Potential Pitfalls, Tips, & Tricks
Startups can be fruitful when they are managed well and strategically organized.
This Guide is a tool to help you organize and establish your startup.
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NUtech wants to provide resources to help you succeed and avoid potential issues during your startup formation and launching process. This page contains "Potential Pitfalls" that many failed startups have encountered, as well as tips on how to succeed.
Tech doesn’t meet commercial needÂ
Sometimes the innovation is unique and exciting, but does not meet a critical commercial need, or current solutions are still better or more cost-effective than the new technology.
Target market is too nicheÂ
If the target market is smaller than expected, the company may not meet its financial targets.
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Tip: At this point, you may want to consider reevaluating your business model and technology. If there are different market applications for your innovations, you may find success in different markets and/or different segments. If there are not additional applications for your innovation, you may want to consider modifying the innovation to meet market needs or abandoning the project so as not to incur additional losses.
Lack of fundingÂ
A startup needs sufficient capital to overcome technical challenges, reach critical business milestones, and progress to the next phase of product development. To attract investors in the company, in addition to great technology, the startup must have a solid business plan and a strong management team.
Click here for a list of funding resources.
Inexperienced management  Â
A strong, experienced, cohesive team is required for a successful startup company. Problems can arise if founders or other members of the team do not have enough startup and business experience, or if founders, new management, and/or investors do not have the same strategic vision.
Timing
Even when a commercial need exists, the startup may miss the market. Sometimes, this is because the market is not ready for the product, e.g., too early, too expensive, lack of need. Sometimes, the product is too late to the market and the need has already been filled by a different technology or competitors have surpassed the company with a better product.
Unrealistic projectionsÂ
It is easy to be optimistic about your organization when you’re passionate about your work. However, this can lead to blindness regarding the reality of the competitive environment and your organization’s success relevant to investors. Though a few companies take off and scale extremely quickly, it is not always the case; most organizations take years of company building, product development, and client service improvements to reach their market share goals. We urge you to think realistically and use tools like benchmarking to establish challenging but reasonable projections.
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Unsupported Optimism
When you are in the fundraising stages of your startup, one of the most important factors is transparency with your numbers, strategies, and expectations. To avoid breaks in trust and legal issues, avoid over-inflating your organization’s worth and market share by completing due diligence on your own organization. If your funding requirements are high, ensure you demonstrate why. For example, if you are a capital-heavy startup that requires you to purchase machines for a factory, your startup costs will be higher than a software platform with no brick-and-mortar location. Additionally, ensure your team has the data and strategy to support any growth goals, sales numbers, or other factors that will be important to investors both during the fundraising and growth stages. Investors want to see that you have a concrete plan to achieve your goals and that your goals are rooted in reality.
Bad LuckÂ
Even the most successful entrepreneurs often accredit some of their success to good luck; there are factors that will be out of your control no matter what precautions you take to limit your risk. These factors are often unanticipated, external factors that adversely affect your business’s ability to succeed. There are still many lessons to learn in the startup process, so even with bad luck, there are potential ways to pivot, and knowledge to gain.
Potential Pitfalls
Tips & Tricks
Company Valuations are an estimation of an organization's worth, and they are important because they can help streamline business processes and facilitate financial conversations.
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Click this link to learn more about the importance of valuation, valuation methods, and how valuations can help your startup.
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Valuating your organization can be challenging because there are many factors to consider. ​
NUtech has the following tips to help you create an informed company valuation.
Establish the geography of your target market
Many startups are founded with the idea that the founders want to go global. While this idea is noble, the reality is that it is difficult, costly, and time-consuming to scale globally, but more importantly, scaleup and formation are two entirely different stages in the startup process. Unless your company is a born-global organization, your target market’s geography cannot be “the whole world.” Brick-and-mortar organizations are generally tied to the market in which their store is located.
Example: Tina’s Coffee Corner is located in Lincoln, NE, so her initial target market is Lincoln and the surrounding areas.
If your startup is software-based, your target market will include your initial test market, which is the location in which you launch the first version of your software.
