13 Mistakes (Almost) Every Startup Owner Makes in California

Building a startup from scratch in California is tough, especially when 81% of customers need to completely trust a brand before buying anything from them.

This means that your startup NEEDS to be as good as it can be right from the start.

The reality is that there’s plenty mistakes California startups make. It’s normal in every startup journey to stumble and have issues with different parts of your business.

But don’t worry; this article helps you avoid making the same common mistakes that most Californian startups unknowingly make.

You can treat this startup article as a cheat sheet that shows you all the hidden pitfalls and traps that you might not be aware of starting out.

Even if you’ve already built your startup and feel like you’re doing great, double-check that you’re not making any of these mistakes.

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The Top 13 Mistakes to Avoid as a Startup in California

This list is in no order of relevance. You should avoid all the mistakes on this list at all costs if you want to thrive as a startup in California.

1. Not Understanding Legal and Regulatory Complexity

While laws for startups are nothing new, you might not be aware that California has one of the more intricate regulations in U.S. employment law. There are several laws you need to be aware of and make sure that your startup has in check if you want to avoid issues down the line.

These laws are for environmental compliance, consumer data protections, and local zoning ordinances.

While these are laws and regulations you could work on and do by yourself, we highly recommend that you consult a legal professional instead. This will ensure that you organize everything and keep it up to date.

Pro tip: If you’re a brand-new startup and you’re in the early planning stages, make sure to hire a startup attorney. They can help you integrate your legal compliance into all of your operating procedures instead of having it be an afterthought.

2. Picking the Wrong Business Structure

This is a very common mistake that startup owners make without knowing and end up paying the price once they start growing their business.

While an LLC can seem like the best option due to costs, the reality is that if you’re seeking venture capital, you’ll run into a couple of issues.

Most VCs prefer investing in C-Corps over LLCs due to their tax structures and legal precedents.

That being said, don’t instantly think that a C-Corp structure is perfect for you. Do your research and check what other startups in your industry are doing.

Pro tip: Make a long-term fundraising and exit plan before you register your startup. Ask a tax advisor for the best course of action for your startup.

3. Hiring Too Many People Early On

Labor is by far one of the biggest costs in California especially for LA startups. As a way to save money, a lot of new startups decide to hire interns or junior talent for very important roles to cut costs.

While this might sound like a good idea budget-wise, it can severely hurt your startup growth if they don’t know what they’re supposed to be doing.

This becomes even more of a problem if you start hiring a lot more employees than you realistically need.

Pro tip: Focus on hiring only for critical roles like sales and product development first. Consider hybrid or remote teams to access talent from other countries as well. As your startup grows, you can slowly start hiring more people for less important roles.

4. Not Caring About Intellectual Property (IP) Protection

California’s startup environment thrives with innovation and ideas. But ideas can get copied and even stolen completely if there’s nothing to stop people from doing so.

Without proper IP ownership, someone can completely steal your brand, product, and ideas.

Make sure that every important aspect of your brand is properly protected.

Pro tip: File trademarks for your patents as soon as possible. Include IP assignment clauses in every single employment and contractor agreement.

Stay on top of your IP portfolio so you can ensure that it keeps evolving with your product.

The last thing you want is for your IP to not protect your product due to your brand changing something on it.

5. Focusing Purely on Fundraising

While securing a big investment is fantastic for any startup in California, it can’t be the only goal and milestone to push for.

Getting a big investment can help your startup improve its product and explore new marketing strategies. But don’t rely on that alone.

Many startups in California focus only on fundraising. This can lead to big risks later when they run out of money.

Pro tip: Focus on your monetization and product strategy as soon as you can. Internalize customer feedback and adjust your product as much as you can. This way, your budget doesn’t rely purely on a good fundraiser round.

6. Ignoring California’s Complex Tax Laws

California’s tax burden is especially high when compared to other states.

When you start looking at all you have to pay from state income tax, gross receipt tax, and local business taxes, it can be overwhelming. Especially if you underestimate the overall cost of it all when calculating your monthly or yearly expenses.

Pro tip: Work with a California-based certified public accountant who specializes in startup tax nuances.

They can calculate the tax implications into pricing, payroll, and financial planning. This is even more important if you plan on expanding to different cities since local tax can change entirely.

7. Getting Caught in Vanity Metrics

This is particularly common whenever we see up-and-coming startups in California. They put all of their focus on social media to try and become as popular as possible.

While this strategy works, you also need an exceptional product and brand set beforehand. What’s the point of creating all this buzz behind your brand if your product doesn’t deliver?

