5 Startup Pitfalls and How To Avoid Them

July 14, 2016

6:00 pm

Every startup is unique. And because they’re unique, they always face a wide range of unique problems. No matter how successful the startup is, these challenges keep pulling the company down. Fortunately, through strong leadership and hard work, founders can make sure the business survives. But if you don’t know the pitfalls, you can’t prepare for the worst.

Fortunately, many people have gone through the ups and downs of entrepreneurship and can provide a little advice on how to traverse the Startup Valley of Death.


Competition in every industry is fierce. Many industries have low barriers and access to capital is much easier than ever before. The only chance for survival for the startup companies is usually to find the niche market in a particular industry and differentiate themselves from other competitors. For industries such as ad-tech where switching costs are low, entrepreneurs have better opportunities because customers are willing to try something new from the untested technologies. However, the competition will only increase as more and more startups will eventually rise.

The best way to deal with the problem of competition is to find ways to enhance the products and services rather than compete with the price of other competitors. The success of a startup company depends on its strategies to win unsatisfied customers from the competitors. Despite how successful the startup is, new companies will always emerge. The best way to win is to do better every day and at a cheaper price. Startups will face fierce competition no matter how big they become.

Rapid Growth

When a startup company has the right leadership, right strategy and the right niche market, the result is high growth and high demand for its products and services. This means that the company will need to grow to adapt to the needs of the growing client base.

However, this is not always the case. Startups find themselves in a very tricky situation when the high rate of growth is a challenge for them. The main challenge is deciding when to move from the startup mode to the scale-up mode. Startups also struggle with organizational changes and talent acquisition challenges needed to make the business stable and moving. Every company has to go through this transformation as it emerges to be a fast growing “emerging company.” The best way to deal with this challenge is to know when it will happen and prepare for what is required.

Team Growth

This is yet another effect of rapid expansion of the startup company. The challenge is to find and recruit new talent that will keep up with startup’s growing needs. Recruiting for high growing startups quickly moves from a key priority to an organization’s necessity. The most challenging part in the recruiting process is managing a large volume of employees in a short period of time.

This eventually places a serious strain on startups while it has to adapt to avoid a harmful growth path. To deal with this challenge, the first step is to establish the culture of the organization and then recruit new employees that meet the requirements of the culture.

Market Problems

A major reason why startups face challenges that could lead to failure is when there is little or no market for the product they have built. The symptoms of this problem include:

  1. Lack of a compelling value proposition from the company to convince the buyers to actually commit themselves into purchasing the product.
  2. Wrong market timing, meaning the product being proposed to the customer is ahead of its time by a few years and consumers are just not ready for it.
  3. Wrong estimation of the market size who really need the product. For instance, when you supply too much of a product when the market is too small.

Bad Communication

Employees and teams may not communicate and collaborate fully to make effective decisions. Some of the reasons why communication may be a problem is because the leadership does not want to involve the juniors in decision-making or there is no available data to facilitate communication and collaboration. Most startups find themselves using digital marketing tools to advertise and monitor customers’ reaction to online ads but fail to analyze the data.

Data visualization is the creation and study of visual representation of data in schematic form. It is equivalent to visual communication and help the business to organize data, eliminate false leads and users to have holistic view of the market. A startup may use the various data visualization tools especially the ones that have employees and teams to have real-time communication on the data dashboard. When every member of the team has access and can communicate on the dashboard, communication and collaboration is enhanced because employees have a view of what is happening in the market.

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Finn Pierson writes on technology, business, and marketing.

Finn is drawn to the technological world because of its quickly paced and constantly changing environment. He believes embracing technology is essential to capturing success in any business and strives to inspire and encourage top technological practices in business leaders across the globe.

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