Five Mistakes to Avoid When Setting Up a Tech Startup - Custard Factory

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Five Mistakes to Avoid When Setting Up a Tech Startup

Posted by Chris Pettitt on March 13, 2017

Though we may have only just scratched the surface of digital potential, it is nevertheless true that current tech has brought a great deal of convenience to the average person’s life. Pull out your phone right now and Uber can send you a car, Just Eat will lavish you with a delectable selection of world cuisine at the touch of a button and Deliveroo will bring it to your door.

Well here at the Custard Factory, there’s another pioneering young company taking that concept of convenience and ease of use and bringing it to the building trade.

If you’re in need of a plumber, an electrician or another tradesperson, then the fantastic Expert Trades App could well be your best bet. With a database of over 13,000 members, a hefty selection of quotes for your work are a mere fingertip away.

The brains (and incidentally, brawn) behind the innovative service is Adam Callow. The thoroughly impressive and ambitious young entrepreneur is a leading light of Birmingham’s thriving tech scene, and a top man to boot. His affable and relaxed demeanour belies a character that possesses huge drive and vision, twin attributes that have seen him take a reasonably simple notion and develop it into a lucrative and successful tech business.

But Adam is the first to admit that his journey so far has not been without the odd bump in the road. The prolonged economic uncertainty that has undermined the UK business market over recent years has made building a start-up company an incredibly challenging pursuit. With start-up business failure rates in the first three years often quoted as highly as 80%, the decisions that entrepreneurs take in their formative months can make or break the company.

Having navigated Expert Trades through those first three years of choppy waters, Adam is the perfect person to highlight the pitfalls to avoid, so we asked him to tell us the five mistakes to avoid when setting up a tech start-up:

Mistake #1 – Don’t Outsource The Development

“When we were first starting out and had our concept for the app, I hired an agency to build it. I knew a bit of code but I needed what seemed to be a very technical product at the time, so I outsourced its development. This actually allowed me to continue consulting work at the time, and so all the money I was making from that was being pumped straight into the agency to build our product.

The problem was, they didn’t care about the business. They were just interested in shipping code. You need somebody who is as invested in the product as you are, working sixty, seventy, eighty hour weeks. We wasted a hell of a lot of money on that agency, and the best advice I can offer is to find someone who can do the technical stuff, make them CTO (Chief Technology Officer) and work together to develop the software. You will save a fortune, and have greater ownership of the final product.”

Mistake #2 – Put More Dogs In The Race!

“Let me explain. At Expert Trades, we did two rounds of funding. We did a seed round, and then we did a VC round. I’ll tell you one thing about me… I do sales, I do marketing, they’re my skills. So I went and pitched, and the first people I pitched to said yes. So I closed the round and that was it. It sounds fantastic I know, and when I was starting out I was given advice to ‘close as early as possible’ because investment can sometimes take forever to materialise. But I took that advice too far and accepted the first bit of cash that was put in front of me. So when I say put more dogs in the race, I mean take a step back and think, ‘Can I get more money? Or a higher valuation? Give less equity away?’

I promise you, when you’re a start-up and you’re giving away 10…20…30 percent of your company, it doesn’t feel like a big difference. Yet when you start doing the rounds later on, it has a big impact, and these are the people you are ultimately going to be accountable to.”

Mistake #3 – Not All Money Is Equal

“Someone writing a cheque for £200k can be very different from somebody else writing you a cheque for £200k. If you’re in the position now where you’re about to go and raise money, you are going to be really excited when someone says yes, because more than anything, that person is going to believe in you. But you need to look behind the scenes at what this person is actually going to add. There is such a thing as ‘dumb money’, and that’s the people who are just going to write you a cheque and then walk away and expect a return down the line. But you’re a start-up, you are going to need help. You’re going to be doing fifteen, eighteen hours a day and you shouldn’t be afraid to admit that you need a little help. You want people who can add strategic value, not just money. So make sure that when you get the offer, you ask what else is being brought to the table.”

Mistake #4 – Money Changes Nothing About Your Business

“This is a common one. I hear lots of people say, ‘as soon as I’ve raised my round, I’ll scale! I’ll win more business! I’ll hire more people!’. But if I’m really, really honest: it changes absolutely nothing. You’ll go into work the next day, look around and realise everything is the same. In fact the only difference is that now with perhaps a six-figure bank balance, you have more money to deploy against the problems that you’ve already got, which in turn, creates its own problems. Because the people who have given you that money need to see the progress. So I guess what I’m trying to say is, money isn’t always the solution. Make sure you’ve got a model that’s sound, and make sure you know why you’re raising money in the first place. Don’t just raise because that’s what Techcrunch tells you to do.”

Mistake #5 – Do NOT be a ‘Yes Man’!

“I’ll let you into a secret, I can tell you all of these things are mistakes… because they are all mistakes I made! In truth I could have had 2-sides of A4 paper filled with mistakes I made in our first couple of years. I picked out the five most formative and this last one is a real personal one. When we raised the first round of VC, everything suddenly gets very formal. You have management accounts, you have a board of directors, and in those first three months under that structure I very much became a ‘Yes Man’. I was thinking, ‘these guys have put money in, they’re very successful’. So every opinion they had, I nodded and agreed with it. And you know what, it’s the kind of thing that can kill a business… very, very quickly. What you have to remember is, they are investing in YOU, because it’s you that has got the business to where it is today, and they believe in you as the founder.

So quickly I realised I needed to change, because I had stopped enjoying running the business. I felt like I was no longer the CEO, I felt like these guys on the board are running things and I was just operating. So I went into the next board meeting and told them that I was going to take their feedback on board but that I needed to run the ship. And they said, “well that’s (effin’) obvious Adam!” It strengthened the entire relationship, brought the enjoyment back for me and has been hugely beneficial to the whole business.

Becoming a ‘Yes Man’ will kill your business, make no mistake. We’re doing well now but if we’d done that for another three months, we really wouldn’t be here today.”

No one has ever set up a business and done it perfectly. The nature of business, economics and society mean it can never be a perfect science. The best we can do is listen to those who have learnt painful lessons: those that have succeeded, and sometimes those that have failed.

The five mistakes Adam highlights for you are his personal mistakes, he made them all and overcame them. Expert Trades are part of a vibrant community of companies here at the Custard Factory, all of whom experienced their own barriers when starting out. The key to remember is, if your core idea and purpose is sound, then believe in it, be passionate about it and be resilient enough to stick with it when mistakes are made. Adam Callow did, and he’s now reaping the rewards.


Join Expert Trades in the Custard Factory digital community, we have office space available now!

Adam records a regular podcast called ‘Startup Diary’. Listen to the episodes here.