Startup Killers

Startup Killer #4: Leading by Comparison

If you ain’t first, you’re last. – Ricky Bobby

One of the most dangerous things to any company, regardless of stage, is paying more attention to your competitors than your customers. When you lead by comparison, every TechCrunch article with a valuation number becomes a distraction, every minor feature release from another company tangential to yours becomes an existential threat, and other companies’ cultures become more important than your own. Constantly comparing yourself and your company to the successes of other products and companies is a surefire way to guarantee being behind your competitors.

In the same way that social media has inflated and exacerbated our natural tendency to compare ourselves to the Jones family, it’s done so in the professional world as well. The difference is that in the business world, we aren’t often aware that news articles and press releases are filtered just like our selfies. Often more so.

“But Derek! If we’re not aware of the market landscape, how can we continue to succeed?”, you say. I’ll let Jeff take a stab:

If we can keep our competitors focused on us while we stay focused on the customer, ultimately we’ll turn out all right. – Jeff Bezos

Focus on the customer, not the market. By focusing on customers, you won’t constantly react to what the market is doing, you’ll actually define what the market is doing. By listening to customers more than you listen to the press, you’ll begin making headlines rather than reading them. This is a much better position in which to be as a company.

But it’s difficult: TechCrunch is easier to read than user feedback. It’s far more fun to talk valuations as some kind of measuring stick rather than focusing on one user who thinks that boxes with borders is a dumb design decision. When you’re out with friends talking about your business, they are comparing you against other businesses. Investors are comparing you against other companies. Ironically, leading by comparison requires you to follow industry norms. But it’s vital to your sanity, your team, your customers, and your company that you refuse to play the game. Focus on what matters, and execute.

Don’t worry about your competition; let them worry about you.

Startup Killers

Startup Killer #3: Challenging Nothing

While indigestion is the most prevalent threat to early-stage startups, starvation is just as dangerous. The most talked about form of starvation is running out of money. But again, I think that’s most often a symptom more than a root cause. Instead of challenging everything within an industry, many startups challenge absolutely nothing within an industry. This is a death knell.

How do startups even begin by challenging nothing? There are a couple of ways this can happen. Most often, it’s because while the industry is already defined, there is room for multiple winners in the space. So companies start, looking to take a slice of the space. In essence, they are starting up to take second place. This is what I’d call the aggressive version of challenging nothing. They do it on purpose.

Instead of challenging everything within an industry, many startups challenge absolutely nothing within an industry. This is a death knell.

The other primary form of challenging nothing comes from founder comfort. It’s much more passive, and therefore much more deadly. At least when you’re intentionally challenging nothing you can be aware of the implications. This “founder comfort” is an unhealthy and inflated version of founder-market fit and is often disguised as such. However, their familiarity with the space causes blind spots to some of the opportunities for disruption. What ends up happening, however, is that the founder(s) do what they’ve always done, and they end up challenging nothing new. Sometimes this leads to a positive result for employees and investors…but sometimes it leads to a quick and sudden death.

For me, there’s two positive observations here:

  1. Founders working in related industries is best. Whether it’s someone from traditional finance moving to crypto-economics, someone from wealth management moving into personal finance, or someone from Uber starting a scooter company, I’ve personally seen founders from one industry transitioning to another, tangential industry extraordinarily well. A couple things result from this: first, finding founder-market fit is accelerated. There’s a foundation of knowledge for the founder(s) to work from and build on top of. Secondly, they’re able to translate challenges faced in one industry to another. They’re immediately challenging something because they’ve seen challenges in a prior, related space.
  2. Between challenging everything and challenging nothing, challenging nothing is the easiest cultural snag to overcome. During the course of building the business, it’s quite possible that you’ll see and seize a key opportunity. Seizing that one opportunity when presented is a lot easier than killing off the inertia of solving multiple challenges. As a leader, I’d much rather deal with the challenge of finding a challenge than trying to narrow down a set of challenges.
Startup Killers

Startup Killer #2: Challenging Everything

Startups, almost by definition, emerge as a reaction to a perceived gap or problem within a given industry. They are often referred to as disruptors and this is by no accident. Either they challenge the way that things have been done prior, or they challenge the fact that something should not exist. Issues arise, however, as one digs deeper into the industry at hand.

As a startup leader, inevitably, you uncover other issues that are tangential to your core problem. Even important issues. And maybe you add that problem to your list of problems that your startup is solving for. And then another. And another. And another. And eventually, your startup is, at least in your mind, “redefining an entire industry”.

The issue with challenging everything is that it’s an exercise in futility. This approach of “challenging everything” often results in drastically reduced execution. As a startup, you have to pick what your core consists of; what one thing about your given industry are you challenging? This is a very tricky thing.

