The following is a guest post.
I have had the misfortune of personally making every one of these mistakes
during my years as a software entrepreneur. I am currently reviewing a startup
that seems to be trying really, really hard to make all of them in one go. As a
result, I decided to put this list together in the hopes of saving as many
startups as possible from crashing in to the rocks of false hope and misguided
20 Ways To Put A Monkey-Wrench In Your Machinery
1. You think that your product must be awesome because your
buddies are telling you it is the greatest thing since sliced
bread. Unless they are willing to hand over cold cash to use your
product, they are just being nice.
2. You are finding that your product is so versatile it could
solve just about any problem. This is a clear sign you don't have
Dharmesh: This is one of the most insidious problems in software
startups. As developers, we tend to like dealing in higher abstractions.
Writing a simple business application is boring. But, writing a framework that
lets others auto-generate a business application (or any application!) is fun
and challenging. For startups, it is usually unwise to try and build a
framework or platform as your flagship offering. Most people use apps not
3. You have found a client, but in your euphoria you have forgotten to
ask yourself if this client is an anomaly. You need to make
sure that the client represents a real market, otherwise you are just building a
Dharmesh: This is what I would call the "you can't build a software
company one custom implementation at a time". It's fine to find big clients
that have big problems they're willing to spend some money for. This is an easy
to way to get started and some cash in the door. However, it's imperative to
look for the patterns in the customer's needs and be thinking about future
customers. If you have multiple sets of code running for multiple customers,
you're going to be in trouble.
4. You keep coming up with ideas for all the many different ways you
can make money with your product. You can sell it to Google, ISV's can include
it in their products, Adobe for sure will be interested. If you are not
focused on something specific, you are dead.
5. You choose to work with verticals that don't have a lot of
money. Sure they like your product, but they can't afford to pay you
enough for it, so why focus on them?
6. You choose to work with a small client first instead of one that
will be able to help you get more clients later on. Just because Joe's Fish
& Chips is using your product doesn't mean Motorola will be impressed enough
to try it.
Dharmesh: Closing on some smaller clients early isn't particularly a bad
thing (in fact, you might be targeting the small business market). As long as
you can find some repeatable pattern so you can build software for many people
(and sell it to many people), you're probably ok.
7. You think you can't work with a "real" client early on because it's
too risky. But you aren't selling them the product - you are selling them the
idea of the product. If you can't sell them the idea, you are
never going to be able to sell them the product.
8. You start building the product before you have a (real) client
identified. Again, if you can't sell the idea, you are definitely not going to
be able to sell the product.
9. You think you can't sell the idea until you have a
product. This is a major killer - you think that as soon as you have
feature X or Y, you can start showing people your idea. One more time - if you
can't sell the idea, you can't sell the product.
Dharmesh: I agree. Reminds me of "Stealth
Mode, Schmealth Mode" posted earlier.
10. You don't want to stop or throttle development when you aren't really
sure you are on the right track. You just want to keep on going, because you
just know that soon the product will be so awesome that it will dazzle everyone
with its brilliance. If people aren't buying the idea, you
better stop wasting money now until you have figured things out.
11. You think that just because your product can solve a generic problem
like "collaboration", you have a sure-fire winner. You have to ask yourself how
your product really stacks up against the competition that is already out there
and why people would buy yours, and if they would, for how much. Often, the
current solution being used is simply good enough, and even if
yours is significantly better, no one is going to buy it.
12. You underestimate the power of a penny over free. If
something is free and barely does what you need, you will stick with it versus
something that's much better but requires you to pull out your credit card.
13. You think that just because someone says they would definitely use
your product that they actually would use it - or that they would pay to use
it. Talk is cheap.
14. You think that just because people say they would pay for your product
(and actually mean it), they would pay enough to keep you off food stamps.
15. You think that just because there is a company making money in your
field, there must be a lucrative market that you too can take advantage of. But
there may not be room for more than one successful product in
this particular area. And the incumbent has a much better chance than you do of
16. You think it's not a big deal for a user to create yet another login to
use your product. But it is. This is like the penny versus free. They have to
have a really good reason.
17. You think because your product integrates nicely with a bigger product,
you're golden. But you forget that there is inside-out and outside-in
integration. If I am in Google and there is a tool (like a gadget) that I can
easily access (i.e. I don't need another login and password), I am much more
willing to try it than if I have to go to another site, sign up, sign in, and
then get to my Google application from there. So if you are going to integrate
with an application your target market is already using, it must be inside-out
integration, not outside-in. Facebook applications are a good example of
18. You think you can get users to pay a reasonable monthly subscription
fee, but you forget that you need a LOT of $19/month subscriptions to make real
money. Do you really understand how many subscriptions you
need, and how realistic is it that you are going to get there?
19. You think that you need to offer an onsite solution to go along with
your SaaS solution, but you forget the huge costs involved in supporting on-site
software. Besides, if think your market is both an on-site corporate solution
and also a SaaS-based consumer application, chances are one of those assumptions
20. You think you have come this far, you can't possibly stop
now. It's like you are swimming across the lake, and you are more than
halfway there. So you just keep on going, but the shore keeps receding into the
If you have your own list of "signs
of trouble" in a software startup, please leave a comment. Or, if you've got a
great article that you think will help software entrepreneurs, email me to
discuss making a guest submission to OnStartups.com.