Yes, it seems to "cheapen" the post and make it feel like a marketing ploy. FWIW the post didn't start off that way. Links were added on the suggestion of a reader.
Agree. And I will change it. Sorry if it made a bad impression.
I got this idea sent on twitter.
I quickly did it and ran off to a meeting. I will change it now.
It wasn't meant as a socialmedia hack but as a cool way to interact.
I appreciate founders sharing their experiences like this, but I feel like most of this list suffers from premature generalization. Especially if these are lessons learned the hard way, I'd rather hear more of a "war story".
Some, like "They plan details about sh*t that never sees the light of day" are quite self-sufficient, but some of the others are pretty vague or even come across as contradictory. "They seek too much advice from too many sources with too many conflicting views" but also "They do mental incest by bouncing ideas off the same people every time"? I know that different founders make different mistakes, but I'm still in the dark on how to find the happy middle.
For ones like that, or "They have no clue about their market", I want to hear what happened! What's the story behind the advice?
I know that this is beyond the scope of a list like this, but maybe it could be fodder for some future blog posts.
I agree! Some of the things are even contradictory from what you hear in the Lean Startup echo chamber now. They would make a ton more sense if they carried examples or some sort of 'war story'.
Why would you expect them to not be contradictory? People will have made mistakes on both sides (and the author may have made them both within the same startup too).
I agree that it's difficult to generalise but the utility of a list this comes from the introspection it can provoke. "Am I talking to too many people?" "Am I following vanity metrics?" "Am I planning details that matter?"
I think the broader point (I think?) is that first-time founders often run off to consult with a lawyer right out of the gate. As a result, they'll spend thousands of dollars, and lots of time, protecting themselves from imaginary legal threats -- time and dollars that should have been allocated to product development at this stage in the game.
If, at the moment, your startup consists of the proverbial two guys in a garage, it's highly unlikely that you need to spend $10,000+ on a lawyer's counsel and advice. Build your product first. You're not even on the radar yet, so it's not as if Google or Facebook even know who you are, let alone want to steal your idea. And chances are, someone's doing your idea anyhow. Chances are, ten people are doing your idea right now. Your best defense isn't legal action; it's product traction.
There's a time and a place for lawyers, but right up front is usually not it. Unless you've got some sort of truly innovative, groundbreaking technological innovation on your hands.
"There's a time and a place for lawyers, but right up front is usually not it. Unless you've got some sort of truly innovative, groundbreaking technological innovation on your hands."
The bigger problem I see is that many people actually think they've got something innovative, unique, groundbreaking or patentable. A "social network for dog lovers" is probably not patentable, certainly not that unique or groundbreaking, and none of it matters without execution and a userbase (ideally of paying customers). But I run in to many people who fret way too much over "how can I protect my (one and only) idea?!!"
We need have a "Founder's Daily Prayer":
"God grant me the wisdom to execute on the mundane aspects of my business, legal protection for the truly innovative and patentable aspects of my business, and the wisdom to discern between the two".
You can start of with a GmbH but it will be just a little extra stone in your seedphase you should have in your way.
Investors will talk to you - but how much effort would you put in if your goal is to invest let's say 50k-100k as a seedround. You are rather worried about the upcoming series of investment therefore you push into a LTD or similar entities. If you invest only 50-100k how much will you really bother holding hands while the founders change their entity
Btw… Changing a legal entity is a very cost intense procedure.
I might be wrong but i experienced exactly that first hand.
Coming from the hardcore developer side I saw myself in some of those, especially in
They do mental incest by bouncing ideas off the same people every time.
They have no clue about their market.
They confuse certain customer assumptions with facts.
I'd like to add one that hit me especially hard
They turn their sleep cycle into crap due to poor planning and for arbitrary deadlines
It's actually strange that it took Eric Ries' to get verification/falsification into the wider Startup echo chamber. Engineers should know better :)
I know someone who spent days and weeks worrying about this. "But, Rokhaya, millions of people will come to the site so .....". Needless to say the site is still on http://localhost/
This is too general to be helpful. I think it's dangerous to try to distill entrepreneurship to a few bullet points of advice. Starting a company is complicated and nuanced. It takes years of hardwork. It's great to pass on experience of failures or successes, but would be better served in a more detailed format so it can be useful.
This is kind of a bummer. As a first time founder, it's not really helpful to read a list of things that you may be doing wrong (especially when there is no mention of a correct path to take - you're simply led to believe that you should do the opposite).
Another point of contention was:
We have been working on our Startup for 3 years now and there were more reasons that it should have collapsed than I can think of.
Is it possible that actually making these mistakes is how you get better? I'm all for primers and advice, but something is missing here.
First of all sorry if the list is not helpful. Kinda hoped for people like you to find santiy-checks for their current process in there.
Regarding your point about making mistakes: I assume the truth is inbetween.
As said it's harder for me to give advice "what works" because stuff that works is usually more specific.
