Why do startup CEOs fail? (V3)
The following is focused on software and high-tech startups. Many of the concepts apply to other situations. Failure results from an inter-related set of experience, skills, character, personality, values, morals, ethics, and luck.
The first point-of-failure is when the CEO is thinking of founding a company and becoming CEO. Examine yourself. Do you already have the characteristics of someone who is likely to fail?
- Not able to clearly communicate on why starting the company and what the idea is.
- Not having a very broad set of knowledge or being able to quickly learn a broad set. A startup CEO does it all without the infrastructure of a large company to support her.
- Not relentless and able to overcome all obstacles.
- Not able to do things quickly.
- Not able to quickly learn from mistakes.
- Not able to work long hours for many years. The average time for a SaaS startup to exit or IPO is 9 years. But the vast majority fail.
- Not willing to take risks. The majority of startup CEOs are forced to leave the company at some stage of funding.
- Not able to minimize cash spending.
- Not having the funds (personal savings, family, and friends) to live for a significant period of time without income from your company.
- Not able to ruthlessly prioritize time e.g. who to meet vs who not to meet; problems which must be solved vs can be ignored.
- Not having the personality and skills to build a broad set of trusted relationships with potential customers, suppliers, employees, advisors, investors, etc.
- Not able to attract appropriate coaches, mentors and advisors. There are major differences between star athletes and star coaches. The same person is rarely a star in both fields.
- Not able to listen, and clearly understand what the other person intends to communicate.
- Not willing to go all-in
- Not extremely intelligent.
The second-point-of failure is when the CEO makes a poor selection of co-founder(s) and is not able to manage co-founder(s).
- Not able to select co-founders with the range of experience and skills necessary for short-term team success. Co-founders should bring diverse experience and skills, resulting in the pool of capabilities necessary to create and launch the company.
- Not selecting co-founders with similar objectives, character, values, morals, ethics, and time lines.
- Not picking founders who have the personal financial resources to live until the company can afford to pay them or third-party investors can provide financial support.
- Not having a common understanding of what each co-founder will contribute e.g. # of hours, capital, finding capital, creating the product or service.
- Doesn’t have the skills to make the founders work well together.
- Not being clear on how decisions are made, and who makes them.
- Doesn’t ensure that the founders are physically located together and working together.
- Unable to articulate and help the all the co-founders understand and support the higher purpose of the company. If the only purpose is to make money, the chances of long-term success are low.
- Not having a common understanding of how much of the company the founders are willing to give up in return for capital.
- Not documenting expectations and assumptions. This leads to future confusion and disagreements. “People forget 40%-80% of what they hear immediately. Half the information people do recall, is recalled incorrectly”
 Lindsay Wizowski, Theresa Harper, and Tracy Hutchings, Writing Health Information for Patients and Families 4th Edition (Hamilton Health Sciences, 2014), Page 5