This post was originally published on Quora as an answer to the question “What are the most common mistakes founders make when they start a company?”
After seeing startups from the inside and out, from seed rounds to billion-dollar companies, from board meetings and CEO dinners, to coaching sessions and leadership retreats—I see three mistakes made at companies time and time again:
I firmly believe that investors invest in (and employees join, and journalists write about) compelling stories, and your pitch deck is really just a vehicle for telling the story you want to tell. So, start first with the narrative and build the deck after you have it nailed.
The best advice I ever got on narratives was from Slava Akhmechet of RethinkDB on a matter totally unrelated to raising money. He said that every story in human history followed the same arc:
1. The world is a certain way
2. Something changes
3. The world is now different
This may seem obvious to you, but I love the simplicity of it. I bet you that any story you can think of right now follows this outline. Like every narrative, your pitch will follow the same arc.
The world is a certain way. Here you outline your background, the current state of the market, how you were introduced to the problem, and why you are an expert. You should also emphasize the magnitude of the problem today (it should be big!).
Something changes. Explain your solution to the problem and why now is the ideal time for it.
The world is now different (aka how your solution changed the world). Here you should discuss product traction (especially metrics/milestone-focused traction) as well as looking at the remaining opportunity (or why your traction will continue and make you big!).
Your narrative must be concise and accessible. Anything that doesn’t powerfully support one of these points should be left out.
I view this narrative as a story you tell through conversation. If you have a powerful narrative you should be able to have a conversation with someone who is a novice in your industry and guide them through it. By the end, they should think your company is amazing and probably going to be very successful. In fact, to refine my narrative I often do exactly this (it doesn’t have to be with potential investors) and use it to iterate the story I am telling (adding or removing specific facts, changing orders, etc). Getting the right narrative is the most important part of the pitch process, so I would make sure you spend a lot of time perfecting.
You need to decide who your customer is. At justin.tv (a live video broadcasting site), we could never decide who our primary customer was. Was it the viewer? Was it the broadcaster? If so, what kind of broadcaster? Because we were scared to commit, and thus tried to serve everyone, we served everyone very poorly. Only when we decided to focus on gaming broadcasters and pivot to Twitch did we truly find product-market fit.
You need to focus on that customer. It is easy to get distracted by shiny new opportunities. For example, a big customer (10x bigger than any existing customer) might come around with a big revenue opportunity. But servicing that revenue opportunity may result in a bunch of custom work. Do you take it? Many CEOs are tempted, but it won’t help you serve the customer base you set out to serve. In fact, it will hurt your ability to execute as well as you could for your original customer base.
Having the wrong people can manifest itself in executing slowly against goals. Mistakes get made, wrong paths get taken, and progress can grind to a halt.
The remedy to this is for founders to have ongoing, assertive, and candid conversations with team members about the needs of the startup, whether the team members are able to meet those needs, and what support is needed to meet them. If they aren’t able to do the job, the team members should be layered under someone who has more experience. Newsflash: you aren’t doing anyone any favors leaving them in a job they aren’t able to do. If you leave them there they will eventually burn out and quit (but first probably become toxic within your organization).
As Co-founder and CEO of Lattice, Jack Altman puts it in his post on building startup teams, “Hire and fire like it’s your most important job.”