Example: If a company called NewTire launches in Minneapolis, MN, though the technology is technically available anywhere because it is on the internet, the company's primary marketing and sales strategies will be local; therefore, its initial target market is local.)
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Target markets change and adapt as your company does, but to properly create and facilitate effective marketing and sales strategies, narrowing your activities to a specific market helps you maintain focus for decision-making and strategy setting.
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Assign tangible
value to IP
Charge fair market
value for your innovation
The value of trademarks and patents isn’t certifiable, especially in the provisional stage.
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Rule of thumb = valuation of the company can increase by $1M for each patent filed.
Determining pricing can be a challenging process. It is important to charge an amount that customers will reasonably pay for the innovation based on the value they receive from it; however, the pricing should be higher than the cost of production and an accurate reflection of your business model.
Assign value to all
employees
Assigning value to each employee can demonstrate the caliber of a startup's talent pool and the potential for future growth. Investors consider both a startup’s products or services and the strength of its team.
Rule of thumb = Their employment and expertise can help increase the valuation of the company by up to $1M.
Consider Various Financial Approaches When Establishing Projections
There are several methods entrepreneurs can use to value their business. The following valuation approaches are some of the most common methods startups use.
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Income Approach​
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Use the Discounted Cash Flow tool (income approach) to calculate more accurate projections considering the time value of money.
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The discount rate for startups is generally 30% to 60%
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Multiple Earnings Approach  
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Earnings (before taxes, depreciation, amortization) by multiple
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The multiple can be taken from industry average tables. The multiple can be taken from scoring key factors in business
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Use 5 as the multiple if there is a lack of information about the industry
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Cost Approach
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Calculate replacement cost for key assets (that is, the estimated value of the company for this approach).
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Market Approach  
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Look at similar companies for their valuation, financing, and financial models to better inform yours. Look at the size of the market and projections for the sector. The bigger market that has higher growth projections = a startup worth more.
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According to Business Insider, “For this to be a premium factor for you, your target market should be at least $500 million in potential sales if the company is asset-light, and $1 billion if it requires plenty of property, plants, and equipment.” 
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Click the links below for more resources for startup valuation:
Business Insider: 10 Ways to Size Your Company's Value for Funding
Startups.com: How to Value a Startup
Silicon Valley Bank: How to Determine Your Seed-Stage Startup's Value
Mass Challenge: How to Value a Startup Company With No Revenue
Investopedia: What Is an Earnings Multiplier
Corporate Finance Institute: Earnings Multiplier
Company Valuation
Assess Direct Competitors and Barriers to Entry
Competitive market forces also can have a large impact on what valuation your company will garner from investors. If you can show a big lead on competitors, you should claim the “first mover” advantage. In the investment community, this premium factor is called “goodwill” (also applies to a premium management team, having few competitors, creating high barriers to market entry, etc.). Goodwill can easily account for a couple of million dollars in valuation.  
When to Abandon
It is the unfortunate truth that many startups fail. There are a lot of negative feelings toward shutting down a venture; many founders feel as though they have failed their stakeholders. The good news is that many investors are aware that their investments might fail, and they will emotionally recover fairly quickly. What bothers investors more than a failed startup is when companies misrepresent their status as successful when they are struggling, then suddenly shut down without warning, or bleed out a business over several years, wasting investors’ time and money.
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Startups can fail during any stage of the startup process. If the customer discovery and validation processes demonstrate no market need or insufficient demand, the startup will likely not succeed and should be abandoned. If the startup is struggling to maintain faith from investors, deliver on its financial goals or value proposition, lose customers, attract new customers and investors, or no longer aligns with your goals, it may be time to abandon the startup.
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Be aware of and avoid the sunk cost fallacy; many entrepreneurs don’t want to leave their startup because they have put countless hours and dollars toward developing their innovation and startup. However, when making business decisions, sunk costs are considered irrelevant when considering the future of a startup. What matters going forward is if the business is viable and sustainable; if the answer to that is “no,” then no matter how much time and capital your team has put into your startup, it is probably time to close the business.
