Nine common things that start-up founders tend to underestimate or overestimate

By boris, September 08, 2015

When you’re in the midst of building a company, it’s hard to fully assess the significance of various activities and decisions- particularly for first-time entrepreneurs who don’t yet have the wisdom learned from prior mistakes.

As an investor (who was also once a first-time entrepreneur), I have noticed several key areas where founders either overestimate or underestimate the value to their company. Here they are…

5 things founders often underestimate

The value of a great hiring process

Your company won’t survive if you’ve got a great idea surrounded by a mediocre team. Founders should stay involved in every hiring decision for as long as possible. When you’ve reached the scale when it’s no longer possible to be hands-on in each decision, you need to make sure you have strong hiring methodologies in place – such as Jeff Bezos’ bar raisers that were implemented in Amazon’s early days to help weed out “cultural misfits.”

The importance of reference checks

I’m always surprised at how often people still get hired without extensive reference checks. When you’ve got a good feeling about someone, it’s tempting to just move ahead without any kind of due diligence. But informal reference checks can be very revealing, particularly if you can talk to people that weren’t provided by the candidate, but know him or her very well.

The need to build culture from the beginning

Founders often mistake culture with things like morning yoga, a company climbing wall or food truck lunches. But culture is deeper than just free perks and it’s also something you can’t just “switch on” down the road when you have time for it. From the start, you should be thinking about the type of company you want to build and then make sure your systems and decisions support that vision.

The importance of the right set of investors and advisors

This point might seem self-serving, but too often I’ve seen founders look at investors as checkbooks. Money is important but over and over again I’ve also seen just how important great investors and advisors can be in shaping an early stage company.

The value of focus

Your company and your product will never be all things to all people. And not every customer opportunity will be worth pursuing in the long run. You need to narrow your focus to a few key priorities, and then make sure this focus is communicated clearly and repeatedly throughout the company.


4 things founders overestimate

The importance of money

No amount of money in the world is going to get you to product-market fit. And raising too much money before you find product-market fit will usually kill your start-up.

The importance of launch and fundraising announcements

Start-up founders typically want to make a big PR splash when they’re launching their product or closing a funding round. A major launch announcement can make a lot of noise in moment, but it’s more important to focus on generating continuous demand than your 15 minutes of fame. Likewise, fundraising announcements can drive investor interest for future financing rounds, but I’ve found it’s usually better to just stay under the radar and build the company.

The value of senior employees with industry experience

Young startups often feel compelled to bring on senior employees with impressive resumes and a deep knowledge of their vertical. While specific expertise can help in some cases, you should hire for smarts, passion and hard work, rather than experience.

The magic of a silver bullet

It would be great to find that silver bullet to take your business to the next level. The problem is that you rarely ever find them. When founders waste their time chasing after that one non-existent thing that will solve all their problems, they ignore all the small incremental improvements that will make a real difference.

This list is hardly exhaustive. What did I miss? I’d love to hear your thoughts on what else founders overestimate or underestimate…

  • Peter Kemball


    Excellent points, particularly over estimating the value of money from investors. I would add the underestimating list the importance of building an organization specifically structured and staffed to grasp their opportunity, including board members.
    If there is one thing I would put on everyone’s wall and computer to provide daily guidance it is Sun Tzu’s statement,
    ” If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.
    If you know neither the enemy nor yourself, you will succumb in every battle.”

  • Sandi Lin

    Underestimating the importance of money from customer revenue – to validate product-market fit, establish unit economics, and provide cash flexibility for the company.

  • Both underestimated:

    Traction is the easiest way to prove you’re right. In counterintuitive markets, it’s the only way.

    Everything you don’t know is best answered by growth.

  • myBestHelper

    Interesting way to analyse success factors, and esp liked the silver bullet! Would add to “underestimate” two things: 1) the importance of Steve Blank’s “get out of the building” concept (keep talking to users) and 2) the challenge of getting people to use the product/service relative to building it. And I like Sandi Lin’s point, re: importance of revenue. (Alexandra, CEO

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  • bwertz

    agreed – especially true for SaaS start-ups and in the context of validating product-market-fit!

  • bwertz

    So agree on #1 – very, very important to talk to users all the time!

  • bwertz

    Very true – traction and growth certainly solve all of your problems….

  • chrija

    Great post, Boris, couldn’t agree more!

    The importance of reference checks is something I feel so strongly about that I recently wrote a post about that one thing alone:

    Oh, and I have one more addition for the “overestimate” list: “Strategic partnerships with BigCos”, distribution partners, joint ventures in other countries, etc. At least in SaaS, it usually doesn’t move the needle.

  • John Scrofano

    Underestimating leadership (both being and growing in). Being a great leader is what can drive exceptional culture, focus, loyalty, productivity, humility, etc., etc. It’s especially critical as companies move from seed stage to growth (imho).

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  • bwertz

    Re strategic partnerships with BigCos: I guess we have both seen this play out badly / unsuccessfully many, many times!

  • bwertz

    great point!

