Truth needs to be told — startups fail because CEOs have lousy bosses
Why do startup fail? Google it — you’ll find hundreds of articles, most pointing to the same reasons:
- No market need
- Ran out of cash
- Team problems
- Pricing/product/business models issues
- Competition
One small problem I have with these reasons. They are all reasons the founders mentioned when asked to tell why their startups failed.
What might be missing? :thinking_face:
Let’s say a company’s marketing sucks. Ask the exed VP Marketing and he’ll most likely give you a list of valid reasons. Ask the CEO and he’ll probably give you one — the VP Marketing… See my point?
Been there, failed that…
I’m of course not saying that all startup CEOs are lousy, but the fact of the matter is if their startup failed they’ve probably earned a significant share of the blame. Now I’m not saying this as a ‘condescending’ VC executive. I’m saying this as a 3 time CEO of startups that shut down (I’ll save my success stories for a different post).
It’s very hard to blame entrepreneurs for not succeeding. These guys are making such a huge sacrifice, taking such big risks and many times just put their lives on hold for their ‘baby’. Yet, statistically speaking, they/we are stupid, crazy or completely irrational. Whichever one you choose, most founders will probably not be offended. They know what they are up against, and yet they believe! Believe in their innovative concept, believe in their technology, believe in their market fit and they believe in their ability to raise money. Ask them and they’ll also (not surprisingly) tell you they believe in themselves, maybe even most of all. In their ability to lead, to manage, to make tough decisions, to prioritise, to set goals, to motivate their team, to build a business plan, to get into the users’ head… Hold on!
I can honestly believe entrepreneurs when they say they are the best at coming up with their specific idea and they might even be the best at fitting a technology to that challenge. But what are the chances that the founder is the best (or even just good) at all the other traits mentioned above? I’m pretty confident that if asked directly, most founders will admit they’ve still got a lot to improve on.
But here’s the catch: Being an entrepreneur and being a great Startup CEO don’t often come together. At least not naturally…
There’s a terrible misconception that the most important trait for a startup CEO to possess is an extremely high level of motivation. As if that is the problem and solution to most startup problems. Adeo Ressi, of ‘Founders Institute’ will tell anyone listening that “At the end of the day there is only one thing that kills a company, that is when the founder gives up”. To me this is like saying the cause of people dying in hospitals are doctors announcing time of death… From my experience, following quite a few startups that eventually crashed and burned, most CEOs give up way too long after their company has effectively died. The same also goes to pivoting. It’s a very hard decision, but one that needs to be made on time. Prolonging it is not healthy.
Please don’t misunderstand what I say. It’s not that motivation isn’t important. It is, very much. But when talking startups, one may acknowledge it as a given. The vast majority of entrepreneurs are highly motivated individuals, that’s not what’s going to make you stand out of the crowd. The problem is not Ressi’s quote, the problem is entrepreneurs believing and following it blindly. In 99% of the cases extraordinary motivation will push you forward a few more inches against your barrier, but believing is not enough to get you through in the long run. You must look yourself in the mirror and acknowledge that.
Motivation is like conceiving in a boxing match. The better you get at it the long you’ll last. But if that’s all you focused on you’ll never win the match. The problem is that once you begin conceiving it’s very hard to focus on anything else.
‘Ran out of money’ is not a cause, it’s a symptom
Most startups die when they’ve run out of money. It’s not a cause it’s a fact. Naturally, we think they reach that point because things went wrong. I argue otherwise. From my experience most CEOs were simply not prepared. Their day to day might run perfectly and production outputs very high. Yet their paths, strategy, roadmap prioritization were not well decided, if set at all. Startup die because companies don’t maximize their opportunity to succeed. And obviously, if they don’t succeed enough before money runs out the story ends there. Being a good CEO means not only running the show, but also running the future — managing yourself. Now that’s much easier said than done for one person with hundreds of decisions constantly on his mind.
Who’s your boss?
Technically, it’s your board of directors (whenever and if ever they meet). So who is better managed, your CTO (managed by you) or yourself (being managed by the board)?
I’m guessing you’re the better boss. Partially because the board’s job isn’t actually to manage, but to guide and supervise. And mainly because you are there and they aren’t (on a regular basis). So who’s the boss?
“You looking at me?” — Al Pacino, Taxi Driver
Startups fails because of many possible reasons: no market need, run out of cash, team problems, pricing and more. But most of these are actually the cause the CEO not being managed properly. Face it, you are the CEO’s boss. Seth Godin wrote in his blog:
If you had a manager that talked to you the way you talked to you, you’d quit. If you had a boss that wasted as much of your time as you do, they’d fire her. If an organization developed its employees as poorly as you are developing yourself, it would soon go under.
How does one become a better boss to his CEO self?
My advice — develop a split personality. Force yourself to stop and view the CEO’s work at predetermined periods. Evaluate their (your) goals setting, priorities, decision making processes, time management, dealing with responsibility, influence, leadership and other critical skills. Don’t let your CEO of the hook. Make them accountable. Make it clear that motivation alone is not enough. Don’t sympathize! Work to find solutions.
Remember, A great CEO is THE most critical asset a startup has. You can have the best idea, best tech and best team. But without a great CEO to connect the dots and leverage them, the company will always be coming up short…
About the writer:
Yoav Yechiam is 4 time entrepreneur currently working on his 5th. He’s a startup strategy consultant and the founder of Y-Perspective Consulting. Apart for his love for startups he specializes in Product strategy and Analytics. Recent altMBA graduate (shout out to the alumni) and most importantly father to 3 boys and husband to (the beautiful) Hadas
