8 Signs of Trouble in Startup Paradise

Starting a business is a lot like starting a marriage. At first, all parties are in dreamland, with a vision of changing the world, having lots of fun, and raking in the profits. But all too soon, reality sets in. Product development is stuck at that 90% mark, a key person leaves, and customers are talking but not buying.

In his book Reality Check, Guy Kawasaki summarizes some of the key issues. I’ve seen them too often, and they seem to be the same for every company (and every marriage) no matter how great the team is. I challenge any startup to show me they have avoided all of these:

1. One of the founders isn’t delivering. Maybe he was the only guy around who could design the product you envisioned, but delivering a scalable, quality product is another story. Besides, he is now more interested in designing the next product.
2. The product is behind schedule. When I was a software development manager, I tried to get a “bottoms up” time estimate from the team, and then pad it by 50%. Invariably we were in crisis mode by delivery time, and the common complaint was that “management” always forced unrealistic schedules on developers.
3. Sales aren’t meeting projections. The team buys its own propaganda and fully expects customers to be leaping tall buildings to get to your product. You never dreamed that customers would be slow to accept an unproven product from an unknown startup in the middle of an economic downturn.
4. The team is not getting along. Things go wrong. People on the team haven’t worked together before, and they don’t fully trust any ideas except their own. As the top executive, you have to make some tough decisions and spend much more time than you expected on communication and mediation.
5. Your marketplace buzz is non-existent, skeptical, or even negative. You have been too busy with your own issues to be out there building the wave, but your competitors have been actively positioning you far below them. The press is focused on things that exist, rather than your early marketing hype.
6. Requirements changed in the middle of the cycle. While everyone was busy building the product and business model you detailed in your business plan, early feedback from the field makes it clear that you were somewhat wrong. Or the economy has taken a sudden turn for the worse, so your high-end product no longer has a market.
7. Investment partners are squeezing you. It may look like micromanagement, but they are just nervous that the milestones you promised have disappeared from your charts. Maybe you think they aren’t “rolling up their sleeves,” but that can’t happen until you actually admit your failures and ask for help.
8. Cashflow is killing you, with no new money in sight. You scaled up your infrastructure, to make sure early sales didn’t swamp you. Nothing is coming in, money is going out, and you are too busy managing pennies to look for a new funding round.

If you are a true entrepreneur, these should scare you, but they shouldn’t immobilize you. As I asserted earlier, virtually every new startup experiences these problems. What separates the successful ones from the failures is how effectively they handle the problems, rather than how many they avoid in the first place.

So I encourage you to take full control and responsibility for your company’s destiny, learn from the challenges, and emerge from every crisis stronger than before. Remember that when the honeymoon is over, that’s when the real fun begins.