Are you thinking about dropping out of university to become the next Steve Jobs, Bill Gates or even Mark Zuckerberg? Are you planning on creating the next UK Tech unicorn? Well if this is you, unfortunately, I must be the bearer of bad news. In the UK, 75% of venture capital-backed start-ups fail to return money to investors, and only 5% become ‘moderately’ successful. Whilst this may look like a huge mountain to climb as a Warwick entrepreneur ready to create the next iPhone, there’s a reason why most start-ups fail and here’s how to make sure yours doesn’t.
Warwick is a hub for entrepreneurship. Take WBS student Raphael Nahoum, who invented the new desk-booking system that is currently being trialled in the third-floor extension of the library. People like Mr Nahoum exist all over campus, creating great ideas that could turn into world-changing concepts. Despite the abundance of people like Mr Nahoum, the UK start-up scene is a cutthroat place. Whilst the UK did place third in the OECD rankings for the number of start-ups created in 2017, we weren’t even inside the top ten when it came to start-ups that grew into well-established businesses. This is only the tip of the iceberg when it comes to UK start-up failure, as a study conducted by the Enterprise Research Centre found that of the 239,649 firms started in the UK in 1998 only 11 per cent survived the following 15 years. For a young entrepreneur, those odds aren’t what you want to hear.
There are plenty of mistakes made by entrepreneurs that lead to this high failure rate, but here are some of the main ones you should try and avoid if you’re planning on starting your own business:
Know your customer
Whilst you may want to sell your new idea to as many people as possible, not everyone is going to want it. Patronize CEO Malcolm Cowley refers to this mistake as ‘selling umbrellas to camels’, noting that you should “make sure you understand who your ideal customer is and focus almost exclusively on them. They are far more likely to become referenceable customers, who can then provide air cover for your sales leads, [by giving your company] a great reference”.
Entrepreneurs who make the mistake of trying to sell their product to as many people as possible, as quickly as possible, often find themselves with warehouses full of unwanted stock and bills that can’t be paid.
Know when to let someone else steer the ship
The initial success of any company starts with the passion that comes from its founder (or co-founders). They’re the ones who put in the blood, sweat and tears to try and turn their idea into something people would want. But there comes a time when the person who founded the company may no longer be the best person to steer the ship.
Take the (until last year) Uber CEO Travis Kalanick. Mr Kalanick was a man passionate about the company he had founded, but he was not prepared nor equipped to lead a multi-billion-pound company. Many start-ups fail because their founders fail to realise that whilst they may be full of great ideas: they’re not great business people. This doesn’t mean you should let go of your company completely, it means you should be sure to surround yourself with people who have management experience and a head for business.
Sell the right product
It may sound simple, but making sure that you’re selling a product people will use is key to your business’ success. Whilst your product may be completely mind-blowing, if people aren’t going to use it then your start-up isn’t going to go anywhere. The most successful start-ups come in the form of ones who are trying to solve a market problem, not ones who are trying to provide a solution to an issue that isn’t there. Your problem also should be scalable. This means that, if you’re solving a problem that’s unique to Warwick, the rest of the UK might not have much use for your solution – so make sure your product solves a wide-spread problem.
Universities are breeding grounds for young entrepreneurs who want to revolutionise society with the next big thing. However, changing the world doesn’t happen overnight, it’s a process that can take years to accomplish and making sure that you go about it the right way is absolutely key to your success. Avoiding the simple mistakes that many start-ups make could mean you’ll soon be running the next billion-pound UK start-up.