When starting a new business, it's important to stay upbeat but not at the expense of being realistic. Here’s a list of early mistakes first time founders make. 


New entrepreneurs are committed to building a better future driven by better ideas. They have the drive and tenacity to enter the market and fight off the ghosts of failure and defeat. They are prepared to launch a firm. They commit numerous errors. In the process, they frequently commit the same biggest mistakes first time founders have made over the years. 

So, what are the early mistakes first time founders have been making? Let’s find out in this post, so you know to avoid these common errors: 

When launching a firm, disregarding market risk:

The biggest cause of business failure is disregarding or minimising market risk. Most entrepreneurs focus too much on developing their technological foundations and need to be more on ensuring they add value to the company. As stated in America's Most Successful Firms: Lessons for Entrepreneurs by Max Finger and Oliver Samwer, however, "Many startups burn a lot of money with a product or technology hunting for a solution." An improved strategy is to spend six months talking to prospective clients to ascertain their needs and confirm your concept.

Figuring out what advice is useful and what to discard:

Most insightful people are in great demand, whilst those with lots of time to give counsel frequently only have very little to offer. Keep the source in mind when receiving advice and balance your reaction accordingly.

Going too quickly:

The majority of startup critics advise going quickly to capture the market first, stockpiling the best talent, and moving forward at full speed while pouring money into the boiler. However, too-rapid expansion causes significantly more business failures. When the corporation knows what the customer wants, it is wise to conserve capital. 

Hiring the incorrect group: 

Among the biggest mistakes first time founders make, this one is pretty prominent. The majority of new business owners need better hiring decisions. Depending on their engagement, introspection, and pattern detection, two people can work side by side at the same organisation and end up with drastically different degrees of experience. Sorting the pile based on the firm's needs, and not the most eye-catching resumes, is crucial.

Underestimating how difficult seed funding is:

Because it's not very difficult to raise seed money, founders shouldn't take pride that a popular seed fund has invested. Very few businesses have succeeded simply because their cap table contained the correct names.

Underestimating how difficult it is to obtain Series money: 

The Series A funding milestone is where the founder can finally stop bootstrapping and begin implementing their concept. Additionally, it heralds the start of a partnership essential to the development of the company: a VC partner. To secure Series A funding, founders must significantly step up their game.

Mental exhaustion:

Founders experience extreme pressure. That makes sense, considering that many of them put in 80 or more hours a week and can't sleep through the night without waking up in a cold sweat. They frequently experience overwork, loneliness, and stress, which harms their ability to be creative and analytical but which they frequently are unaware of until it is too late. To keep the inevitable disappointments from spiralling into crises, founders need a solid foundation—something to care about that is unrelated to their business.

Pre-funding compliance: 

Observing the Registrar of Companies' requirements:

According to the Companies Act 2013, a private limited company may offer its shares through a Preferential Allotment of Shares to obtain money, either within India or outside India. It is the simplest way to raise money and the company's share capital.

How to run a board meeting:

All board members must be notified at least seven days before the scheduled meeting. The meeting will cover the following topics:-

  • Taking into account the valuation report.

  • The choice to be made concerning the list of recipients.

  • The selection of the offer duration.

  • A bank account must be opened with a Scheduled bank to receive the funds.

  • Completing the offer letter's draught.

  • It must decide the Extraordinary General Meeting's day, date, location, and hour.

  • Completing the accompanying Explanatory Statement and the EGM notification.

Organising a Special General Meeting:

The Special Resolution respecting the Preferential Allotment is the main purpose of the EGM. The Special Resolution is in effect for a year. The certified authentic copy of the Special Resolution and a justification statement are enclosed with the private placement offer and forwarded to the allocators.

Issue of Letters of Offer:

Following approval, the prospective allottees must receive the private placement offer letter and application in writing or electronically within 30 days. The Registrar of Companies must receive a detailed record of the preferential allotment. After this, the company can then start receiving money from the investors.

Post Funding Compliance:

Distribution of Shares:

After the securities are allowed, the Registrar of Companies must receive a Return of Allotment within 30 days. After receiving the payment for allocating shares, the allottees should receive the securities sixty days later. 

Certificates of Shares are issued:

The allottees will receive the share certificates, formally representing the company's shareholders. However, there are a few additional complications to be observed by the recommendations provided by the Reserve Bank of India if the investor is a foreign investor.

And that was our list of the biggest mistakes first time founders make usually. Of course, no one has the secret to be an extremely successful first-time founder. 

But if they can steer clear of these aforementioned blunders and reduce the risk on their company's future course, their chances of realising that vision to bring change to the world around them does significantly rise. 

Here are 5 Candid Advice from VCs To All Early Stage Founders with actionable tips. ​

Salt is a neobank dedicated to making global banking easier and instantaneous for startups and small businesses in particular. Give our website a visit today to find out more about us!