What are the startup challenges that await founders when they start their venture? Starting a business is fun until everything starts going south. In this article, we will debunk the common challenges that most startups face globally. As a founder, you might face some or all of the challenges that we are about to discuss.
Before expounding on the startup challenges faced by most businessmen and women, let us first break down what a startup is for our visitors who are new to the topic: A startup can be defined as a business in its infant stage or early days. In addition, these businesses are yet to break even or are not generating revenue. Mostly these businesses will depend on the business owner’s capital or getting funds from venture capital firms.
Why do startups exist?
Well, now that we have the definition of startups out of the way, let’s discuss why we need them in society, shall we? Startups play an important role in innovation and advancing technology that helps humanity in general. Thanks to startups, we have better healthcare, better education, advanced methods of farming, and many other innovative ways of carrying out our day-to-day activities. However much startups tend to make our lives easier, they also face a number of challenges as we are going to see in a jiffy.
Top ten startup challenges
- Weak team with no rhythm
- Weak ideas and lack of vision
- Lack of funds
- Knowledge deficiency
- Poor networks and networking skills
- Legal team deficiency
- Fund mismanagement
- Poor leaders
Weak team with no rhythm
The team behind a startup has a lot to say about the future of the company. Most startups struggle with having the right people in the team and end up hiring and firing regularly. Keep in mind that startups operate with minimal resources in a highly competitive market. This makes it difficult for them to acquire and maintain the right talent for the job. At times, you might think you have the right people just because they are well-skilled. It takes more than skills to take the company off the ground. The entire team needs to be in sync with the company vision. This will make workflow with less friction and a lot will be achieved within a short span of time.
Solution: This challenge can be addressed by being slow to hire and ensuring due diligence is done on every hire brought on board. Also, team dedication can be increased by offering them stock options. They will tend to work harder knowing that there is a reward once the company becomes successful.
Weak idea and poor vision
Ideas are just ideas. There are good ideas and bad ideas. Let’s say 20 people are put in a room. Then, everyone is asked to write down a business idea on a piece of paper. At the end of the exercise, we will not fall short of answers. At least everyone will have an idea or two to write down. However, it is important to note that when one idea might work for person A, it does not mean that it will work for you. Startup founders might be carried away by fads and hypes around technologies and think that they need to start a company right away. Most of the time, these founders will jump on ideas in industries that they have little or no knowledge of at all.
Solution: It is important that as a founder, you invest in ideas that operate in industries that you are knowledgeable about or at least put in some effort to do some research to understand the idea deeply before committing.
Lack of funds
As we mentioned earlier, startups are mostly funded by the founders themselves. However, not all founders have the money to kick-start their businesses. In this case, they will often seek help from venture capitalists. Venture capital firms or VCs as they are commonly known usually have a pool of funds that they invest in a diversified portfolio to earn a return. Some of these funds usually find their way into startups that prove to be viable and have a solid business plan. With so many startups competing for funds from VCs, it becomes a challenge to get funded.
Solution: As a founder, it is important that you understand your business in and out if you want anyone to invest in you. You should also be able to clearly explain why an investor should invest in you and your company because there will always be a similar company solving the same problem that you are solving.
This is a problem that cuts across different areas in life from schools, sports, churches, places of work, and business ventures are no exemption. Gender bias and racism are all part of the discrimination experienced in the startup world. At times people might not believe in a company just because it is woman-led or led by a person from a specific race that people hold with less regard. History has shown us the opposite. People of different genders have led unicorn companies and we have seen big and successful companies rising from different continents spread out across the world.
Solution: It should be a collective effort for the startup community to work together and eradicate discrimination.
Knowledge deficiency in startup founders
Lack of knowledge is a big problem for startup founders and teams that work blindly without prior research. Acquiring knowledge in your specific area of operation should be a continuous process. It should be a habit to grow your knowledge base and that of the team members as the company grows. Change is inevitable and it will always come. Change might affect startups either positively or negatively. Either way, it is important to be prepared in advance with sufficient knowledge of how to act.
Solution: Living in the internet era, getting knowledge in any domain is just a click away for anyone who seeks it.
Poor network and networking skills
If you walk alone, you will move fast. If you walk as a team you will move far. Poor networks and networking skills are a slow death for startups. Working in a silo in a population of 7 billion and counting will not get you far. Most startups do not have the proper networks that they can leverage to survive and grow into sustainable companies. Some might have networks but they have no value.
Solution: Startup companies ought to be intentional in building networks that are valuable and long-lasting. As a founder, you need to be strategic in building your valuable network by attending events related to your industry and exchanging contacts with relevant people.
Legal team deficiency
Legal affair is one of the startup challenges that is overlooked during the early days of the company. Most of the time the excuse is, “We could not afford a legal team.” Not having a legal consultant in the young company makes it operate blindly with regard to the laws of the land. Doing so might have a case filed against the startup when it is scaling or has already grown just because of negligence. Court cases are usually expensive and are likely to make a company go bankrupt.
Solution: Having an entire law firm for a startup might be expensive. However, it is reasonable to have a legal consultant on a budget who can advise and give legal direction to the firm from time to time.
Fund mismanagement in young companies
As discussed earlier, lack of funds is a big problem for most startups. Having funds will solve this problem you might think, right? Yes and no. Managing fund is a big problem for most startup companies. Companies tend to inflate their expenses once they get funded. This in return puts them in the same spot they were before the funds came in. Poor fund management will also chase away investors who might be willing to put money into the startup.
Solution: An accounting team will come in handy to ensure that the company is tame at its expense. This can be achieved by removing unnecessary expenses from the budget and ensuring that the company spends money in a decent and reasonable manner.
Startup challenges are compounded by poor leadership. Even if all the other challenges are resolved but the leadership, a company is bound to fail. The leader is the person who molds the company culture and sets the tone for the company. It is their duty to ensure that the company vision is crystal clear to every member of the team. If a leader is not focused and the vision is blurry the company is already set on a downward trajectory no matter the amount of investment poured into the poorly led company.
Solution: Leaders are supposed to be selected carefully and possess the characteristics that are globally accepted as leadership traits. If you are a founder and find yourself in a leadership position without prior experience, find a mentor to guide you on how to lead. Additionally, you should do research on how to improve your leadership skills on a daily basis.
Ego as a startup problem
Pride comes before a fall. From the good old days, stories have been told of men and women who held themselves with high regard and brewed their egos to levels that they saw themselves as little Gods or untouchables. We all know how these stories end. It is irresponsible for startups to pick up on other companies that might be facing troubles for their own good. Startups will always fall if they put their egos above else.
Solution: Every startup company should put their PR stunts in check to ensure that they stay humble and respect the other players in the game.
These are not all the troubles that startups face. The startup challenges list is endless. Drop some of those startup challenges that we might have missed in the comment section below and remember to share the knowledge if you find it useful.