Why Funded Startups Fail? – What is wrong with Funded startups?4 years ago Maddy Anand
What is wrong in Funded startups?
A founder, on the path of entrepreneurship, convinces himself (in some cases sees a unreal world), convinces investors, lives fancying a few compliments from friends and family to pull of a charismatic marketing and a successful investment round. Funding is treated as success while thats not even close to it, and with very little business acumen, patience, experience, humility many startups fail, and the founders cannot handle failure.
Why does this happen?
Recent layoffs (Hiree), shutdowns (like AskmeBazaar), exits, merges (like Snapdeal), etc., are testimony to many things going wrong after funding. This is just rubbing the surface of it, there are hundreds of funded startups shutting down every year!
Its purely a founders fault! Here I explore what goes wrong with founders, why they go wrong and what can you do to not let such mishaps occur in your startup.
Disclaimer: This is completely my personal observation and view.
Founders with Ego-Boost
Funding gets founders a massive boost to their confidence, and a sense of power. They talk more, seldom listen. Their capability to being receptive to feedback ceases. These two become the root cause of failure. Too much pride is too much bad. Arrogance attracts many wrongs, it affects the startup culture for people working with them. They mistreat their own employees, customers, partners and in some cases their own cofounders too.
They carry that ego to their investors meetings, as they endlessly battle with them to prove what they did was right and their know-how of subject dominates an entire panel of experts with a wealth of experience.
Founders Pally with Investors
Instead of focusing on the business, founders only try to impress the investors and they disrespect everyone else. A founder got a dream investor onboard and nothing else starts to matter after that. More thinking is spent on impressing that investor which complicates ones’ approach towards running a successful business, staying customer centric, employee centric, product centric and others gets ignored.
In some cases, after taking the money, founders completely ignore the investors, this too is dangerous and as investors sit on top of market, have a network of connections & can help with insights but will move to another side of the table due to lack of communication.
They think they can do everything, they can work round the clock throughout the year. They dont trust anyone but themselves. They do not delegate work and productivity goes for a toss. They limit their thinking to running the task mill instead of finding ways to solve a problem faced by their customer in the most creative, innovative way!
These founders struggle with issues of hiring team, product release, and invariably delays & cost their business at every juncture. They are obsessed with perfection which does not work in a startup which needs continuous iteration. They fire fast, hire less. From the moment they hire someone, from the very next minute onwards they start to note down bottle list of faults in that employee that can be opened to make firing easier. They seldom understand that perfection doesnt exist in a startup and everything you do can be an experiment that needs to stay iterative with a speculate-adapt-speculate approach and remaining Agile.
They live for the media. They want to be speakers and never an audience. They want to preach never to learn. They like to keep appearing in news media so much that they worry little about their own startup. All this to only silence a few people who either rejected them at their job offer or had proven better than them at some previous juncture. Come on founders do not forget that its business that you have to run and more than ego, more than fame, more than money you have to remain a world-class product/service company that is of so much value!
It is very unfortunate that many founders don’t think of value, they think only of success!
These suspicious, secretive geniuses want to develop business at scale without talking to anyone. To execute your plan one need’s to share, communicate and engage. Insecurity is part of their life, be it their teammates, customers or investors. It’s all locked in the founder’s head. These founders cannot strike partnership with anyone because their fear has reached delusional proportions. They limit their chance for success.
Failing to deal with People
Founders will have a lot going on in their startup. New shit is always coming up and a founder’s job is to deal with it. Amidst all this if an employee walks up to the founders and says that he genuinely feels we could do better or presents a better solution – he is turned down. Failing to handle criticism or attending to employees’ concerns and ideas culling their creativity is a major failure recipe for a startup
They want everything done in a jiffy! It always happen with non-tech cofounders. They want an app built, algorithm ready and a fully functioning product released overnight! They dont understand a product life cycle! They want a iPhone built in their office that they saw and liked and appreciated and envied 2 hours ago! iPhone went through several hundred iterations before it was launched. iPhone 6 that we have today has gone through thousands of such an iteration, thats how product life cycle is achieved. Your first product will never be the best product.
Founders with an elite college degree aiming to be a corporate strategist with freshly printed business cards with the tag “CEO”. A founder who applies corporate world complexity to startups and tries to fake it till they make it by aping successful enterprise policies to startup. They scale prematurely, assume many things about the market, they burn more before they achieve a strong business model and a product-market-fit, they do not hustle enough to develop resilience. In demanding times they throw in the towel without putting up much of a fight because they lack resilience, the drive, and determination.
Entrepreneur coincides with the sanskrit word “Antarprerana” which means self motivation and motivation to others! Become a person who the world will adore and not someone whom everyone wants to ignore!
Founders, keep your feet on the ground, treat people right, look around, work hard, stay humble, stay hungry and don’t fall into the traps of failure and understand it took centuries to build Rome and so will you atleast dedicate a few years to build a beautiful startup that helps a lot of people, serves many and becomes of great value!
Make it a journey, not a destination and while on the run, enjoy the view!