There are a lot of ways to break a startup.
An incomplete list of things that can (and often do) destroy them includes:
- Inability to balance long term growth of a company / product / culture against day to day choices
- Uncertainty around what’s worth measuring and what’s extra noise
- Failing to minimize the biggest risk(s)
- Accounting for the needs and anxieties of your investors and key partners vs. what’s important to your users and/or customers
In a recent episode of the Reboot Podcast, Fred Wilson reflected on the early days of founding a venture capital firm, and talked with his then co-founder Jerry Colonna about the heart wrenching process of being on the board of Star Media, which at one point had a $2 billion market cap before eventually going bankrupt. In particular, he talked about support he received as well as times when he wishes he’d provided more direct support to the companies he invested in.
“…when you watch a company of 500 or 1000 people go bankrupt, it was like we did not live up to our duty and obligation as a board…we knew the founders were in over their heads, and we knew they weren't really running the company properly. And we should have stepped in and done something about it and we didn’t until it was too late.”
Things look a bit different for entrepreneurs now compared to when Fred and Jerry started Flatiron Partners in 1996. If you start a company in 2015 you can find almost any information you need via a combination of YouTube, blogs, and simply punching some phrases into a search engine. Paperwork to incorporate, advice on dividing equity, and other basic structures are all easily accessible on the web.
If it’s easy to find information, why do so many startups fail?
Entrepreneurs and investors often point to growth as the number one characteristic of the health of a startup. Paul Graham’s essay on startup growth is frequently cited in blog posts, and has been rehashed by a range of people across the startup ecosystem.
But how many companies that went through rapid growth and led to an IPO or acquisition are still around 10–15 years on? Making significant revenue? Continuing to add value and/or meaning to their customers’ lives?
I don’t know the answer to these questions. But I do know growth alone isn’t enough. It must have purpose, and that purpose must be long term. Andy Baio’s painfully honest description of the fall of Upcoming.org is a too common story for startups, especially those where community is a critical building block.
In the early stages of a startup there’s no clear path, and it takes guts, grit, and heart to build something quickly. You have to get used to pulling in as much information as possible, and still not knowing if you’re making the right decision. In that environment, balance becomes critical — both for the health of the company, and of the founders and first employees.
Here are a few things I think about regularly when it comes to balance…Read More