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  • Andreas Schroeter

    Great post, agree except for one point: It’s not about building a culture, but more about leadership which results in company culture. I would rephrase to:

    The need for real leadership
    Just being a founder or having a fancy title does not make you a leader. IMHO, it’s about three things:
    First, leading by example which is the foundation of the company culture you are building. If you are punctual to meetings, others will be as well. If you prepare for the client meeting, others will as well. You set the standards as everyone will look towards your actions of what is acceptable and what is not.
    Second, a leader formulates and constantly communicates a clear vision. This will get people excited & motivated and at the same time help everyone focus on what’s important: If something helps building towards the vision, you should do it, if it doesn’t, forget about it.
    Third, a leader leads. The early days are all about operational execution, picking up every little task yourself. As soon as you have more people, it’s about leading those people and less about you doing it. That means knowing how to delegate, knowing how to motivate, setting goals for people, ensuring the right communication flow, but also taking hard decisions like firing people, shutting down projects, or in other words: Saying no more than yes.

  • Very useful. Lots of founders don’t understand how VCs and investors look at their business.

  • One of the biggest thing that startup founders underestimate is the belief that building a company will get easier over time. The classic comment of “life will get easier when we close this big customer” or “it will be easier once we close this fundraising round”. It never gets easier and it takes a long time for first time founders to figure that out!

  • bwertz

    Great point – the only businesses I have sometimes seen to be getting easier over time are network effect-driven businesses

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  • Piero Marlia

    I´m curious – why do you think so? At that stage you have to 1) find ways to keep popularity high, 2) ensure growing content is always in line with USP and more and often than not 3) nail monetization strategy right to avoid disappointing customers

  • TEAM Design Group

    As a view from the other side, we find founders and startups try to go too vertical too fast, they want to control (or believe no one else can do it) every aspect of their business, technology, product and market. Many times it is best (probably maps to the FOCUS category) to stick to your discriminator and inherent technology and leave the support efforts to other companies that do those activities every day (maps to the right set of investors and advisers). We have found the smaller the company the more they feel they have to hand make every aspect of a product/process from scratch.

  • Love the focus point. I have found people often look at big scaled-up companies and think that to get there, they need to create a mini-version of the end goal. Not usually the case. Start with a narrow and focused value proposition, then grow from features from there. It is often high-touch to start, so that at scale, it can work for clients with a lot less touch.

    We are in the middle of examining our focus with our company. Equity Crowdfunding is a massive space- but it is not won by boiling the ocean.

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  • Satish Jha

    Most employees get hired with references and most of them do a job. Passionate and performance outliers are not easy folks and may or may not have the references you like. It’s the instinct of the founder about his/her key team members that is way more value adding than any system of reference checks! Refs are grossly over rated and are best for selecting an average employee! Do not forget, 50 % or more have a negative view of Obama or Bush and both are the highest achievers of past couple decades that no entrepreneur can beat!

  • bwertz

    Great way to put it – “don’t just create a mini-version of the end goal”

  • bwertz

    Not sure I agree 100% – great interviewing is important but informal references can be super valuable…

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  • Jim Miller

    Generally love the post. Disagree with the comment on experience. (Perhaps it is how you described it.) Every pitch I have ever made to a VC (or any savvy investor) wants to know about the team first and foremost. They know that plenty will go wrong and the team has to be smart enough and capable enough to adapt or pivot. Smarts, passion, and hard word won’t really help here (smarts maybe, but has to be the right kind of smarts). Experience in doing this before is extremely helpful.

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  • Francois Perrault

    Dear Sir with all my respect i am 50 and believe it or not we are a group of different Skills in the same group of age.We are working on a NEXPERT Disruptive Start up.I must say to you that our combined skills give a BOOM EFFECT! We Strategically choose young people to work with us .We believe in the Mix value. I wish that you can put a break on this point.Think about Einstein,PIcasso,Warren Buffet ,Leonardo Da vinci,

  • Jeremy Pemberton

    Thanks, Boris.

    I’ve raised 10 million in private equity to startup 4 different operations I’ve founded over the past 7 years. The single, most important item to my success that I undervalued/underestimated during my first two startups was WRITTEN AGREEMENTS.

    Strong written agreements with clear expectations for investors, staff, advisors, and partners has made all the difference in my success.

    My first business partnership was consummated with a one page agreement without an attorney fees clause. That “partner” found 3 different attorneys that worked on contingency to come after me with an initial claim of 7 figure damages. 3 Years later, the claim was finally settled for $5,000 – a price that was easy to pay after exhausting $200K+ in legal fees to defend myself and company.

    Strong employee agreements with clear responsibilities, scope, vesting requirements, and day to day workplace expectations has been a game changer in how to recruit, onboard, and manage a strong team.

    Strong investor agreements has allowed me to bring in money from 35+ investors without keeping me awake at night when things don’t go as planned. The investor agreements clearly set the expectations and protect me from losing control, so long as I honor the expectations.

    All of your suggestions ring true.. but the underlying foundation to keeping any founder in control of the success of their startup is strong written agreements.


  • bwertz

    Great points – and sounds like a painful lesson learned!

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