can run a company alone, nor should anyone try. By hearing the opinions and voices of your team, you will be fostering the healthy communication required to rank in the top 50%.


Finding the right people can be stressful in many ways. One mistake that many new founders make is hiring based on qualifications rather than a personalized fit. Most of the people you find will have the technical abilities required to complete the job. Startups are fragile. There is more to hiring than a resume.


Recall the first topic in this list; core values and beliefs. If you hire a fantastic Chief Marketing Officer with values that conflict with yours, you may quickly notice that your CMO is incompatible. As a result, you will need to replace this person, hire and train a new person and potentially shatter a relationship.


“When I find an employee who turns out to be wrong for the job, I feel it’s my fault because I made the decision to hire him.” ­­– Akio Morita

(Akio Morita Born: January 26, 1921. Died: October 3, 1999. Japanese businessman and co-founder of Sony.)


The people hired to work for a company represent the company. The company is who it hires. When you hire someone, you are accepting the responsibility of the hiree including their actions, their values, and decisions. For this reason, hiring must be taken seriously.



When a guest eats at a restaurant and receives bad customer service, the first comment is, “I am never eating at this restaurant again.” The employee is an extension of the restaurant. The same can be applied to all businesses. Make sure that the people you hire reflect the environment you would like the company to inspire.


Hiring Hiring Hiring


Hiring is one of the top mistakes startups make across the world. Is it the single most mentioned mistake in various blogs and articles on successful startups? Do not make the same mistake.


You should pick your team as a casting director would cast their award-winning film. Be specific and upfront about expectations. Inquire about their personal goals. Find out their values and work/life patterns. If you need someone who can answer emails in less than an hour, make sure you hire someone who keeps their notifications on loud.


Working with an organization, such as Allied Teams, that specializes in building productive and healthy teams will prove to be a significant contributor to your companies success.



Mistake Number Three: General Planning, Weak Preparation, and Little Research

  • Lack of Internet speed, equipment, and tools

  • Having No Plan Alphabet

  • Neglecting to Balance Routine And Long-Term Tasks

  • Failure to Research Audience and Competition


Now that you have your morals in check and a personalized team, you need to plan, plan again, and plan some more. As a tech startup, problems, and unforeseen predicaments are a right of passage. However, there is such a thing as a good problem vs. a bad problem.

Needing to hire a team of accountants because too much money was made last year is a good problem.


Losing a deal because your internet connection was too slow and you missed the video meeting is a bad problem.


Lack of Internet speed, equipment, and tools


The equipment and tools the company can use have a direct impact on the quality of work. You do not need to have a $10,000 internet connection or every SEO tool the web has to offer. You must invest in your company enough so that a lack of resources does not hinder performance.


The ultimate goal is to make money, right?


Right.


If money is due to a lack of resources, then your company needs to upgrade.


If your company is spending more money on upgrades than it is making, you need to rethink your company strategy.


Think about it like this. Your company starts at level one, meaning you can provide the services or products you claim to have. You also have Level one (Bare minimum) equipment and resources. Therefore, your company should be making level one profit ( breaking even with a bit of profit to show Mom).

Once you can successfully do what you say your company can do, you can start looking into upgrading to the next level.


As your company grows, more opportunities to spend money on tools and equipment will arise. However, spending money will NOT make your company successful. Instead, make sure your company is equipped with the appropriate tools to make a profit at all times.


Having No Plan Alphabet


“Plans are nothing, planning is everything” - Winston Churchhill/Dwight Eisenhower/others.

By this point in your career, you have heard the words “planning is everything”

at least once or twice. What does this mean in practice? You need to have backup plans for your backup plan’s backup plan.


It is common for plans to fall through or not work out the way you thought they would. It is vital to have a plan A, B, C, D, E, F, and G to start. Do not be so naive to think that your first plan will work without any issues. You will be part of the 10% that vanishes within the first year.


Neglecting to Balance Routine and Long-Term Tasks


Long-term plans are easy to neglect because the outcome is expected. However, to ensure the long-term goal is met, routine, short-term goals most reflect the long-term goals. By doing so, you are actively working towards your long-term goals at all times.


