The Mistakes Startups Make In Their VC and Partner Relationships and How to Prevent Them
It’s no secret that a majority of new startups fail. What’s more surprising is that most of these startups fail from the same mistakes, which are actually quite preventable. These mistakes usually have to do with how startups manage their business relationships, from VCs and investors to their partners. Here are some of the common mistakes made regarding these relationships and how to prevent them.
When forming partnerships, startups often only think about how the relationship will bring cash and capital. A strategic partnership is more than just funding; it is about how the partnership can help your startup to reach a wider audience, expand into new markets, refine and improve your business model, raise market and brand awareness, as well as to develop new products or solutions. By forming strategic partnerships with well-established and better experienced organizations and entities, your startup can leverage on their knowledge, network connections and expertise in order to grow further and achieve more than it otherwise would have. Certain large corporations and companies, for example, will help their newly established startup partners by providing mentorship, guidance and access to their markets and clients, as well as the use of their products and services.
Rushing to raise venture capital without careful consideration of the consequences is one of the mistakes that startup founders make when they first begin the process of raising capital. More than cash and capital, it is actually more important to look at the investors’ intangibles such as their leadership qualities, mentorship capabilities and network connections when considering who to work with and raise funding from. In the pursuit of the next big unicorn like Grab, Gojek or Tokopedia, some investors and VCs may push their startups to pursue all out growth no matter the cost, thus ultimately forcing the startups to expand too far, too fast. While it may be tempting to go after the biggest funding available, it is more prudent and wise to consider how the VC’s relationship can benefit your startup in the long run. For example, consider whether they have the patience and willingness to provide guidance and mentorship for your startup as it grows; a VC partner who’s willing to walk side by side with you through thick and thin is a partner who truly wishes for your startup to succeed.
Before raising capital, your startup should also have a clear vision and roadmap of where it wants to go so that you have a better understanding of the financial needs required and the kind of partners that you want to work with. Without a clear goal and roadmap, some startups may bite off more than they can chew when given too much capital and cash than they know what to do with. Having a well-defined vision and goal also provides clarity and purpose, and may attract like-minded VCs and investors to invest in your startup.
How you manage your business relationships with your VCs, investors and partners is one of the most important determinants in whether your startup fails or succeeds. By having a clear focus and understanding of your startup’s goals and where it wants to go, the better off you will be when choosing which VCs, investors and organizations to partner with.