One of the most memorable lessons from my time at Addepar was this: startups don’t fail because of starvation. Sure, they may run out of money, but that’s often a symptom rather than a root cause. More often then not, startups die of indigestion: they bite off more than they can chew. They try to swallow too much and end up choking on their own decisions. It’s a (very visual) lesson that has stuck with me.

Startups rarely die of starvation; they often die of indigestion.

For some, including us at Exeq, our core focus has a lot of different touch points. It may seem from the outside looking in that we’re taking too much (financial management, loyalty, payments, promotions, etc) on to our plates. The reality is that we’re taking on one thing at a time, and that each item is a smaller part of the singular belief that exists at our core: we believe that both consumers and merchants want to be directly connected via data.

Now as we speak to consumers and merchants alike, we’ve discovered areas ripe for innovation, ranging from gift cards to inventory management to financial tooling for parents with older children. But these items are not in our wheelhouse, because they are not a part of our core challenge. They are simply tangential. While those things are important, it would be a mistake for us to pursue those items. Do we have opinions about those things? Yes. Do we think that someone should do something about the problems in those areas? Yes. Do we think it should be us? Nope.

As startups, we have to be extraordinarily disciplined in how we approach our respective industries. We have to be focused on what’s on our respective plates instead of biting off more than we can chew.

Startup Killers

Startup Killer #1: Hype-Driven Everything

I think a natural side effect of being a leader is also being a voracious information consumer. Leaders are readers. We attend conferences, listen to countless podcasts, subscribe to tens (hundreds!) of blogs, and are constantly in conversations with other people we respect. We analyze trends in the industry, both the industries that our startups serve, and the industry of technology companies itself. But if you’re anything like me, you’re both guilty of it…and you recognize that there’s a significant problem with this approach.

If we’re not careful, then every new article, every new post can become a new wind that blows against the sails of your startup. The latest and greatest items found in industry trends become the enemy of the startup’s number one priority: focused execution. All of a sudden, you begin shoving “technologies” into your stack even when they don’t belong. You begin adding marketing strategies based on the blog posts of some brilliant marketer living in Portland, Oregon who works remotely for some big shot agency with a name that would double for a consignment shop. You introduce new concepts to your leadership team that you’ve read from a Forbes article about (insert tech leader here).

And all of a sudden, you’re an iced tea company with Bitcoin in your name.

From a design & technology perspective, just think of the trends that have come and gone. Rounded edges. Gradients. Countless Javascript libraries (remember mootools? prototype?). There are a lot of examples there. But the same is true even on the business side: trends exist, and they often cause us to introduce new things to our groups when it’s simply not necessary….and most often it’s a distraction from the things that do matter.

This introduction of new items is only the misdemeanor-level crime that can be committed here. Worse yet, you begin changing strategies, technologies, or company culture, ripping out things that are unique to your company that have grown from within and proven themselves worthy of keeping for at least a season. Within a short period of time, for very little reason, you’ve now given at least a particular group within your startup organizational whiplash, if not the entire team. All because you consumed the latest book. The latest magazine article. The latest blog post. The latest podcast episode. And are seeking to ride a wave.

And if we’re honest with ourselves, all of this is usually done to impress some third party (investors, the press, friends/family) that doesn’t directly impact the bottom line of the company.

Now. What I’m not saying is that these third parties don’t matter at all. Of course they do. I’m also not saying that we as leaders shouldn’t pay attention to trends in our industry. Or what’s happening in tech in general. Or that we should cease consuming external information in general. I’m saying avoid the hype. This hype-driven everything model of leading is simply unhealthy.

The number one way to avoid the hype? Have a clear, concise mission & vision for your company…and your own life as a leader. Write it down. One that’s fairly stable. One where a sudden swing in trendiness won’t cause doubt. Then, weigh every new trend against that mission & vision. Seems simple. But it’s not. Because some trends will seem like no-brainers at the time, but will only falter with time.

Startup Killers

Startup Killers

In my observation, startups fail way before they run out of money. Running out of money is just the period of a long run-on sentence in a company’s history. Aside from this financial ending, there are a lot of items that kill startups: many out of the hands of founders, employees, and investors. Timing, market dynamics, and regulatory environment changes are just a couple of these killers outside of our control.

However, there are quite a few cultural items that will destroy your company from the inside out…items that are almost entirely in our control. I’ve seen a couple of these items creep into teams I’ve led during my career, and I thought I’d write about them here as a precaution to anyone reading.

In no particular order, here’s the list, along with a link to the detailed post as they’re written.

  1. Hype-Driven Everything.
  2. Challenging Everything.
  3. Challenging Nothing.
  4. Leading by Comparison.
  5. Not Iterating.
  6. Acting in Self-Preservation.
  7. Acting With Self-Entitlement.
  8. Organizational ADHD
  9. Pretending to Be Something You’re Not (or Not Yet)
  10. Prioritizing Intelligence Over Wisdom.