Should you treat your startup like your baby?

The short answer to the question above is – no. 

Many founders across the globe aim for the grand success of Bill Gates, Phil Knight, and now Whitney Wolfe Herd. As studies show us 90% of ventures fail, an extraordinary amount to comprehend, yet each entrepreneur approaches the market with high optimism. And failures come big and small, even with the most renowned investors on board and with $1bil+ in total funding.  Moreover, successful CEOs who are also founders are a very rare breed – HBR analyzed 212 American startups and discovered that in the period of 1990-early 2000, 60% of founders were no longer a CEO in year 4 and fewer than 25% led their public offering. 4 out of 5 were forced to step down from the CEO post, and 4 out of 5 needed to be persuaded this was the right time to step down. Founders also are usually convinced that they are the only ones who truly understand their venture and are “the only ones with the vision”. 

Many entrepreneurs in the study by HBR were overly emotionally attached to the venture, frequently referring to it as “my baby”. 90% of respondents estimated their chances of success to at least 70%. Undoubtedly, the drive, the passion, the persistence is what fuels the early steps for not just the founders but their team, aligning the vision and determination to one direction of success. However, this continued attachment and overconfidence can later cause big problems for the founders and the venture overall. Founders need to learn to segregate themselves from the legal entity which is their venture and the possible successes and (let’s be realistic) failures of oneself as a human being. Passion is a great fuel yet cannot fuel the company on its own – real view on problems the team is solving, customer feedback, and data at hand are just a few points to place on your frontline. Getting the venture to an initial PMF is not necessarily proof at hand that one can successfully lead the venture’s future and certainly isn’t sufficient to secure the backing for the next stage of growth.

To summarise, here are the 3 core points on why your business is not your baby:

  1. Emotion over logic. Emotions prohibit you to listen to constructive feedback and adjust the offering  when needed. Logic has to prevail when aiming for success. 
  2. Your businesses should not be dependent on you, the venture has to be sustainable.
  3. Businesses are financial assets, they do not have feelings. Selling one is a viable outcome.

With time the organization has to become more structured, and the CEO has to create formal processes, develop specialized roles, and, yes, institute a managerial hierarchy. The dramatic broadening of the skills that the CEO needs at this stage stretches most founders’ abilities beyond their limits. The research shows that the main trade-off arises between 

«Choosing money: A founder who gives up more equity to attract investors builds a more valuable company than one who parts with less—and ends up with a more valuable slice, too.”, and

“Choosing power: Founders motivated by control will make decisions that enable them to lead the business at the expense of increasing its value.”

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