Some Pitfalls that Entrepreneurs Must Avoid for Continued Success of their Ventures

Pitfalls for Entrepreneurs

Beneath all the glamour and glitz of start-ups that raise Millions and Billions of Dollars in funding lies hard work, determination, and dedication of their founders.

Indeed, Entrepreneurship is as much about gritty persistence as it is about having a good idea and crystallizing the idea into action with the help of a committed team. It is not always the case that entrepreneurs would have it easy and find backers and funders willing to bankroll their ventures.

For every Flipkart that raises Billions lie a hundred other start-ups that fall out of the race at different stages in the start-up lifecycle.

This means that any potential entrepreneur must take into account several aspects or pitfalls to avoid if they are to enjoy continued success in the marketplace and if they are to ensure that their ventures become profitable and turn into successful companies.

The Timing of the Funding Decision

First among the pitfalls is to decide on when to seek funding from the Venture Capitalists and the Angel Investors. The first steps in the life of an entrepreneur are usually the ideation stage and the incubation stages wherein entrepreneurs start with an action plan to transform their idea and then launch their ventures to incubate their ideas and transform them into workable businesses and products.

In these stages, it is advisable to ensure that entrepreneurs spend as much time as possible thinking through the various problems and the pitfalls that they might encounter in terms of timing.

As there is nothing such as too early, there is also nothing such as too late meaning that seeking the first round of funding from Investors and then using them judiciously to spread the funds across various stages has to be carefully planned and managed.

Legal Pitfalls Related to Contracts and Funding Terms

Indeed, even before the Investors release the funds, the entrepreneurs must be wary of the terms and conditions that the Investors are proposing as unfair and tough terms can easily lead the entrepreneurs to give up control over their ventures when they “strike gold”.

The so-called “fine print” named so because much of the meaning of the terms and conditions is usually buried within the contracts and in inside pages means that entrepreneurs better have a lawyer of their own or seek legal help before they sign the contract with their investors.

Apart from the fact that so many Twenty Something’s are launching ventures which means that some of them barely understand the legalese and the complexities, the other aspect has to do with “getting giddy” in the “euphoria” of “raising funding” and agreeing to all the terms and conditions put forward by the Investors.

Therefore, it is recommended that Entrepreneurs exercise abundant caution before they commit themselves to external parties.

What Comes After Success ?

Turning to the question as to What Next once the Entrepreneur becomes successful and hence, has to make a choice between taking the company public or spinning it off and starting another venture, some pitfalls here are the prospect of hostile takeovers from established businesses and industry veterans who “know the game” better than many and hence, are adept at such strategies.

Indeed, the example of Sabeer Bhatia who founded the world’s first commercial Email, Hotmail is instructive in this regard.

While many of you who are reading this might not have heard of Sabeer Bhatia who was quite a sensation in the 1990s for taking the world by storm with Hotmail, those of you who were in college at that time would surely recognize the name and more importantly, would also remember how he was “outsmarted” by Bill Gates into giving up control of Hotmail.

While it is the case that Bhatia made enough money on the deal, it is also the case that such a game changing idea could not translate into continued success after the sale wherein the present generation knows Gmail but not Hotmail.

The lesson from this for entrepreneurs who strike it big is that be careful in “playing your cards” and turn to your inner voice for guidance in case a “fork in the road” appears and you have to decide between equally attractive options.

Timing Quitting for Failed Ventures

While the above is in case of successful ventures, the other side of the coin namely what happens when ventures do not meet the expectations of their investors, founders, and the market has to be taken into account as well.

In cases where ventures fail or are failing, it is a tough call for the entrepreneurs to decide when to pack up and move on.

While there might be emotional reasons as well as fact based reasons in “sticking around and hanging around” to “tide over the tough times” and hope for “the light at the end of the tunnel”, it is also the case that the decision to terminate the venture, however painful it is has to be taken at some point or the other.

Indeed, if such a decision is not taken, the entrepreneurs risk being “submerged along” with their ventures and hence, the pitfall to avoid here is about how soon to call it quits and how to exit without too much of losses for all stakeholders.

Conclusion: Nothing is Permanent

Thus, there are many pitfalls that Entrepreneurs must be wary of and we have covered some of them in this article. While it is tempting to bask in the glory of successful ventures, Entrepreneurs must realize that there are twists and turns in every business and venture as well as remember that success one day can easily be followed by failure the next day.