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Why do startups fail? A simple Google search will unearth hundreds of articles, most of which will cite the same reasons:
But there’s one small problem with these reasons: They are all cited by startup CEOs when asked to explain why their startups failed. But are CEOs really the ones to ask? Let’s say a company’s marketing is terrible. Ask the VP of Marketing and they’ll most likely give you a list of valid reasons. Ask the CEO and they’ll probably give you one — the VP of Marketing.
See my point?
When you’re the CEO of a startup, you take on two very distinct roles: managing subordinate staff and divisions, and managing the CEO (who happens to be yourself). And I believe failing at that second role is likely the cause of a lot of startup closures.
Been there, failed that …
If a startup fails, the CEO probably holds a significant share of the blame. Now I’m not saying this as a condescending VC executive. I’m saying this as a three-time CEO of startups that have gone out of business (I’ll save my success stories for a different post).
It’s very hard to blame entrepreneurs for not succeeding. They make huge sacrifices, take enormous risks, and often put their lives on hold for their “baby.” Yet, statistically speaking, they/we are stupid, crazy, or completely irrational. Whichever word you choose, most entrepreneurs will probably not be offended. They know what they are up against, and yet they believe! They believe in their innovative concept, in their technology, in their market fit, and 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, manage, make tough decisions, prioritize, set goals, motivate their team, build a business plan, and get inside the users’ head.
I 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 the founder-turned-CEO is the best (or even just good) at all the other traits mentioned above?
Being an entrepreneur and being a great startup CEO don’t often go together
There’s a terrible misconception that the most important trait for a startup CEO is an extremely high level of motivation. As if that is the solution to most startup problems.
Adeo Ressi of Founders Institute insists 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 a bit like saying the cause of people dying in hospitals is doctors announcing time of death. In my experience following several startups that eventually crashed and burned, most CEOs give up way too long after their company has effectively died.
Let’s be clear: it’s not that motivation isn’t important. It is, very much so. But when talking startups, we should take it for granted. The vast majority of entrepreneurs are highly motivated individuals; that’s not what’s going to make you stand out of the crowd. In 99 percent of 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 have to know how to manage your CEO — yourself — properly.
Technically, you may see your board of directors as your boss (whenever and if ever they meet). But who is better managed, your CTO (managed by you) or yourself (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. But mainly because you are there and they aren’t (on a regular basis). So you have to be your own boss.
‘I ran out of money’ is not a cause; it’s a symptom
In my experience, most CEOs are simply unprepared. Their day-to-day might run perfectly, and production outputs might be very high. Yet their paths, strategy, and roadmap prioritization are not well planned if they are planned at all. Startups die because companies don’t maximize their opportunity to succeed. And, obviously, if they don’t succeed enough before the money runs out, the story ends there. Being a good CEO means not only running the show, but also running the future — managing yourself. But that’s much easier said than done for someone with hundreds of decisions constantly on their mind.
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 to be a better boss to yourself
My advice : Develop a split personality. Force yourself to stop and view the CEO’s work at predetermined periods. Evaluate their (your) goal setting, priorities, decision making processes, time management, dealing with responsibility, influence, leadership, and other critical skills. Don’t let your CEO off 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 come up short.
You can blame many things for your startup’s failure — no market fit, not enough cash, team problems, pricing — but all of these reasons boil down to one cause: a CEO who’s not being managed properly. So fix that.
Yoav Yechiam is four-time entrepreneur currently working on his fifth company. He’s a startup strategy consultant and founder of Y-Perspective Consulting. Apart for his love for startups he specializes in product strategy and analytics.
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