The Three Rs for Avoiding Start-up Failure

The Three Rs for Avoiding Start-up Failure

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People problems are the leading cause of failure in high potential start-ups. Noam Wasserman, professor at Harvard Business School, attributes 65% of failures to personal tension within the founding team.

Here are three pitfalls to watch out for.

1. Relationship decisions

Friends and family are the most unstable founding teams. You skip early discussions that help you get to know someone professionally, and put off decisions that could benefit the business.

Tip: Have firewalls in place to protect your relationships and your venture.

2. Role decisions

Founders may not want to be CEO but want equal say in decision-making, making the team top heavy. In more than 1/3 of start-ups, the founding team all receive a C-level title. This slows down decision-making and increases tension.

Tip: Founders should choose titles that reflect the realistic, long-term goals they’ll play which may not be the C-suite.

 

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3. Reward decisions

Equity ownership is an area of contention in a founding team and the common 50/50 split occurs within the first month for 73% of start-ups. It’s a problem because most start-ups will change strategy, business model or co-founder involvement, but won’t be able to adjust the split.

Tip: Negotiate an equity arrangement that can change as circumstances do.

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