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Want more insight? Click here to listen to this Freakonomics episode about how to succeed at failing.
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Many founders of startups are known to be driven perfectionists and get caught up in their innovation design or niche areas of their business model and business plan. Because of their passion and commitment, founders are hesitant to release an imperfect innovation to the market. This hesitation can lose you opportunities to create new markets and innovations and obtain significant market share, which can be detrimental to your startup’s launch and success. To avoid this hesitation and gain market research with low impact, you should launch your MVP as soon as possible.
Building a Great TeamÂ
Building the right team is the cornerstone of startup success. In the fast-paced and dynamic world of entrepreneurship, finding individuals who not only possess the necessary skills but also resonate with your company's vision and culture is paramount. Start by defining your company's core values and mission and use these as guiding principles in your hiring process.
Look beyond resumes and qualifications; seek out candidates who demonstrate passion, adaptability, and a willingness to learn. Leverage your network, attend industry events, and utilize online platforms to connect with potential team members who share your entrepreneurial spirit. Be transparent about your startup's challenges and opportunities and inspire candidates with your vision for the future. Finally, prioritize cultural fit and team dynamics, as a cohesive and collaborative team will be better equipped to navigate the inevitable ups and downs of startup life. Remember, getting the right people on your team isn't just about filling positions—it's about building a foundation for long-term success.
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For more information about hiring a great startup team, visit the resources below:
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Startup Savant: Startup Hiring Guide
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Business News Daily: The First 8 People You Should Hire
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LinkedIn Article by Mathias Klenk: How to Hire Exceptional Team Members for Your Startup
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Finmark: The Ultimate Guide to Hiring Your First Employees at a Startup
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Cobloom: The Ultimate Startup Hiring Guide: How to Build a Winning Team
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Workable: Hiring for Rapid Growth from 5 to 50
Be Prepared to PivotÂ
As a new entrepreneur, it's crucial to understand that flexibility and adaptability are key ingredients for success in the ever-evolving landscape of business. While you may start with a clear vision and a solid business plan, it's essential to recognize that unforeseen challenges, market shifts, and unexpected opportunities may necessitate a change in direction. This is where the concept of pivoting comes into play.
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Market Feedback: Your initial idea may not always resonate with your target market as expected. By staying open to feedback and observing market trends, you can identify areas where adjustments are needed to better meet the needs and preferences of your customers.
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Competitive Landscape: The competitive landscape can change rapidly, with new players entering the market or existing competitors launching innovative products or services. Pivoting allows you to stay ahead of the curve and differentiate your business in a crowded marketplace.
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Resource Optimization: As you gain insights into your business operations, you may discover inefficiencies or areas where resources could be better allocated. Pivoting enables you to realign your resources for maximum impact and efficiency.
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Learn how to Adapt Quickly:
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Embrace a Growth Mindset: Cultivate a mindset of continuous learning and growth. View challenges as opportunities for innovation and improvement rather than setbacks. Stay curious, open-minded, and willing to explore new ideas and perspectives.
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Stay Customer-Centric: Keep your customers at the forefront of your decision-making process. Regularly solicit feedback, conduct market research, and stay attuned to changing customer needs and preferences. Your ability to adapt quickly hinges on your understanding of your target audience and their evolving demands.
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Iterate and Experiment: Adopt an iterative approach to business development. Instead of waiting for the perfect solution, embrace experimentation and iteration. Test new ideas, gather data, and iterate based on the results. Fail fast, learn quickly, and course-correct as needed.
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Build a Diverse Team: Surround yourself with a diverse team of individuals with varied backgrounds, perspectives, and skill sets. Diversity fosters creativity, innovation, and resilience, enabling your team to adapt more effectively to changing circumstances.
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Stay Agile: Embrace agile methodologies and principles to foster flexibility and responsiveness within your organization. Break down complex projects into smaller, manageable tasks, and iterate frequently based on feedback and new information. This iterative approach allows you to adapt quickly to changing market conditions and customer feedback.