But i will try in future to rather focus on actionable stuff that works instead of warning signs
As far as "sanity-checks," I feel like you've accomplished this. When I see lists like these, though, I hope there's something I can chew on; a couple of sentences that further articulate the point being made (this may be a personal thing, but it helps me to really "get" the point). There's nothing wrong with warning signs, but warning signs aren't necessarily what you're doing wrong (rather, just a hint that you might be).
Some things in this list hurt me, because I'm affected - however, the one about "social and/or marketplace startup" seems a bit broad. Could you elaborate on that?
While doing a social software startup that goes into the direction of a marketplace i noticed one thing:
Social Startups are the hardest to do because they usually rely on the critical mass of interaction and network density within the community. Basicially you are relying on other people to do your job of creating content.
The only thing that is harder is doing an marketplace, because in a market place you not only need network density you also rely on them selling the content.
They usually have a high upside if they work. The problem is to get them to work. And for some reason they are highly attractive to first time founders - like me back then.
Ok, so it's the chicken-egg problem combined with too much schlepp. What do you think of marketplaces where, initially, the founders create all the content for sale?
(i)They are arrogant and ignorant to any feedback they don’t want to hear.
(ii) They seek too much advice from too many sources with too many conflicting views.
Seeking advice is the opposite of being arrogant, and if seeking advice is a mistake it's only because you listen to too much of it, thus making you too responsive to other people's thoughts, not ignorant towards them.
I've seen this with people I've consulted with. They'll get advice from 12 people, and ignore the advice from 9 of them because they don't agree with it, then go ask another 5-10 people for more advice to confirm the original 3.
well perhaps these are different phases. At first when you're looking for an idea you are looking for good advice, but once you've set your mind on something there's no need to hear anything discouraging. There are enough reasons why things won't work, I don't need to hear them.
I don't think the list is meant to be read as "every first time startup founder does all of these" but rather, "be vigilant of some of these patterns."
They underestimate everything apart of one thing: Themselves.
They don’t get that a low burnrate and being prelaunch doesn’t mean you have more time to waste.
This sums up my attempt doing my own startup with my cofounder last year perfectly. We did our YC interview and got a reality check. Did about half these things.
Why is "They launch in one month." a mistake? Aren't startups advised to launch early, then iterate? Unless he's implying that waiting a month is too long...
Since the GmbH is very strict and formal and compared to a UK Ltd is founded with more initial capital (min. 25k €), I also don't see why international investors wouldn't bother.
From the founders perspective the introduction of the UG (haftungsbeschränkt) is also great way to found a GmbH on a budget (the needed capital is down to 1€, while technically most laws of GmbHs apply), esp. if you are bootstrapping or dont look for external capital right on the start. When you are ready (25.000€ of capital in the company) you can convert it to a GmbH easily.
I do see problems for investments with GbR, KG or Gmbh & KG, though.
Note: I am not sure what the right translaion for "Stammkapital" is, I just used "capital", it might be "authorized capital" or "original share capital" or "corpus" according to my dictionary. Can someone enlighten me?
I'd love to agree.
Can you please provide proof for that.
I only experienced the complete opposite. Even if it was "ok" it would have lowered our upside by a percentage on the long run.
For Europeans: Create a UK Ltd holding company, and a local entity for each country you operate in. Happy to answer specific questions by email (we're UK Ltd holding with local AT GmbH)
You can also save that local entity by moving the UK Ltd into your country and registering it in the local company registry (EU only) - great article on how to do this: http://www.internetszene.at/2009/03/31/checkliste-limited-od... (German, unfortunately)
What was your reason to do both a Ltd in UK and a GmbH in Austria?
We've registered an Austrian GmbH couple of years ago and haven't had any issues with that so far. The break-down of voting rights and shares are directly bound to how the common stock (usually 35k€ in AT) is being split. When it comes to investment rounds, the investors either increase the common stocks or buy it from the other shareholders for the nominal price (the percentage of the common stock value). The whole process is strictly bound to a formal process (a notarial act), which can get quite expensive, which is the only down-side in the long run.
On the other hand, Ltds still have some shady smack for some reasons over here (one is that you're seen as being cheap), so when you're an Austrian or German company, I bet you gonna need to explain as a small startup why you have gone the Ltd path when talking to big potential customers, and I think this is something you want to avoid at that stage ("act like how you want to be seen, not like who you are", and each serious company here is a GmbH). I understand that it's a big turn-off for young founders to put in 17.5k€ in cash from the start (which is the minimum amount to be provided when founding), but it pays off when it comes to reputation, at least when acting in the B2B business.
The simple fact that GmbH law greatly differs from UK/US corporate law makes it uncommon, and therefore cumbersome for any interested UK/US investors. Though obviously if you've got the traction they'll just bite through.
Also things like stock options, reverse vesting, convertible notes turn into overly complex issues when trying to re-create them in GmbH law.
And besides the additional bookkeeping/accounting burden, I have not encountered any issues with our current setup.
In regard to why Ltd+GmbH: We found the move-the-Ltd-to-Austria process a bit complicated, and also encountered the issue you mention, that people think of Ltds being shady/not trustworthy.
