I’ve founded two startups and invested in over 50. My first startup, which I started while young and clueless, was acquired in an amazing exit. The second, to which I brought considerably more knowledge and wisdom, just folded.
What these experiences have taught me are that there are companies which succeed while the founders fail, and vice versa. Traction is what happens to the company. Success or failure is what happens to the people involved.
The Basics of Company Success
There are not many reasons why a company doesn’t get traction: The founders don’t have the core skills, don’t understand the problem or user, don’t try hard enough or don’t have a good decision-making process. But even if you figure all of these out, success is never guaranteed. The secret sauce is luck and timing. Great investors can harness the former and make a good guess about the latter.
Five Ways to Really Fail
If your company doesn’t achieve traction, that’s not really a failure. A true failure happens when the company has a negative impact on yourself and the people around you. I find that there are five ways that a founder can truly fail:
1. Personal financial bankruptcy: You borrowed a lot of money personally and now have no way to pay it back. This makes you desperate, stupid, lose friends and end up in a bad place. It’s usually bad for both you and the company. Entrepreneurs should have skin in the game, but not take stupid personal financial risks.
2. Health or relationship bankruptcy: You don’t know anyone outside the startup bubble. You haven’t had a real meal in weeks and most of them are eaten in front of a screen. Your closest relationships are suffering from neglect. Make sure to schedule “normal people” time and activities in your calendar. Entrepreneurs need to work hard but not to the extent that it negatively impacts the company and your long term life.
3. Blaming others: You think it’s somebody else’s fault that you didn’t “put a dent in the universe”. It wasn’t. Maybe you should have tried harder. Maybe you didn’t make bold or difficult choices when they were necessary. Sometimes the solutions can be as simple as asking people, being honest when it is scary and thinking things through.
4. Not learning: Most startups don’t end up with billion dollar valuations but they are wonderful vehicles for learning: Learning about yourself, about group dynamics, and about the future. Most people I know who have worked in startups have personally grown 10x, even if their metrics didn’t.
5. Becoming an asshole: Sadly, some founders think they are better than everyone else. They never need help and never help anyone else without making a big fuss about it. They talk at people rather than with them. They bottle their own farts. There are plenty of founders of successful companies who fall into this category. Remember that luck, hard work and some skill can lead to success, but never guarantee it.
Building a startup is damned hard, but failure can be controlled. We have always made sure to have meetings every second month talking about how we are feeling as well as one on what will kill us and how we will fail.