Seven deadly sins of startups and how to avoid them

Written: July 02018

The last four years have given me a front-row seat to watching dozens of founders build their startups. Some of which have had major successes (topping the app charts, raising big money from top investors, and receiving acquisition offers) while the others have had much more modest success.

The successful startups have some things in common. They approach team-building and culture-building with thoughtfulness and intentionality. They seek to deeply understand their customers and build products that solve their problems. They consistently show discipline by focusing only on things that will help them achieve their end goals.

Interestingly, the not-so-successful startups have quite a few things in common as well. This post aims to call out the seven deadly sins I have seen these startups commit.

1. Thinking company culture is a “later stage” problem.

If you don’t tell the story, someone else will. Whether you’ve dealt with a story in the media or remember a rumor about someone in high school, you know this saying holds true. You have to get in front of the story and intentionally craft it before someone else does. The same can be said for your company’s culture.

If you don’t create your company’s culture, someone else will. People tend to bring old habits and mentalities with them when they change jobs. Perhaps at an employee’s last job it was common to eat lunch at their desk instead of socializing with coworkers. Or maybe it was expected that feedback would be given periodically at quarterly reviews but hardly ever in between. One person sees another behaving this way and thinks “oh, this is how it’s done here.” Before you know it, this becomes the office norm.

Do you want those things to be your company’s culture? If not (and even if so), you need to define your company’s culture before someone else does. Write down your company’s culture and speak of it often. Reinforce the values that are most important to the company. Whether your company’s headcount is 1 or 1,000, bad culture breeds bad culture. This is a lethal snowball you do not want to deal with down the road.

2. Thinking company culture can be bought or borrowed.

Culture cannot be purchased. Beer kegs and ping pong tables may bring some employees a welcomed relief from work and a chance to socialize with coworkers; but they will not give your company a culture that attracts and retains top talent.

Nor can culture be borrowed. Companies like Bridgewater and Netflix are master-class in creating cultures that attract and retain top talent; and while you can take inspiration from them and adopt some of their principles, you’ll never have a unique set of values that you passionately believe in if you only copy another company.

The best company cultures are intentionally-crafted, consistently spoken of, and organically evolved. Borrowing another company’s culture in place of developing one unique to your values will comes across as disingenuous and unsustainable. This starts with a clear, well-crafted set of beliefs that the company writes down, speaks of often, and reevaluates periodically.

3. Using money raised as a proxy for success.

Raising money (while giving away equity, mind you) should never be the objective. It is only an enabler to help you reach your objective. Only you can say what your objective is. Some people build companies for a cause or out of passion, some build for the sake of building, and some build for a financial payout. But in none of those cases will you reach your goal simply by raising venture funding.

Another more harsh (and honest) way of saying this truth is if you try to trick investors into writing a check you will only play yourself. It’s disturbing how many founders I’ve worked with that use smoke and mirrors to trick investors into writing checks. If that’s your approach to building a company, I’m quick to say your company will fail and your relationships with those investors will suffer.

Defining success in dollars raised means your north star is impressing investors. In an ideal world, this would work out well since investors are generally impressed with traction and the promise of a financial payout. Unfortunately humans have a tendency to want to take the shortcut in any situation and the shortcut (or so it seems) ends up being “hacking” a way to make investors think the company is doing well. On top of being deceitful and slimy, it distracts you from spending time on what matters most.

Spend your time building a team and shaping a culture. Spend your time seeking to deeply understand your customers and solve their problems. When necessary or advantageous, raise money from investors. If you’ve done your job and built something people love, you won’t need to trick investors into writing a check.

4. Starting a company to live a CEO/Founder lifestyle.

Being a CEO and/or Founder isn’t the smile-big-for-the-camera-in-my-open-office-headquarters you’ve seen on Forbes. It’s fucking hard work. With a little digging online, you’ll find founders writing about mental health issues and supporting one another through the ups and downs of running a startup.

If your motivation to building a startup is the fame or fortune that comes along with it, I’m willing to bet against you being successful. The best founders (and subsequently most successful companies) I’ve worked with shy away from the spotlight in favor of giving the team credit. They enjoy building and solving problems more than attending speaker conferences or building their personal brands. They do whatever it takes to get the job done.

5. Chasing new and shiny objects.

The best employees want to create and build things that will have a meaningful and lasting impact on users and on the business. By prematurely shutting down projects that are in progress in order to work on something new, you deprive your employees of the satisfaction of seeing their work come to life.

By no means is this a hard and fast rule. But before you shut down a project in favor of going with something new, consider the impact on moral the change may have. This is especially important if the new project in question is a fresh idea, not fully-baked, and seems a little out-of-left-field to the team.

In a word, focus. When Bill Gates and Warren Buffett were asked what the single most important factor in their success, they both said “focus” at the same time. Take the time to carefully and thoughtfully plan your projects and stick to them when new and shiny objects appear.

6. Building financial or projection models.

I once watched a company’s Head of Product build a financial model for three weeks. In my subsequent three months at the company, I never once saw that model used in any significant way.

I especially see this in founders coming from a business or finance backgrounds (looking at you, Wharton grads). In early stage startups, the slightest change in a variable can have a seismic impact on your model and render it useless.

Pouring your time into forecasting and modeling unknowns will only distract you from the things that matter most in an early-stage startup — people and culture, deeply understanding your customers, and building and distributing products that solving their problems. Outside of keeping an eye on your burn and money in the bank, resist building out detailed projections and focus on the things that matter most.

7. Not firing faster than is comfortable.

Firing employees is hard and uncomfortable. On top of the emotions that accompany letting someone go, a good leader will think through the impact it will have on team moral, finances, and project deadlines. And in startup world, we can see each other as a family which muddies the water.

I have watched a toxic employee drag down office culture and morale for eight months before an executive finally let the employee go. For many of those months and to many employees, his impending firing felt like an elephant in the room. There’s no way he should be working here, but we’re like a family. How could they possibly let him go? In retrospect, the family analogy made it difficult to see the best solution clearly. I believe companies are most analogous to sports teams — if you consistently don’t play well (on the field and with other teammates), you’re traded or let go.

If an employee comes to mind when the topic of firing comes up, take this as a sign to investigate and seek advice. Talk to your mentors and advisors to get a better sense of how to think about things. Talk to cofounders and employees to gauge their assessment of the person in question. Talk to the person directly to see if he/she is happy with their work and whether or not they are alignment with company values and expectations. And if the decision is to let the person go, make the move immediately and without hesitation. Try to remove emotion from the situation while still treating everyone fairly.

Your employees and your future self will thank you.

Special thanks to Tamer Barsbay for making this post better.