Wanna Do a Startup? 10 Mistakes You Must Avoid

February 15, 2022

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Wanna Do a Startup? 10 Mistakes You Must Avoid
(source: https://www.rockpa.org/how-catalyst-fund-is-connecting-fintech-impact-and-climate-resilience/)

Author: Gloria Qiao, Founder & CEO of Trusli

In the fall of 2020, we began thinking about building a legal tech company. We wanted to use what we have learned in the self-driving car industry (i.e., data and artificial intelligence) to revolutionize the antiquated legal industry. That marks the beginning of Trusli, aka Sleegal AI. Now, 15 months later, we have launched our product, raised $1M+, hired a team, and are pushing our legal marketplace to the next level. But what have we learned? If you want to begin a startup like ours, here are the 10 mistakes that you MUST avoid.

1. Not doing it

Starting something new is scary. Leaving the comfort zone of a well-paid corporate job is challenging, and there are always plenty of failures and naysayers. However, if you have a vision and passion, and you believe you are on to something, the worst thing you can do is talk yourself out of it. Of course, it won’t be easy. Most people will not want you to succeed. The incumbent will do what they can to prevent you from disrupting the status quo. However, none of this should be an excuse not to do it. Like the Nike logo, if you have the entrepreneurial itch, JUST DO IT.

2. Finding the wrong co-founder(s)

Finding the right co-founder(s) is almost as important as finding the right spouse, maybe more so. After all, you and your spouse might not spend 18 hours a day together the way you do with your co-founder(s). The question is, are you of the same mentality? Do you share the same beliefs and core values? How about work and communication style? Do you have complementary skill sets? Can you bear each other’s shortcomings and idiosyncrasies? Ultimately, are you on the same page? Just as with a marriage, it is far less painful to find these things out early than to do so down the road. In our case, we had someone that was a truly nice person, but who didn’t rotate at the same rhythm as us. We fixed that right away.

3. Not lawyering up

From the day you start your company, you must keep legality on top of your mind. Are you choosing the right entity to raise money and go IPO someday? Are you protecting your trademark and patents? Are you protecting your trade secrets from employees, contractors, and investors? Do you have the right terms and conditions for your website? Are you opening yourself up to trouble down the road with employees, contractors, customers, or suppliers? How about options and RSUs? Are you obtaining the right terms when fundraising? All these questions and potential issues can be resolved by having the right kind of lawyers on your side from the very beginning. Here at Trusli, one of our missions is to help entrepreneurs like yourself find the right kind of lawyers without breaking the bank.

4. Not raising money or enough of it 

Some people still believe in “bootstrapping.” We did a bit of that ourselves. However, we quickly realized that, in order to scale and hire the talents necessary to build a top-notch product, we had to fundraise. Fortunately, we had believers that gave us money even before we had an actual product. Once we did, though, we went out and found more smart people that believe in us and raised some more. The truth is, things always take longer and cost more than you expect, so raise money when you can, and as much as you can.

5. Burning through the money you have too fast

Once you raise money, be diligent about spending it. My co-founder and I met at a “startup” that raised millions but was not very diligent at spending it responsibly. In turn, this led to a fire sale, and all of us shareholders were left holding the bag. That was a hard lesson for us. When we raise our own money, we watch every penny. We do not spend it unless it is absolutely necessary and critical for the company's growth. We do not indulge in things that are simply nice to have, at least not yet.

6. Not spending money on the right expertise

That being said, you should also not trade goods for cheap. We made plenty of mistakes where we thought we were trying to save money by getting something cheap, only to later realize that you get what you pay for. In today’s highly specialized world, pay for the professionals that can take you to the next level for your product, be it in marketing, engineering, or design. Otherwise, you might end up with a mediocre product that you end up throwing away sooner or later.

7. Not hiring an effective core team that’s in this for the long haul

When we first started, we hired people quickly with the optimistic assumption that they are good and that they will love us and stay. They were not and they did not—at least, the majority of them. We then became much pickier about who we bring on. Do not settle for B players. Do not believe in the talks alone. Watch them walk the walk. Also, do not hire people who want to “try this out” and use your company as their stepping stone for the next big thing. Hire people who are smart, can learn, and believe in the cause. Then, train them and reward them. This will save a lot of churn and heartburn along the way. 

8. Not having a robust back office operation

Many founders spend most of their time pitching, working on the product, and making sales. However, having the proper backbone for the operation is also crucial. This includes legal (per 3 above), accounting, payroll, HR, and, sooner or later, other functions such as procurement. Having the proper team and systems for daily operations will improve efficiency and ultimately save you time and money in the long term.

9. Not being flexible with the product and target market

As Jeff Bezos said, to build a successful product, you must be stubborn about the vision, but flexible about the product, and you have to know how to switch the two. When we first started, I envisioned a chatbot on an App. My team talked me out of it. We then had multiple ideas about how the product should be and who it should serve. Even now, we are still exploring and changing both on a daily basis. In this way, having the open mindset needed in order to pivot and find a product-market fit is a key to long-term success.

10. Giving up

We thought about giving up after we were told no twice by YC, told no by multiple investors, told no by customers, users, and multiple other people. However, being told no is part of the journey. Thinking about giving up is like thinking about stopping running when you are in the middle of a marathon. You are guaranteed to have these thoughts, but the key is to not give in. As entrepreneurs, we need to build the mental grit necessary to grind on. Ultimately, those who thrive will be the small minority that avoids all these mistakes and carries on after being beaten up by the world.

Founding a startup is not easy. We all make mistakes along the way. However, we wanted to share what we have learned, so that you may be able to avoid similar mistakes on your journey. Questions or comments? Please share them with us and we can discuss and debate.