For example, your company wishes to have 40,000 more followers on Instagram in the next 2 years. An example of a routine would be following a content release schedule and adjusting tactics based on engagement bi-weekly.


It is not enough to have short-term and long-term tasks and goals if the company is not reaching those goals on time or even at all. Encourage employees and yourself to be proactive about meeting deadlines and working smarter, not harder.


Research is an example of working smart.


Failure to Research Audience and Competition


There is no such thing (within reason) as to much research. As a founder or a member of a tech startup, you need to know your competition and your audience. You need to know more than the general; age, gender, educational background, financial background, hobbies, interests, location, etc.


You need to know who you would invite to your company brunch, where they would choose to sit, what they would eat, and what they would talk about between bites of their eggs benedict.



Being in the know about your audience opens opportunities for you to influence them to buy your product or use your service. Think about how many times you’ve been told to watch a show or eat at a restaurant but never did until someone finally convinced you.


For the longest time, I did not want to watch Game of Thrones. I was told by at least 4 different people to watch it because I would love it.


I do love it.


But, it was not until my cousin explained to me that there was a woman (Spoiler) who rode dragons that I was finally convinced.


My other friends knew I would love the show. But they never brought up the dragons. I love dragons. That little detail that my cousin referenced changed my entire opinion about the show. It was small and, for the most part, insignificant (until much later in the show), but it turned me.


Details about your audience make or break their opinion about your company. For example, if even one of my earlier friends had mentioned dragons, I would have instantly watched The Game of Thrones.


Do not be like my four friends. Figure out your audience’s “dragons.”


“Keep your friends (customers) close, and your enemies closer” - Sun Tzu.

(Chinese general, military strategist, writer, and philosopher. Born: 544 BC. Died 496 BC.)


The same applies to your competition. Knowing your competitors is equally-if not more important than knowing your audience. You can learn from your competitors and learn about your company as a result.


Go to the websites and social media accounts of competitors. Go to their blogs and reviews. Be humble and acknowledge in what areas they have the advantage. Also, take note of what you are doing better and lean into your strengths.


Mistake Number Four: Unrealistic Expectations

  • Being Unable to reach Goals

  • Lack of patience


You know to make plans, backup plans and, how to set long-term goals. Short-term tasks are being worked on, but the company is still failing to hit target goals.


Expect your company to have expectation issues. By definition, a startup is a young and hopeful child who wants to be and do everything when they grow up. The problem comes when those hopes and dreams create dauntingly unrealistic expectations for you and your employees.

Being Unable to Reach Goals


Make sure that your goals are attainable for where you are as a company. Setting unreachable goals will lower company morale and discourage you and your company. If you believe that the new goals you are setting are too easy, try implementing some reach goals in addition to your new manageable goals.


Reach goals are similar to bonus points; hitting them should only encourage the team; however, failing to reach them should not negatively affect your long-term goals or team morale.


Lack of patience


“The key to everything is patience. You get the chicken by hatching the egg, not by smashing it.” - Arnold H Glasow.

( Arnold H Glasow- Famous Businessman from the USA. Born: 1905. Died:1 999.)



Having healthy expectations correlates to having patience. 50% of all startups fail after five years. These failed companies ran out of patience and expanded too quickly due to unrealistic expectations in the long-term plan. Alternatively, the company may have abandoned the long-term plan impulsively, resulting in a swift demise.

Mistake Number Five: Not Enough Promotion and Marketing


You now have a team that shares your core values. You hired a well-prepared with measurable goals and plans created using diligent research. Expectations are reasonable and achievable. So why is the company still not seeing adequate growth?


Promotion and marketing is the difference between the raw and cooked chicken. One is edible, and the other is just dead. Do not kill the chicken you spent so much time hatching to leave it uneaten (see "Lack of Patience ” section.)


Promotion and marketing is its beast to tackle. Startups end up in the bottom 50% because they market and promote poorly. Utilize SEO when posting to social media. Keep up with trends and participate in conversations happening beneath your fingertips.


Get personal with your clientele and gain their loyalty and respect by posting consistently. Do not overpromote. Instead, dive into the interest of your audience and see how you can make their lives better through listening.



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