Pro tip: Good branding is important for your startup. Make sure to focus on it first. Ensure you make your product as good as it can be and sort everything related to your branding. When your branding matches what your ideal customer wants, you can grow your social media accounts.

The biggest metrics to focus on are engagement, retention, and sales coming from social media. While other social media metrics, such as shares, also matter, people shouldn’t take them as seriously.

8. Not Looking for a Mentor

While it might seem like a waste of time to most startup owners to get a mentor, it can be a significant change if they specialize in your industry.

A mentor can help you overcome obstacles that they have already gone through with their own startup. This means less wasted money and faster growth.

Pro tip: Look only for mentors with significant experience in startups. Bonus points if you find a mentor with years of experience in startups in your industry. Make sure to give the mentor some incentive to stay and help your startup grow as well. Equity shares, a salary, or in some cases, royalties all work as payment.

9. Refusing to Adapt

California, as mentioned before, is a fast-moving and innovative state. Products or ideas that seem good today might be obsolete in a matter of months.

Unfortunately, not all startup ideas will grow and flourish into big companies.

That being said, being able to pivot and change your startup into something new can help revitalize it completely.

Pro tip: Measure your brand awareness by tracking KPIs and customer feedback as much as possible. Be willing to part with your original startup idea if nothing is meeting the expectations it should after several months.

Pivot and change your approach to your startup with metrics and ideas backed up by statistics. Don’t let your ego dictate the future of your Californian startup.

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10. Ignoring Burnout

Working hard is vital if you want your startup to grow, especially in California, but that doesn’t mean that you shouldn’t take care of yourself. Make sure to also rest and enjoy other aspects of your life. The last thing your startup needs is for you to burnout and have to forcefully take weeks off work.

This goes for your entire team as well. Don’t neglect their well-being and ensure that they aren’t overworking themselves while working on your startup.

Pro tip: Build a culture around positive mental health and supporting each other.

Encourage breaks and set reasonable expectations for their work. While being ambitious is great, not meeting metrics due to unrealistic expectations will only burn the team out faster.

Remember that your startup journey in California isn’t a 100-yard sprint but a marathon.

Keep the work consistent, and brand growth will follow.

11. Not Working on Your Local Network

California thrives on connections and knowing different people.

Be it investors, mentors, or even other startup founders. Not doing any sort of networking hurts your startup as a whole and can close doors that could potentially help your startup grow that much faster.

Pro tip: Attend local pitch nights, startup meetings, and even tech conferences. Interact with like-minded people and make sure to exchange contact information.

Don’t stop there, though; make sure to follow up and build actual relationships with the people you meet.

12. Overspending

We get it, you need all the best AI tools to work as efficiently as possible, but do you really need that ergonomic chair worth $2000?

It’s very easy to not notice how much you’re actually spending on your business every month. This is without including the cost of the office space. California is well-known for its premium real estate costs, so making sure you find a space that is affordable is vital.

Pro tip: Adopt a flexible workspace. Nowadays, most companies allow their workers to work hybrid or fully remote. This cuts your office space costs completely and lets your employees work wherever they feel most comfortable.

13. Not Accounting for California’s Diverse Demographic

California is very diverse, both culturally and economically. Startups that ignore this in their early planning can lose potential customers right away. Customize your product for different groups.

Sell it differently for each group.

This way, you won’t alienate markets you want to reach.

Pro tip: Conduct A/B testing and test what works and what doesn’t. Consider how much a multilingual website affects sales and how cultural nuances can improve your conversions when done correctly.

Get a Custom Built Website For Your Californian Startup With Blacksmith

Despite going through all of these 13 mistakes most startup owners make, there is still one extra mistake we see very often. Neglecting your website.

It’s hard to grow as a startup with no website or one with little to no work. A bad or unpolished website only makes visitors know that you don’t care enough to build a proper website for your startup.

Not only will they not buy your product, but they will tell their friends and family about it. A website is the core of your brand, and it should look its best at all times.

But how are you supposed to work on your website when you’re busy working on other aspects of your startup?

That’s where we come in. Blacksmith – an award winning web design agency in Los Angeles with seasoned web designers ready to create a stunning custom website for your startup.

From having a section dedicated to potential investors, to showcasing how your product works and where to get it from, we’ll create the custom website that your startup deserves.

Still unsure if investing in a custom website is a good idea for your startup? Click here to schedule a call with us so we can audit your startup and show you how much more you could grow with a custom website.