Pivoting is not a sign of failure but rather a strategic response to changing circumstances and opportunities.
In the dynamic world of entrepreneurship, the ability to pivot and adapt quickly can be the difference between stagnation and growth. By embracing change as an opportunity for innovation and improvement, entrepreneurs can navigate uncertain terrain with confidence and resilience.
Networking, Networking, Networking
​Networking is an important part of being an entrepreneur. Building a network can help you gain support, resources, and input from others in the industry and your community.
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Why Networking Matters:
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Access to Resources: Networking provides access to resources such as funding, talent, and expertise that can fuel the growth of your startup.
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Market Insights: Networking allows you to gain valuable insights into market trends, customer needs, and industry best practices.
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Partnerships and Collaborations: Networking facilitates partnerships and collaborations with other startups, established companies, and industry stakeholders, enabling mutual growth and innovation.
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Mentorship and Support: Networking offers the opportunity to connect with experienced mentors and peers who can provide guidance, advice, and emotional support during the startup journey.
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Visibility and Credibility: Building a strong network enhances your startup's visibility and credibility within the industry, making it easier to attract customers, investors, and strategic partners.
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How to Network:
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Attend Industry Events: Attend conferences, trade shows, and networking events within your industry to meet potential partners, investors, and mentors.
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Join Professional Associations: Join industry-specific professional associations and networking groups to connect with like-minded individuals and stay informed about industry developments.
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Utilize Online Platforms: Leverage online networking platforms such as LinkedIn and industry-specific forums to connect with professionals, participate in discussions, and share insights.
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Be Genuine and Authentic: Approach networking with a genuine interest in building relationships and offering value to others. Listen actively, ask questions, and be open to learning from others.
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Follow-Up: After networking events or meetings, follow up with new connections to express appreciation, continue the conversation, and explore potential opportunities for collaboration or partnership.
Where to Look for Networking Opportunities:
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Industry Conferences and Events: Attend industry conferences, trade shows, and networking events relevant to your startup's niche.
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Startup Incubators and Accelerators: Join startup incubators, accelerators, and entrepreneurial programs that offer networking opportunities, mentorship, and access to resources.
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Local Meetup Groups: Join local meetup groups focused on entrepreneurship, technology, or your startup's specific industry to meet like-minded individuals and exchange ideas.
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Online Communities: Participate in online communities, forums, and social media groups related to startups, entrepreneurship, and your industry to connect with professionals worldwide.
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Alumni Networks: Tap into your alumni network from universities, incubators, or previous workplaces to leverage existing connections and expand your network.
Networking is a powerful tool for startups and startup founders to build relationships, access resources, and unlock opportunities for growth and success. By investing time and effort into networking, you can strengthen your startup's position within the industry and accelerate its journey toward achieving your goals.
Build for Scalability Â
Building for scalability is essential for startups aiming for long-term success and growth. Scalability refers to the ability of a business to handle increased workload or growth without a proportional increase in resources or costs. Here's how your startup can build for scalability:
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Design a Flexible Architecture: Start by designing your product or service with scalability in mind. Build a flexible and modular architecture that can easily adapt to changes in user demand, technology advancements, and market trends. Avoid overly complex or monolithic systems that are difficult to scale.
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Invest in Scalable Technology: Choose technologies and platforms that can scale seamlessly as your startup grows. Cloud-based solutions, microservices architecture, and serverless computing offer scalability benefits by allowing you to scale resources up or down based on demand. Leverage automation and DevOps practices to streamline deployment and management processes.
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Focus on Performance and Efficiency: Optimize your software and infrastructure for performance and efficiency to handle increased workload efficiently. Conduct regular performance testing and optimization to identify and address bottlenecks before they impact scalability. Implement caching, load balancing, and content delivery networks (CDNs) to improve speed and reliability.
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Build Scalable Processes: Establish scalable processes and workflows across your organization to support growth and expansion. Streamline operations, automate repetitive tasks, and implement scalable systems for customer acquisition, onboarding, and support. Invest in tools and technologies that can scale with your business needs, such as CRM systems, project management software, and collaboration platforms.
