Eight out of 10 startups will fail in the first 18 months. It’s a cold, hard truth. But instead of scaring potential entrepreneurs away, this statistic should encourage them to work smarter and harder.
As co-founder and CEO of AlleyNYC, a co-working space and incubator for startups in New York City, Jason Saltzman hears plenty of elevator pitches from budding entrepreneurs.
He says his biggest pet peeve is when people aren’t prepared, “When people don’t know what they’re talking about from the get-go, it’s extremely frustrating.”
Saltzman stresses that startups should also not forget to emphasize their management team. After all, people invest in people, not ideas.
Before making your pitch to investors, it is critical that you know your customer and make sure there’s a real need for your product or service in the marketplace.
“Unless you’re building a product for yourself,” Saltzman says, “you should ask other people how they feel about it and not operate in a vacuum.”
While self-confidence and independent thinking are trademark traits for an entrepreneur, Saltzman believes listening to the people around you can yield dividends.
Another common mistake startups make is underestimating how much capital they need to actually fund their business. Others simply don’t want to dilute the equity they have in the company and so try to raise as little money as possible.
But Saltzman cautions startups against raising too much capital too quickly. “If you give them too much money, they won’t have to figure it out. They can support their lifestyle and be able to build and build and build without validating their ideas. “
A lean budget also forces an entrepreneur to be disciplined and focused, especially in the early stages. Less money leaves less wiggle room for mistakes.
Once the revenue starts rolling in, Saltzman advises not to forget the ABC’s of running a business, including paying taxes and having adequate office space. Saltzman suggests early-stage entrepreneurs set themselves up properly. “It’s kind of like money management. You might not have money now,” he says, “but think about the way you manage money for the future, when you have money.”
