Reasons Startup CEOs Fail | Hacker News Reader

Reasons Startup CEOs Fail

blog.bostonsearchgroup.com

20 pointsJayNeely13 comments

Interesting point: "At some point, it may be required that the rest of the team that started the company with the CEO may need to be changed out for an executive team with experience at the “growth-stage” versus just the “start-up” stage."

While I've definitely worked with founders who weren't fit to run a big company (lack of focus, lack of common sense, blind to customers' needs - you name it...), the "experienced executive team" that replaced them seemed to go out of their way to run the company into the ground. I have now seen this happen 3 times (both at companies I've worked at and friends' companies).

> the "experienced executive team" that replaced them seemed to go out of their way to run the company into the ground

I've seen this, as well as seing the -same- executive run two different companies into the ground.

I've seen this as well.

This seems to happen more prevalently in newer industries and software based businesses, where the team coming in may be extensively briefed, but still does not really 'get' it. It may be a disconnect with customers wishes, with the market, competitors, or even with the existing employees/staff.

It seems much better to hire awesome advisers than to replace founders. Good founders also know when it is time to give up the reins as well.

You nailed it: "It seems much better to hire awesome advisers than to replace founders. Good founders also know when it is time to give up the reins as well."

You don't run a $100M business like you run a $1M business.

In the $100M range (and before), you start obsessing about gross margins, tax issues, renewal business, reduce on-going discount practices, etc.

When you are in the $1M range, you are focusing on gaining your first customers and it doesn't really matter if the deal is profitable or not, each sale makes you grow by leaps and bounds.

If you are detail-oriented, you'll enjoy the $100M business. If you are a born-entrepreneur, you may prefer the 0-to-1 adventure. I know where I stand.

and it doesn't really matter if the deal is profitable or not,

Um, it matters more, if anything. SV mentality is not the path to success. The faster you get profitable, the better your chances overall.

For a tiny business immediate profitably might be an absolute requirement for the survival of a company. For a company that's prepared to spend money to have significant long term success it's a different story.

It may very well be wise to aim for $10 million in revenue with $500k losses rather than a more conservative $1 million revenue with $50k profit.

Ok, I should have been more specific. When you close your first deals, you care about bookings. You cash the check. When you approach the $100M range, you care about revenue, with its complex rules about revenue recognition, whether the deal has to be recognized over multiple years, etc.

You can end up in a situation where the CFO tells you that the check in your hand is not profitable... Weird.

the founder CEO can become caught up in the initial “vision” and stick to it regardless of external market input that would indicate changes to the initial value proposition are needed to capture broader market adoption

This bugs me like the idea that public companies are legally obliged to maximise shareholder value.

Aren't you supposed to build something you want? Build something you're passionate about? Isn't the current economic collapse and markets overflowing with a slurry of average products a symptom of companies focused on growth and money and market capture instead of doing a good job?

> This bugs me like the idea that public companies are legally obliged to maximise shareholder value. ... Aren't you supposed to build something you want?

Yes ... if YOU OWN IT.

If you are the EMPLOYEE of a company OWNED by other people (i.e. "CEO of a publicly traded company"), then you do not get to be a prima donna with other people's money (i.e. their retirement hopes, their investment for their kids' educations, etc.). You buckle down and you do your job. And that job is "trying to grow the investment".

And that bugs me.

Check out Engadget.com on and off. See the churn of shite products. See how they "maximise market capture" and "shareholder value" by choosing "everyone" as their target market. See how much missed opportunity to make groundbreaking standout devices or cult niche items there is in the dreary ongoing clone wars.

When I was writing this blog post, what I was trying to get across was the circumstance where a founder CEO sticks to a vision, despite lack of market traction, customer validation. What's critical is to iterate the idea. Rarely does the first iteration win the day, but multiple revs, multiple tweaks, and a host of test-and-learns are required to get the success formula to a point where "kindling temp" is achieved.

Great post!

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