The 3 Most Costly Mistakes Both Early and Later Stage Founders Make

s someone who talks with CEOs and founders all the time, and a multi-time founder and CEO himself, Matt Blumberg at Bolster is often asked about the biggest mistakes he sees founders make and what to do about them. He divided his response into common mistakes made by “early stage” and “later stage” founders.

 3 Mistakes Early Stage Founders Make

1. They cling to someone who is a “good enough” fit

‍Or perhaps who is a good performer but a weak cultural fit. Oftentimes this might be because the founder either feels beholden to the employee for their output, or worse, they’re actually afraid losing them will cause the company to miss a milestone or trigger another departure.

What to do? Of course, the answer is to have courage and make the change! Years, ago, Matt wrote an essay entitled Hire Slowly, Fire Quickly, which appeared in Brad Feld and David Cohen’s book, Do More Faster. He compared a poor cultural fit to a cancer that can infect the whole body of your company. 

A “good enough” person obviously isn’t quite that toxic, but an employee like that can still prevent your team from reaching its potential. In either case, the faster you realize what’s going on and make a move, the better off you are.

2. They get the balance wrong between “leading with vision” and “listening to customers"

‍Both are important for and finding the balance is important, especially for early stage founders. It’s easy to get led to a too-narrow Product/Market Fit definition that has you building something awesome that only a dozen customers will be excited about. 

On the other hand, founders also have to listen if enough potential customers say no. Your vision could just be too far ahead of the market.

You have to get around this by constantly checking your enthusiasm with a mix of cold hard logic. Lots of market traction is great—but is all that traction coming from the same type of customer? Have you run your idea or wireframes by different segments, different buyers, different sizes of company (if B2B) or lots of different demographics (if B2C)? Are all of them equally enthusiastic and willing to buy? A complete lack of market traction when you’re sure your vision right is equally vexing. 

If literally everyone is saying “no” or worse, some polite but noncommittal version of yes, are you working to shape the vision, or at least shape how you articulate it? Sometimes your vision might be right, but your messaging might be off. Try a different one on for size.

3. They focus on fundraising and valuation over business fundamentals

‍Especially in this day and age, it’s really easy to get caught up in the “more money” hamster wheel. Raise, raise, raise. Finish one round, immediately start working on the next.

In the end, business fundamentals matter—no fundamentals, no business (e.g., no next round). More than that, it’s vital to spend more time caring about your customers and learning and telling stories about how you made their lives better with your product or service. That’s more important—and will benefit you more—than just blowing through one round of money to get to the next.

 3 Mistakes Later Stage Founders Make

1. Misreading Product/Market Fit

‍Misread it too high, and founders end up dumping money into sales and marketing too soon. Misread it too low, and you can fire a good sales or marketing team when it’s not their fault!

On the high side, Product/Market Fit isn’t just coming from a healthy CAC/LTV ratio or by good early adoption. Early adoption can come from a small group of Visionaries (think Geoffrey Moore’s Technology Adoption Lifecycle curve from Crossing the Chasm), so understanding how extensible your early adopter crowd is—and how easy it will be to reach the next batch of customers and the next batch and the next batch—can be complex, but it’s costly to get wrong.

The opposite is also true. It’s easy to get caught up in a wave of enthusiasm around early Product/Market Fit and then blame a slowdown on the sales team, when in fact, you either didn’t have true Product/Market Fit beyond visionaries in the first place…or maybe you had it, but the market changed over time, and it slipped away. Product could easily be the culprit here, not Sales or Marketing. You have to constantly go back and re-test your assumptions as products mature and more substitutes and competitors become available.

2. Throwing people at problems

‍It’s so easy to do this. Building automation, designing new business processes, and implementing new—or worse, changed over—systems can be hard, expensive, and time consuming. So yes, sometimes it makes sense to just hire that extra person or two instead of investing in processes. But do too much of that, and you will drown in your cost structure.

Founders have to learn to embrace the tear-down. Remember, you’re an entrepreneur. You’re creative. You like to invent things and disrupt things. That includes things you yourself built! Better to tear down an existing process or system and replace it with something more efficient for scale than to throw people at problems.

3. Believing they alone must continue to drive their culture forward.

Cultures are truly hard to scale.

But there’s a trick to scaling them. The trick is to stop doing the work yourself, and partner with your HR/People team to build your cultural touchpoints (values, artifacts, etc.) throughout your employee lifecycle so that everyone in the company (NOT just HR/People) becomes a cultural steward. Recruit and interview against your values. Onboard people with founder sessions on values and culture. Bake those things into performance management and compensation, so you’re no longer the sole driver of your company culture.

Being a founder or CEO—at any stage—offers plenty of opportunity for mistakes. Iteration and learning is part of the lifecycle of a startup, after all. There are, of course, a variety of other common mistakes that CEOs and founders can make. What are the ones you’ve encountered?