Challenges vary depending on what business, industry, scale, market and team we are talking about. However, there are a few areas that cause trouble for start-ups more often than others. Today we let you in on ways to avoid such mistakes.
1. The product does not respond to the needs of users
Founders are often enthusiasts of some field of knowledge, life or business or experts in a specific area. Sometimes they fall into the trap of this specialisation and assess the market demand according to their own needs and feelings. As a result, they become convinced that their solution is exactly what the world needs. Building companies and technical solutions to solve a non-existent or insignificant problem leads to painful disappointments when there is no customer interest in the market.
To avoid this mistake, you need… Self-discipline. Do not lose sight of the key success factors of the product, such as the size of the target market, existing or potential USPs, other ways to address the same problem. It is also crucial to keep in mind the answer to the following two questions – is the issue under consideration important enough for customers to want to pay for the tools used to solve it? And will they be willing to pay as much as we would like to earn?
How does a venture builder help?
“A venture builder verifies the investment hypothesis in various ways, i.e. examines the importance of the problem and the potential of the proposed solution. Among the activities are: reaching out to potential customers, competitive analysis and verification of the size of the markets on which the company wants to operate.” says Michał Wrzołek, Senior Investment Director at Tar Heel Capital Pathfinder.
2. A “Heath Robinson” product
Do you want to create a product that’s absolutely perfect? Very well! Keep in mind, however, that a perfect product is one that customers want and need, so the bells and whistles might be unnecessary. It happens that founders – especially those specialising in tech – put a lot of effort into equipping their product with as many functionalities as possible. Meanwhile, overdeveloping products usually turns out to be unnecessary, and the excess of functionality makes it difficult for users to use the tool, instead of making it easier.
And the effect? Start-ups invest resources in developing unnecessary features, losing time and thus an advantage over competitors.
The simplest and best solution to avoid this type of situation is to work closely with customers at the early stages of solution design. The advantages of this approach have been common knowledge for years and yet many founders still do not use it.
How does a venture builder help?
“The founders who cooperate with us have at their disposal the teams of experienced designers, UX and product owners who help develop the product taking into account the needs of users” explains Arkadiusz Seńko, Managing Partner at Tar Heel Capital Pathfinder.
3. Lack of quick verification of assumptions with the market
Engaging customers at the earliest possible stage of the project – even when we do not yet have a finished product – makes it easier to create a solution that meets their needs and which the market will accept with interest. Involving target users in the development of the product also causes them to feel like its “co-owners”, which in turn increases the likelihood that they will be among its buyers or regular users. This approach is particularly effective for more expensive B2B products – as a result, the first customers can be sure that the product meets their needs.
Such a strategy has way more advantages and helps avoid mistakes that, if made at this stage, can prove to be a real nuisance.
If we do not lead to a quick verification of our assumptions about the product with the expectations of our target, we risk building a solution that does not have the right product-market fit, i.e. matching the product to the needs of the market. In addition to the obvious sales-related consequences, it is also worth remembering that when going to customers with a sub-optimally designed product, we can “burn” it. By showing the world an innovative solution we reveal our hand, so if it is necessary to go back to the design stage, we can give the competition a chance to overtake us. The negative reaction of our customers also has a negative impact on the motivation of the team – every person co-creating a new product would like to feel that it positively affects the lives of its users and wants the product to be received with enthusiasm.
Interaction with customers also has many other advantages: among other things the organisation can learn to work in a transformative way, actively listen and adapt activities to the key needs of customers and solve specific problems. This, in turn, allows to build customer trust, which will pay off in the long turn.
A great example of an organisation that has adopted such a strategy is Plum Research, a provider of solutions for analysing audience data, cooperating with major film studios, television broadcasters, talent agencies and the media. A large film studio, whose representatives worked closely with the Plum Research team for half a year, had a direct influence on the shape of their product and its functionality. As a result, the final product introduced by the startup to the market perfectly met the expectations of not only this but also other film producers and was very well received by the market.
How does a venture builder help?
“We offer the support in the form of a team of designers and UX specialists who have experience in designing solutions tailored to the needs of customers. We help introduce tools for collecting feedback from customers and A/B tests of functions and options. We facilitate access to a network of people with industry experience, from whom you can collect feedback about the product. In situations where a pivot is necessary, the support of our strategic advisers and product design specialists makes it easy to quickly make changes to the strategy and product.” says Michał Wrzołek.
4. Multi-level management – a higher level
One of the most difficult tasks faced by founders is multi-threading in management, i.e. managing the company and the team on many levels and in many perspectives. The CEO must make decisions of long-term importance (concerning aspects such as strategy or raising funds) along the ones having to do with medium- and short-term future. In addition, of course, there is also supervision over their execution.
Simultaneously receiving a new round of financing and managing everyday life is objectively difficult. In addition, there are also personality traits and a tendency to stay in the comfort zone, and thus devote more attention to those aspects of the business in which we feel more confident. Some founders are great at operational activities, others are much better at creating strategic and long-term visions. Running a company requires a combination of these competences.
The solution may be to gather the appropriate set of competencies within a broader management team. However, a more extensive structure also generates higher costs, and finding specialists with matching personalities and competences that complement one another can prove a significant challenge.
How does a venture builder help?
Kamil Sabatowski, Interim CEO at Portfolio Companies explains that “as a venture building organisation, we support founders in managing the company at various stages of startup development. One of the forms of this support is to help by temporarily supplementing the missing competences, which ensures the smooth functioning of the company. Another is the structuring of issues to be solved and planned actions”.
5. Lack of a helicopter view and competency deficiencies
Another challenge in running a business is the ability to objectively look at the company’s situation, including competence gaps. The lack of self-criticism in this area makes it difficult to build a proper organisational structure. Contrary to appearances, this is a fairly common problem in start-ups, where – especially at the beginning of their activity – the founders have limited time, resources and skills to construct an optimal team with complementary and complete competences.
How to deal with it? It is worth using an experienced advisor who is able to look at the organisation from the sidelines and suggest how to organise not only the work of the management team, but also the organisational structure of the entity, which will allow one to develop the business without obstacles. We must not forget that an organisation is a living organism that should change depending on the problems encountered, bottlenecks or needs.
[How does a venture builder help?]
“For many young businesses, strategic consulting on the design of the organisational structure turns out to be crucial for building a healthy entity. As a venture builder, we take advantage not only of our own competences and many years of experience of our team members in building and scaling businesses, but also make use of and facilitate access to a network of experts in attracting investors. They are able to look at the business completely objectively, which helps to avoid making basic mistakes at a crucial stage in terms of the long-term success of the organisation.” – adds Arkadiusz Seńko.
Sounds interesting?