Almost every list of reasons startups fail, point out near the top that they run out of capital. Lists created by founders abound and it’s not unreasonable to conclude that they’ll cite that they ran out money. It’s not wrong, startups most often succeed through perseverance, tenacity, and patience, but I’m intrigued by what you probably agree are the second and third most frequently cited reasons startups fail:
- Run out of money
- Poor product-market fit
- The wrong team
Intrigued, as what struck me is the question of that which is consistent between the top three challenges. Startups just don’t run out of money, they fail to develop the cash flow needed to continue the business. Businesses don’t automatically have a product or service nor does your team simply pop into existence one day. At the root of every cause of startup failure, is the founding team, the leadership. The founders who nurtured a new idea into a product and encouraged others to join them. Begging the question, if the founders are at the root of those hiccups, can we identify characteristics of leadership that are likely to foster failure?
I think we can as at the end of the day, the founding team is that which gets funded, the initial leadership, the reason people want to work with with venture, and the founders, the very reason a product exists (and whether or not that product meets a need the market).
In my advising, and engaging, with dozens of startups, I’ve taken note of a pattern that we might refer to as the difference between a boss and a founder. Invariably, companies run by a “boss” struggle and languish; while they might be successful, they never seem to crawl a specific revenue milestone, funding event, or team size. They aren’t necessarily failures but when we define startup success and consider it not just sustainable business but one easily attracts funding, talent, and traction on its way to an IPO or acquisition, we find they are run by true leaders.
Elsewhere on the interwebs: