Common mistakes of start-up founders – and how to avoid them
Posted on October 22, 2020
By Ryan Floyd, MD of Storm Ventures
It’s tough as a founder on so many levels. As an investor in B2B startups, I’ve seen many of the same mistakes made – here are some thoughts on maybe trying to avoid some of the biggest pitfalls.
Going with the wrong co-founder
The right co-founder is critical. The wrong one could cost you half the company – or worse sink the entire ship. The things you should optimise for are trust and transparency. Is she a great coder – great. But can you trust her? Transparency and trust are foundational because whether you fail or succeed, I promise you, there will be difficult days.
You should bias towards someone who compliments your personal strengths. If you are confrontational, maybe you need someone who is better at making peace. If you cannot deliver bad news or be direct – find someone who can. Everyone has blind spots, as a team you can be whole.
Some people think that because they’re the CEO, they should know all the answers. But CEO is just a title. As a founder, you need to be able to accept and be comfortable not knowing all the answers – but at the same time maintaining the ability to make decisions in times when the path forward is uncertain. As a founder, you need to accept not knowing all the answers to every question while still maintaining the ability to make decisions under those conditions. You are going to make mistakes. Find a co-founder who understands the challenges and can be your partner in thinking through those tough situations.
Not being honest with the team
Transparency also applies to yourself as a founder. Some CEOs struggle with what exactly they feel comfortable sharing with their team or investors. Culture is what you make it – if you are not honest with yourself and your team, don’t expect it in return. Your team is investing their career in the business – respect the commitment. Some think you can “fake it until you make it” and stretch the truth – the ends justify the means. I am sure there are examples of this working but usually, at some point, this ends up in disaster. There is no foundation in the culture. If you live in denial about the realities on the ground, you’ve ruined your own business all by yourself.
Saying the wrong thing to investors
Selecting your early-stage investors correctly is important, almost as important as finding the right co-founder. A lot of investors don’t have the right personality or mindset; others might be a perfect fit, but for a different stage of your business. Investors who typically show up for a Series C or D round, for instance, tend to be focused on financial results. If you come to them as a startup founder with a problem along the lines of “Some of our initial assumptions about an aspect of the business turned out to be wrong; we need to start again,” they might try to tell you to hire a new VP of sales, or a new board member, or a new CEO. They have a hammer and they think everything is a nail.
As an early-stage investor, I don’t expect that things will be perfect and I’m going to get all good news all the time; in fact, the majority of my conversations involve bad news. I don’t enjoy bad news – but it’s actionable and I know it’s part of the journey so the reality meets expectations.
Hiring the Resume
As a startup founder, you’re often hiring for a skillset very different from your own. Imagine a founder with an engineering background who’s very technical: when she goes to hire a VP of sales, she may not have any experience with vetting candidates in that particular field. Founders in this position tend to end up working with friends because they’re a known quantity: “Oh, he’s a good guy.” It’s a good reason to be friends, but a terrible reason to hire somebody. Get someone involved in the process that knows the right questions to ask and can help you and the team evaluate a candidate. The biggest mistake is hiring to a resume – you might think this person is awesome because they worked at so many successful companies. But maybe they were just at the right place at the right time or are great networkers, but will fail miserably when they are the ones that have to lead the team.
My rubric for assessing advice isn’t “Is this advice good?” You are going to get lots of opinions. The question I like to ask myself is “Does this person have the experience necessary to give credible advice?”
Avoiding Team Changes
Inevitably, some people you’ve hired aren’t going to work out. Maybe they’re just not a good fit for their role or the business is moving quickly and they can’t keep up. As a startup founder, you’re not doing anybody any favors if you can’t let them go when it’s time. You might hold out in the hopes that the situation will improve over time. You might think to yourself, “If I just do x or y, they’ll get better and it’ll all work out.” You don’t have the time – your money is running out and time is not on your side.
Once it’s clear that things aren’t working out and you’ve made the decision to let them go, it’s vital that you switch to a high-empathy mindset. Rarely is the problem purely a fault of the person that is leaving – maybe your training was terrible, maybe you set the wrong expectations, maybe you changed course. Its best to leave things at its not a great fit and move on – with empathy and respect. Everyone on your team is watching. Treat others just as you would want to be treated.
Your first task
Before you do anything else: know yourself. Are you a genius with an inability to focus who needs a lot of structure? Are you maniacally focused on execution to the point where you need a designer who can see things from a different perspective? If you don’t know who you are, you won’t know who to work with. This goes for anyone in any relationship, whether it’s a marriage, a band, or a VC firm, but it’s especially true for a startup founder trying to get a business off the ground. Start from there and work outward.