From success to failure: 7 rules to follow

“Learn from the mistakes of others. You can’t live long enough to make them all yourself.” — Eleanor Roosevelt

Having an idea and starting a project is relatively simple; however, building a startup that grows and transcends through time and space is a challenge. Entrepreneurs need to be passionate about the activity they are developing and should dedicate all of their time and energy to build and develop their business in order to increase their chances of success.

A clear case is that of Salesforce, where its founder Marc Benioff, never gave up in the face of adversities he encountered along the way. Marc was an executive at Oracle, where after 13 years with the company, he saw a great opportunity to develop a CRM for any individual or organization at affordable prices. This led to the creation of Salesforce using the business model of Software as a Service (SaaS). In the construction of Salesforce, as in the story of other entrepreneurs, Marc had to face social rejection from his former colleagues, since no one was motivated to help him on the new project. In addition, various Venture Capital funds rejected the option of investing in the startup. However, his tenacity, determination, perseverance, and desire to excel led him to build Salesforce, a company that is now worth more than USD$230bn.

Can you imagine what are the elements that can contribute startups to fail? Here are some of the most common:

1. Overconfidence and overpromise:

Some companies like DaWanda failed due to an excess of confidence and overpromise. With operations in Germany, Austria, and Switzerland, DaWanda acted as a marketplace for handcrafted products with more than 380 thousand active sellers, six million products on offer, and $140 million euros in sales, at its peak. However, the competitor Etsy understood the market, adjusted operations to English and executed better. Also, vendors’ sales on DaWanda were no longer growing as expected and the platform lacked to respond on technical issues compared to its competition. The lack of vision and innovation led DaWanda to the closure.

As an entrepreneur never underestimate competition and innovation. Regardless of your past and your current investors, don’t lose the floor, act humble, and always try to be realistic. In addition, remember that always is better to be realistic and deliver what you have promise.

2. Openness and transparency:

It is important to be consistent and maintain an upright image that does not compromise the reputation of the company or the founders. Jessica Alba founded The Honest Company in 2011, promoting natural and synthetic chemical-free products; however, the company was involved in fraud since labeling of some products that did not comply with the promoted characteristics. The Honest Company had to pay a fine of USD$7.3mm and modify the labeling of its products. It may still be operating, but the financial and reputational costs are not always bearable.

3. Unprofessionalism and maturity:

On one occasion while performing the due diligence of a startup, we found in the data room a file with an offensive title towards the investor that did not represent the values ​​that we seek in a startup. The culture of the company must permeate at all levels, promoting values ​​such as professionalism and respect.

4. Business is business, don’t take it personally and don’t close doors:

The investment or client acquisition processes consider multiple factors, if an investor or client turns down the opportunity, understand the background, take feedback, and improve. Leave a good impression that keeps the doors open for possible future collaboration, for this or other projects. Remember, what you harvest now is what you sowed yesterday, if you do not like what you are harvesting modify what you are planting.

5. As an entrepreneur, don’t think that someone owes you something:

Being an entrepreneur is a state of mind where you are always looking for innovation, development, and problem solving. You develop all of this to generate a financial return at some point in time. Along the way, you will raise capital, conduct a proof of concept or pilot with a company, and enter into business negotiations with potential clients. The time invested in these processes is part of the requirement to develop the opportunity, but this does not guarantee a positive result. Life is not fair, adapt to the circumstances, and always do your best.

6. Don’t have a closed mind towards new opportunities:

It is essential that you put yourself in the shoes of the other party so that you gain perspective and thus define the best strategy and steps to take to achieve your goals. It is not bad that you want to speak only to decision-makers, your time is valuable, and you are important. However, you must understand that you are not the only startup in search of capital or business opportunities and that each entity has its unique processes.

7. Don’t be afraid of failure, but don’t take too many risks:

As an entrepreneur, you know that you can be among the 75% of companies that fail. Still, jump into the ring and play the battle. The worst thing that can happen to you is giving your best, losing your investors’ money, and thus having to start from scratch with a new idea. Don’t foolishly cling to an idea and don’t risk your integrity, the startup’s resources, or your stakeholders’ wellbeing in order to be successful. Don’t act like Bouxtie, the gift card company that misled its investors by creating the illusion of an attractive and successful startup, altering its financial statements, and falsifying legal documentation. This type of action erodes your credibility and condemns your future in the ecosystem.

Everyone has the dream of having a story like Marc Benioff’s. However, the circumstances of each startup are different. Remember that reputation is your most valuable asset and your mental health is your best companion.

“All our dreams can come true, if we have the courage to pursue them” — Walt Disney

Written by:

Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund.

Ricardo Latournerie. Investment analyst at ACV.

ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

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