Strategy April 06, 2021
How to Know When a Startup Won’t Last
5 warning signs to look for.
1. Noncommittal
Stay away from people who treat their startup as a side gig, says Matt Lerner, founder and managing partner at Torchlight Consulting. “If they’re only working on this in the spare hours outside their day job instead of dedicating 100% of their time, they’re not going to last,” Lerner says. “You should also be wary of founders looking to give away a lot of equity to somebody for jobs they don’t want to do.”
2. Nonresponsive
If it’s a struggle to communicate, it’s time to cut bait, says business expert and venture capitalist Shane Neman. “If they don’t get back to you the next day or the day after, I would never work with them,” Neman says. “If they won’t get back to you early on, imagine when it’s time to collect payment or renegotiate.”
3. Resting on Laurels
Sometimes, after a few successful projects, startups lose motivation and become less productive, says Emma Sargsyan, founder and CEO of Saege Consultants. “Reaching some milestone or achievement or even landing a big sale may make them become a bit lazy,” Sargsyan says. “When you see even a tiny bit of lack of motivation, that is a definite red flag.”
4. Lack of Focus
A startup needs to know its target audience, says Joy Corkery, content marketing lead at Latana. “For a company to make sales, it really needs to understand who its product is beneficial for,” Corkery says. “If you don’t know your customer’s wants, needs and expectations, then you won’t be able to sell your product. Likewise, a startup that markets to everyone is never a good sign, either. Its marketing message will be too general and miss the emotional connection needed.”
5. Unwilling to Pay
Beware of startup leaders who convince potential employees, desperately needed suppliers and advertising partners to work for them for free. “Every startup founder who doesn’t have any cash will usually get very creative verbally, dangling all kinds of exciting investment jargon and future compensation yarns in lieu of payment,” says Baron Christopher Hanson, lead consultant and owner of RedBaronUSA. “Unless you’re on the startup’s board, married to an owner or privy to the actual funds in their bank accounts, be sure to get everything in writing, including a healthy deposit up front and certified funds upon delivery.”