However, it’s fair to say that the economic turbulence of the past two years has reduced the room for margin for error. With flight to quality, growth capital harder to access, valuations declining, and VCs more exacting in how and where they deploy their funds, founders are under renewed pressure to become capital efficient and make the right choices at the first time of asking. Second chances are, sadly, in short supply.

Given that some mistakes are more costly than others, the trick for founders is to avoid the classic entrepreneurial pitfalls that consistently lead to bad outcomes or set alarm bells ringing with investors. Here are some of the common pitfalls to be mindful of when setting out on your new business venture:

1) Do not fall into the trap of becoming a solution in search of a problem

I speak to dozens of founders every week. Most struggle to answer the simple question, “What is the problem you are solving for?” More often than not, they talk about what their solution does. They’ve fallen in love with an idea, built a solution around it, and are now searching for a problem.

The key to avoiding this issue is to have a brief, clear, and concise problem statement. Saying manufacturing is inefficient is not a problem statement. The reason this is so important is that when you are able to state the problem, you will then be able to identify who you will be solving it for; your ideal potential customer. That allows you to validate this thesis with that target customer. Just because you think this is a problem does not mean your potential customer is willing to spend capital for it. Ideally you choose ten customers for whom the problem is a high priority, identify their pain points and tailor your solution to address these specific needs. You’re only onto a winner if they’re willing to pay for what you’ve built.

I’ve also found that the closer the founder’s connection to, and understanding of, the problem, the better they are at solving it. This is a strong argument for founding startups in industries that you’ve worked in previously, or for bringing in co-founders with relevant domain knowledge.

2) Don't get distracted

In the early stages of a company’s lifecycle, it’s important to have a very clear and concise target customer in mind with a very narrowly focused offering. Your goal is to get to product/market fit as soon as possible. You won’t achieve this by attempting to solve multiple problems for multiple audiences concurrently; indeed, it’s far more likely that you’ll fail to fully solve any of them or that your message will be diluted or missed by your ideal customer.

Equally, while it’s important to seek early feedback on your product, many founders get distracted by customer requests for additional features that don’t really support the foundational company vision. Know what you’re building and focus on building it.

3) Don’t forget about your key unit economics

Customer acquisition takes time, effort, and money, particularly for early-stage startups that have very limited resources and lack strong market awareness. Getting your strategy right requires close attention to the unit economics involved in bringing your product or service to market, and founders frequently slip up in this area. Many underestimate how long it takes to achieve product market fit, how to measure it, customer acquisition costs (CAC), or overestimate the customer lifetime value (CLV); others fail to account for hidden expenses involved in production or bringing the product/service to market.

Investors like myself look at each startup’s unit economics to assess the feasibility of the company and its business model. Is it scalable? Will there be margin expansion at scale? When can you achieve profitability? Will you be capital efficient? How much cash will you burn before achieving product market fit? Equally, the unit economics can highlight future risks and red flags, such as higher than expected CAC, or high levels of churn.

Founders who pay close attention to unit economics invariably spot potential problems earlier and buy themselves more time to address them. Founders who forget about them may feel like business is booming, when the underlying metrics are telling a different story.

4) Do NOT put debt (other than a safe or convertible note) on the balance sheet

Managing startup finances isn’t easy, particularly when there are limited funds at your disposal, but however tempting it might be, adding debt to the balance sheet at an early stage is only going to cause problems down the line.

Balance sheet debt makes your business an even riskier bet for investors and adds fixed costs to the business (interest payments) that reduce your profitability. It also makes your business less agile, adding financial obligations that could prevent you from pursuing other emerging opportunities or adapt to market changes.

The only exceptions to this rule are safe and convertible notes, as these are short-term debt instruments issued by investors that will convert to equity once the startup reaches its next fundraising milestone (i.e. you don’t have to pay it back or pay interest on the debt).

Ultimately, founders need to be frugal wherever possible and keep costs to a minimum – this is a far better way to extend your runway than taking on debt.

5) Don't try to do everything yourself

Founders have limited time and need to use it wisely, which means focusing solely on the core business functions; your job is to hire and fire, raise capital, provide clarity and, of course, sell sell sell. You shouldn’t be drafting marketing collateral or masquerading as the company’s finance director.

Over-recruitment early in the growth journey is a problem that’s easily avoided by outsourcing all non-core functions like accounting, finance, HR, PR etc.

Mistakes are inevitable, but the best founders don’t repeat them.

We all make mistakes and there’s a lot of room for error when trying to build an early-stage business. Grit and resilience are essential characteristics that investors look for in founder teams, simply because experience tells us that things always go wrong at some stage!

The very best founders try to avoid mistakes by seeking guidance from those who have already been on the startup journey and succeeded, but when mistakes do happen, they react quickly, decisively, and with a view to ensuring they aren’t repeated.