Why You’ll Fail As A Startup CEO
“The co-founders were fighting all the time,” Abdenour, an engineering candidate said to me about the previous startup he worked at. “It made the work environment really bad. I think that’s why we failed.”
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Abdenour’s right. When you and your co-founders are fighting all the time, there’s no way that can’t impact the environment in your company.
I was curious about what happened, so I said, “What happened?”
Abdenour’s response was telling, “It was very difficult not to chose sides. You were either on (one founder’s side), or you were considered to be on (the other founder’s side). It was a mess.”
I shook my head and said, “I’ll bet it was.”
There’s a difference between having disagreements with your co-founders and being in open warfare with your co-founders. It’s okay to have disagreements with your co-founders. That’s normal.
However, when the disagreements turn into war, then your culture turns toxic. That’s the first reason that founding CEOs fail.
There are many more reasons founding CEOs fail including:
B. Your co-founders don’t care.
Certainly the company Abdenour worked at had bad co-founders. Toxic co-founders come in other flavors.
There’s nothing worse than a co-founder that doesn’t take their responsibilities seriously. You don’t have the luxury of having dead weight on your team, so this one really stings.
And, it can kill your company when the co-founder that doesn't care is your key technical person. I’ve been there. You’re so reliant on this person that it can instantly stop the company’s progress.
It’s really difficult to rebound from an absent co-founder.
Then there are the self-induced failures such as…
C. You cede your power to your co-founders; trying to operate as co-CEOs.
I’m amazed at how many times I’ve seen this one. It happens often with inexperienced teams where there’s an unrealistic expectation amongst your co-founders that they have special privileges.
One of these special privileges is that you will make all the big decisions together. There’s always an exception, but making all the decisions together usually never ends well.
To begin with, you take away one of the big advantages a startup has because decision makes slows down dramatically. You end up in group think. What do you do when you and your co-founder disagree?
Two of my co-founders, "Randy" and "Ken", demanded to have an "Office of the CEO" where the three of us would make all key decisions together. I said no. You'll need to do the same.
Someone has to be the leader, and that’s you. Then there’s…
D. You don’t know what you're doing as CEO.
I don’t know why this is such a surprise to me, but it’s amazing how many founder CEOs just don’t know what to do. Worse yet, they’re not getting much support from their investors or board of directors.
So, they flail away, and the result is a failed startup.
However, this doesn’t mean you can’t learn what to do. It starts by being really intellectually honest about your skills. In other words, you need to understand what your strengths are, and, more important, where you're not strong.
Then, you can get help. Sometimes, a friendly board member or investor may mentor you. Count yourself as lucky if that happens.
More often than not, you’re going to have to look for outside help. It may cost you some funds, but it’s well worth it if you find the right person.
E. You choose the wrong investors.
Of all moves a founding CEO makes, the choice of your investors is the most important one. If you and your investors don’t see the future the same way, you will likely lose company
It’s almost impossible to recover from the damage a bad investor can do to your company. I know this from my own experience dealing with our bad investor, the notorious “Donald Ventures.”
It’s really important, whether you’re raising money from your friends and family, angels, or VCs, that you make sure your goals and your investors goals align.
For example, if your parents loan you money, you want to make sure everyone understands how the loan will be paid back and when the loan will be paid back.
If you’re raising venture funding, you should check with other founders that have worked with the fund. Founding CEOs that have failed are great references because you can ask if the fund supported them throughout the life of the company.
The moral of the story is pay attention to the signs you might have a bad co-founder. And, if you do have a bad co-founder, then take action quickly.