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Startup Horror Stories: Don’t Make These Scary Mistakes

Posted by Early Growth

October 27, 2016    |     4-minute read (657 words)

Sometimes you have to take a look beyond and hear the stories from the Graveyard of Startups Past. If you listen closely you can hear the thrills and terrors as these ghosts impart their mistakes and frights so that hopefully you don’t repeat them.

They Came from the Fog

Our first tale comes from a VC friend of ours on Sand Hill Road and starts with a seemingly normal occurrence: an appointment to meet with a team seeking funding. This investor went for a walk shortly before the meeting, and as he strolls just a few feet from the office what should he see right there on the sidewalk outside the door?

An ominous cloud rolling towards him with strange creatures lurking within.

Turns out that cloud was streaming out of the car filled with the very founders with whom the VC was set to meet. These poor souls had neglected to notice they were blazing one in plain sight of the entrance of their upcoming meet. The meeting right afterwards was one of the least stressful, most laid back presentations they've ever had.

Unfortunately, that ended up being the only positive takeaway of the day for that team.

Plan 9 From Outer Space

Another investor tells us of receiving a funding application that could only have originated from an alternate universe. For this company's request could only be categorized as "out of this world."

Their business objective was simple: To became the main consumer outlet of the entire internet, television and mobile.

The rationale? No one else had accomplished this yet! But the scariest bit was yet to come: their entire value proposition was based around beating giants like Google, Amazon, Microsoft and Netflix - by fostering better customer loyalty.

This startup was looking to raise two million dollars to compete against existing, heavily entrenched global conglomerates, based off the idea that customer loyalty will turn the tide. Just David vs. four Goliaths. A truly alien approach.

On top of this request, the founders presented poorly constructed financial models, including revenue projections that even the most optimistic investor would find unrealistic.

While they had made a memorable impression that would not be forgotten on the investor, he ultimately decided not to send funds to the distant galaxy where this particular idea made sense.

The Unclear Growth

Our last story is of the firm that had it all. A killer app with the killer growth to match. With those downloads came glowing reviews and greater adoption rates. Naturally, with such a growing user base came the pursuit of investors. Several rounds of which brought in the cash to go forth in marketing and get the product out even wider still.

This company was becoming a crown jewel within its industry, with continued growth and investment. All was safe and sound.

Or was it?

It wasn’t till employees were amassed and centers were opened that a discovery was made. No one had figured out how to monetize the app. Explosive growth is great in the early days, but eventually every company has to start making money from its users. Otherwise, this "Frankenstein's Monster" can turn on you very quickly.

This startup tried several efforts to pull in meaningful revenue, but inertia, ineffectiveness and investor impatience soon overcame the company. They were eventually forced to shutter - the echoes of "Freemium!", "Sponsored Content!" and "Paywalls!" still haunting the stylish loft that once housed their headquarters.

We hope you’ve enjoyed these stories, and haven’t been too spooked by the bumps and scares within them.

Now having heard them, you will be sure to prep for meetings, have a reality in the same world as your investors and, of course above all else, build a plan that includes revenue.

And always remember, if the path through building your startup ever starts to have more chills than thrills, reach out for a consultation and we’ll be there.

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