What is the biggest challenge of an early stage startup?

As more and more governments continue to encourage young people to launch startups, it is difficult to ignore the fact that startups are faced with numerous challenges in their early stages.

The most common challenge is coming up with the required seed capital. But even when capital is not the problem, there are still other tough problems to navigate as you set out on your entrepreneurial journey.

Here are some of the top challenges that most startups face:

(1) Gap or need fixing

Delivering a product that meets a specific critical need like no other product can is not as easy as it sounds. If you have a perfectly executed product that meets an urgent need, your business will flourish even in a not-so-good economic climate. When the execution is perfect, raising capital is not hard.

(2) Human capital

Finding a team is one thing, but finding a team that shares your passion and zeal is another. For any early stage startup, filling the staff can be tricky as each selection is a potential make-or-break choice. The lack of capital does not help as it means you are unable to attract the best talent that would accelerate progress.

(3) Customer acquisition/retention

It is the customers that you keep that guarantee you a specific retainer every month. This is a fact that is lost on many startups. Don’t just run for the customers, try as much as possible to keep most of them.

(4) Unrealistic goals

Most early startups only think of the best case scenarios and end up failing to prepare for the worst scenarios. The projections that you have on a sheet of paper don’t necessarily project the realities of the practical world of business.

(5) Cash flow

Managing cash flow in the early stages of a startup is absolutely vital as startups face different problems compared to well-established businesses. In fact statistics show that poor cash flow is the main reason why 90% of small businesses fail.

(6) Unfavorable terms

Startups receive unfavorable credit terms in their early stages compared to existing businesses. This is because they lack an established business credit. Landlords, utility companies, and suppliers may require you to pay upfront until you establish a relationship with them.

(7) Legal issues faced by startups

As the CEO of a legal marketplace, I’ve seen how the lack of adequate early legal planning can cause a startup a lot of problems in the future. There are certain situations that may need the services of an experienced attorney to navigate. Here are some of them:

Business formation

It is important that you choose the best entity structure and state of incorporation for your business. Some of the most common considerations include limitation of liability, number of founders, tax treatment, employees and procedures for raising outside capital.

Intellectual property

Most startup businesses are likely to produce intellectual property. Issues can arise if a company fails to protect its IP, such as trademarking its name or logo or forgetting to assign IP. A well versed attorney should help you protect all your intellectual property interests.

Customer/vendor relationships

Without the presence of an attorney, it is easy to ignore some of the details contained in the fine print of contracts. An attorney helps to structure the agreement and protects you from unexpected outcomes.

Founders

When entering into an agreement with a co-founder, issues such as ownership details, vesting of equity and roles of each founder should be thought through very carefully to avoid unnecessary conflict. Accordingly, develop a founders agreement!

As you can see, there are many hurdles in the way of an early-state startup. If you’re looking for help taking care of the legal challenges then feel free to visit LawTrades. We’re a legal marketplace that was created for startups and small businesses. The attorneys on our website our passionate about working for startups and have a ton of experience doing just that. Visit us for a free initial consultation! Best of luck.

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