With the perfect idea, strong drive for success and the right mindset, there’s no chance to fail building a business, right? Unfortunately, the reality looks different. Most startups fail – mainly because Entrepreneurs fail to recognize mistakes that could stop their startup before it even gets off the ground.
No Product-Market Fit
Many Start-Ups already fail in the first year after inception, oftentimes because they overestimated the market size and demand for the business they created, which mostly is related to bad timing or not offering a compelling value proposition. We think this is unfortunate and can be prevented in most of the cases and this is why we emphasize doing proper (but yet pragmatic) user research early-on to determine problem statements your potential customers might have and you might solve as well as what the ideal feature set of an MVP could look like.
Business model failure
Another common mistake is an overly optimistic business model which is why it is important to validate your assumptions. Two important metrics in any business model are Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) and how they might be affected when the business scales. One part of determining these metrics is based on experience and peer model analysis. Another part to estimate CAC is to run Smoke Tests or Landing Page Tests, to actually run ads and track user behaviour on a fake website. This is a standard task for us when validating a business idea and we have automated the set-up of such Smoke Tests and analyses as much as possible.
Obviously, hiring decisions are always important, but even more so at an early stage when the impact is high, requirements of new hires might be changing and you don’t have a gazillion applicants to choose from and your technical scope is maybe not yet so clear. We have witnessed this first hand and when building MVP Factory we created a vast freelance network of experienced Designers, Product Managers and Developers to account for scalable teams and different tech requirements. In the meantime we have built a fully-blown Freelance Marketplace around this and launched it as a stand-alone venture, MVP Match. Even today, in most of our projects we complement a core team of MVP Factory with the right talent through our Freelance Network to make sure the best people work on our client’s ideas. Besides delivering great work this is also a great way for our clients to experience working with different people profiles with various backgrounds and levels.
Another typical problem of young and yet-not-so-well financed startups is that they simply run out of money and are not able to raise money soon enough. While we are not a typical investor, we do invest in promising ideas when we do see fit and – given our entrepreneurial background – are happy to introduce clients to potential investors and partners and support in fundraising processes. Also, raising capital is oftentimes highly connected to achieving the next milestones. When building a product or a venture we have this view in mind and make sure that MVP Scope and subsequent iterations fit together on a timeline. And finally, we have launched the joint Venture Studio with DB Schenker to digitize the Logistics industry, where founders are supported with Cash as well as industry know-how and contacts and the support from MVP Factory to build your product.
Obviously, there are a lot more things to consider when launching a venture, but some common mistakes can be prevented through due research and the operational set-up. At MVP Factory we’re happy to help aspiring entrepreneurs to follow their vision and go to market with a first MVP as well as expanding ideas into products. At the same time we help Enterprises with Corporate Venture Building in various models and are happy to discuss specifics with you.