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Plan for Growth: Anticipate future growth and plan accordingly by forecasting demand, assessing scalability requirements, and developing a roadmap for expansion. Consider factors such as user acquisition strategies, geographic expansion, and product diversification. Build scalability into your business model and financial projections to ensure sustainable growth.
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Focus on Customer Experience: Prioritize delivering a superior customer experience that scales with your business. Invest in customer relationship management (CRM) systems, customer support tools, and feedback mechanisms to ensure seamless communication and interaction with your customers as you grow. Continuously solicit feedback and iterate based on customer needs and preferences.
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Stay Agile and Iterative: Adopt an agile and iterative approach to product development and business operations. Break down large projects into smaller, manageable tasks, and iterate based on user feedback and market insights. Embrace a culture of continuous improvement and innovation to stay ahead of the curve and adapt to changing market conditions.
By designing a flexible architecture, investing in scalable technology, focusing on performance and efficiency, building scalable processes, planning for growth, prioritizing customer experience, and staying agile and iterative, startups can build for scalability and position themselves for sustainable growth and success in the long term.
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How to Stay Positive in the Face of RejectionÂ
In general, the NUtech Startup Guide encourages entrepreneurs to be realistic about the state of their startup and the environment surrounding it. However, even successful startups endure a lot of rejection and criticism, so it's also important to know how to stay positive in the face of rejection and criticism.
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Focus on Your Vision: Remind yourself of why you started your startup in the first place. Reconnect with your passion and vision for your business. Having a clear sense of purpose can help you stay motivated and resilient in the face of rejection or criticism.
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View Rejection as Feedback: Instead of taking rejection personally, view it as valuable feedback that can help you refine and improve your business model, product, or strategy. Every rejection is an opportunity to learn and grow. Ask for specific feedback from potential customers, investors, or partners, and use it to iterate and evolve your startup.
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Seek Support: Surround yourself with a supportive network of mentors, advisors, friends, and fellow entrepreneurs who can offer encouragement, advice, and perspective during challenging times. Share your experiences openly with trusted confidants, and lean on them for emotional support when needed.
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Practice Resilience: Cultivate resilience by adopting a growth mindset and reframing setbacks as temporary obstacles on the path to success. Embrace failure as a natural part of the learning process and an opportunity for growth. Stay adaptable and flexible in your approach, and remain committed to your long-term goals despite short-term setbacks.
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Celebrate Small Wins: Acknowledge and celebrate even the smallest victories and milestones along your entrepreneurial journey. Recognizing progress, no matter how incremental, can boost morale and reinforce your confidence in your ability to overcome challenges.
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Take Care of Yourself: Prioritize self-care and well-being to maintain a positive mindset and resilience in the face of adversity. Make time for activities that recharge and energize you, such as exercise, meditation, hobbies, or spending time with loved ones. Taking care of your physical, mental, and emotional health is essential for sustaining your entrepreneurial journey.
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Stay Persistent and Patient: Remember that success rarely happens overnight. Stay persistent in pursuing your goals, even in the face of rejection or criticism. Keep pushing forward, learning from setbacks, and adapting your approach as needed. Trust in your vision and have patience as you navigate the ups and downs of entrepreneurship.
By focusing on your vision, viewing rejection as feedback, seeking support, practicing resilience, celebrating small wins, taking care of yourself, and staying persistent and patient, you can maintain a positive mindset and navigate through rejection and criticism with confidence and resilience. Remember, every setback is an opportunity for growth and eventual success.
Thank you for visiting our Startup Guide!
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To submit questions about the guide or suggest Tips & Tricks to include in the NUtech Startup Guide, please contact jeakin@nutechventures.org
Still have questions? Continue to our FAQ page to view some of NUtech's frequently asked questions. If you still have questions after visiting the page, you may submit them to jeakin@nutechventures.org.
For a list of all the resources linked and referenced in this guide, visit the Resources & References page. Here you can find our consolidated list of financial resources.