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Seven startup sins to avoid

Seven common mistakes have led to the demise of thousands of startups, says Ben Parr. Here's what not to do.

Twitter and Square founder Jack Dorsey is a man who knows what causes most startups to fail.
James Martin/CNET

I've seen thousands of startups fail, but they almost always fail for the same reasons. Most entrepreneurs fall into the same traps over and over again, despite how easy they are to avoid.

At the London Web Summit earlier this week, I told an audience of European entrepreneurs the seven mistakes I believe most often destroy promising startups.

These are my seven startup sins. Avoid these common mistakes at all costs:

1. Losing focus: If you're like the typical entrepreneur, you probably have hundreds of new ideas for your startup. But you must resist the urge to build lots of features, rather than focusing on the few that will actually take your product forward.

Giving users many choices and features may seem like a good idea, but it just confuses them until they abandon a product in frustration. Simplicity and focus are the keys to building a great company. Google became a $100 billion-plus company with a text box and not much else. Square became a leader in mobile payments by not trying to do too many things at once.

Don't start building every idea that comes into your head. Make everything as simple and streamlined as possible, and don't build everything the customer wants -- you will simply end up with a bloated product nobody will use.

2. Ignoring cashflow: In the early days of a startup, cashflow is far more crucial than revenue or profit. Your job as an entrepreneur is to find ways to extend your company's runway for as long as possible.

It doesn't mean you have to be a penny-pincher, but make sure that every purchase you make will deliver greater benefits than its cost. My company buys the fastest MacBook Pros possible for our engineers because the increased productivity more than makes up for the upfront costs of the computer.

3. Obsessing over competition: Many startups worry too much what Google or another startup may be building. If you obsess over what they're building, you're going to start building products based on your fears. There will always be competition, but the best companies focus on user experience instead of focusing on the competition.

4. Failing slowly: Your first product is most likely going to fail. Whether it takes you weeks, months, or years before you realize your product is a dud is entirely up to your flexibility.

Find out quickly whether your idea will succeed or fail -- research, build, test, and iterate as quickly as you can. Don't be discouraged by setbacks, but if you can see the writing on the wall, don't ignore it -- figure out why your product isn't gaining traction and fix it. Tools like Google Analytics, RJMetrics, and Optimizely are great for gathering the information you need to make decisions quickly.

5. Ignoring company culture: It's easy, especially in the early days, to make company culture a lower priority. But much like plaster, once a company culture is set, it becomes very tough to reshape.

"Zappos sells shoes and apparel online, but what distinguished us from our competitors was that we'd put our company culture above all else," Zappos CEO Tony Hsieh famously said after the company was sold to Amazon. Zappos used that strong culture to successfully recruit employees and customers.

The most important job of a founder is company culture and recruitment. Most successful founders stop coding as their companies scale, but their example sets the tone for the work ethic, priorities, and morals of the companies they created.

James Martin/CNET

Mark Zuckerberg understands the importance of company culture better than almost anybody. He famously takes engineers Facebook is trying to recruit on a walk in the woods of Palo Alto to build a relationship and explain the company's vision.

You should have a strong idea of what kind of company culture you want to build long before you hire your first employee.

6. Being complacent: No company is immune to catastrophic failure -- just ask Yahoo, Digg, MySpace, RIM, and Friendster. Don't confuse traction for victory, because that is what leads to a startup becoming complacent and getting blindsided by an upstart competitor.

7. Not building: You can worry about competitors and fundraising until you pass out, but there's no bigger sin than not building. Ideas are easy to come by -- it's execution that separates successful companies from thousands of could-have-beens.

At some point, you just have to build and see how it goes. That's the beauty of entrepreneurship -- it's democratic. The people, rather than investors or competitors, will ultimately decide your startup's fate.