I’ve worked with many early-stage companies — some have failed, while others have gone on to see enormous success. I’ve created a rubric over the years that I use to judge whether a company is on the right path or is marching towards failure. It takes far less time than you would think to make that determination.
Want to know how to judge the success of a company in a single meeting? Shadow a product strategy management meeting and watch how decisions are made. It’ll tell you a lot about company vision, CEO disposition, and team friction or fluidity.
Here are four things to look for as you observe a high-level product discussion:
1. Does the founder want to be right rather than rich? It’s important to see how founders lead discussions. Being open during a product meeting and actively evaluating other solutions, ideas, or ways of thinking is a show of strength. Alternatively, stubbornness at all costs is a show of weakness and is unsustainable over the long term.
It’s true that some of the CEOs we look up to, such as Steve Jobs and Jeff Bezos, are known for having been particularly stubborn, but they are also likely the exception to the rule and should not be mimicked. The road to failure is lined with people who thought they were Steve Jobs. It is okay — even fundamental — to be passionate about an idea and market direction. However, if you fall in love with the wrong idea and do not listen and evaluate information from your product people (customers) or engineers, then your stubbornness can sting.
2. Strategic Product Decisions: If strategic product decisions are being made by the non-founding engineering team, this can be a big red flag. Founders, product marketers, and those who are actively analyzing the market and customer needs should be the ones to make such decisions. Alternatively, it can be a problem if you notice a technical CEO micromanaging all aspects of product, or if a non-technical CEO seems completely separated from the product development process.
At the very early stages of a company, the CEO should be very close to the market and customers. They should be ready to make a move or pivot, without hesitation, based on customer feedback. Often, this early feedback is tied closely to company vision and mission.
3. Team Discussion Dynamics: Does the team come to an agreement and then respect that agreement? Does the team get along, or is there tension, frustration, one-upmanship or brinkmanship? For example, the vision of a product manager should be aligned with that of company leadership. The team should move on after a major product decision is made rather than holding on to their earlier ideas and not letting the issue go. It’s important to constantly move forward, to execute, and if old ideas are constantly rehashed on a daily basis that is a recipe for disaster.
4. Respect for Leadership: Is the CEO the final decision maker? This is an especially salient question when there are multiple founders in a startup and they are equal cofounders. In fact, I encourage very early stage companies with multiple founders to have this discussion early and agree that the CEO founder is the one who makes final decisions. The vision of the company emanates from the CEO and must flow down to the rest of the company — and that includes the other cofounders. Otherwise, it is extremely easy for a company to change course from one day to the next. Strong leadership is tied to building a clear and rock solid company mission that informs daily decisions.
Rather than predicting long-term success, the process of watching a company product meeting and evaluating the discussion based on this rubric will reveal any red flags and will highlight the possibility of short-term failure. Knowing that something is not working is the first step towards rectifying it and marching towards success.
Liron Petrushka is a three-time serial entrepreneur, an angel investor in companies such as Check and LendingClub, and a partner at Silicon Valley accelerator UpWest Labs.
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