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What Goes Wrong With Funded Startups?

What Goes Wrong With Funded Startups?

Startup idea is not a lottery ticket

A founder, armed with dreams, convinces himself and investors to believe almost anything with a mix of charm, charisma, bravado, hyperbole,marketing, appeasement, and persistence. For founders, after getting funded the experience of failure is unsettling but for investors, it’s not new.

Here are 10 types of founder traits that define what goes wrong with startups even after getting funded. 

Boy in Costume

Founders with an elite college degree aiming to be a corporate strategist with freshly printed business cards with the tag “CEO”. A founder who applies corporate world complexity to startups and tries to fake it till they make it by aping successful enterprise policies to startup. They scale prematurely, burning through their capital before they have achieved product-market fit. In demanding times they throw in the towel without putting up much of a fight because they lack resilience, the drive, and determination. In startup race its a marathon, not a sprint because luck favours founders who stay put long in the game.

Paranoid Founders

These suspicious, secretive geniuses want to develop business at scale without talking to anyone. To execute your plan one need’s to share, communicate and engage. Insecurity is part of their life, be it their teammates, customers or investors. It’s all locked in the founder’s head. These founders cannot strike partnership with anyone because their fear has reached delusional proportions. They limit their chance for success.

Investor Relationship

Once funded, founders look to ignore investors and move 100% focus on business. A startup does a lot of PR for its achievements to attract talent or customers. They tend to go into complete silence with no communication with investors. It lays the groundwork for future problems, especially in tough times. Investors sit on top of market, have a network of connections & can help with insights but will move to another side of the table due to lack of communication

Flawed ego

On getting funded founders get a tremendous boost to their confidence. It’s good but when they start thinking that they are smartest people on earth, their problems start. They talk but don’t listen. It’s the root cause of startup failure. Pride is important for founders but there is the fine line to making a point & being arrogant by not listening to others.

They battle ceaselessly with investors to showcase subject dominance. I know what I am doing so no one dares question me & my business plans attitude does not help.

Superman Founders

They think themselves superhuman with infinite strength and capabilities to solve everything and anything. They do not delegate or trust with their team. They overwork and burn themselves. Founders ought to be part of the intense action and leading from the front but it cannot be 24/7 for 365 days which leads to zero critical thinking. When founders take it all on their own shoulders then productivity, creativity & innovation deteriorates while operational chaos rein.

Over-hyped Founders

Media has made startup founders part of gossip pages. Founders love to see themselves glamourised by the media. They believe in self-aggrandising promotions. These founders hide their shallow technology, business or numbers behind cloaks of unquestioning marquee investor names. They share testimonials but no real numbers. They create soft stories in media without any substance & stay away from disclosing hard facts. Obfuscation is common. They sabotage their own startup by building high expectations with unnecessary overexposure in media.

Criticism Management

Startups will face criticism, especially from investors. Founders should not consider it as dissent or disloyalty to the company. There will be hype around rapidly growing startups, hence eyebrows will be raised & questions will be asked. Founders should not threaten critics or disparage dissent. It doesn’t matter how hateful the criticism of your critics may be, there might be some truth in it so it is very important to observe their criticism.

Money Matters

Founders need to respect money. It’s a ticking time bomb when founders raise too little money so as not to have enough runway to be able to launch the product or go to market. It’s a race to failure when you raise too much money and get overvalued. Investors’ expectations are difficult to achieve, the pivot of an idea is harder, spending is liberal, teams are bloated and even with too much money raised it might last not more than 24 months. These founders have very little understanding of finance. They burn money irrationally in the name of growth & scale and find themselves in a spot with down rounds.

Gold-digger

These founders dream of becoming rich by following trends, attract investors and build companies like playing poker with investor money. These gold-diggers believe money is the solution to everything. They are self-centred founders with very little skin in the game taking advantage of investor herd mentality of funding trends. They constantly focus on creating income for themselves and if things go well create wealth on exit equally. While gold-digging isn’t an honourable method of entrepreneurship, it has continued to work time and time again for selfish founders, while the company fails and as a result has created an immense paranoia amongst investors.

Perfectionist Founders

These founders struggle with issues of hiring team, product release, and invariably delays & cost their business at every juncture. They are obsessed with perfection which does not work in a startup which needs continuous iteration. These founders procrastinate in the name of perfection without realising that nothing is perfect & finished till it’s released.

While investors & media tend to credit startup funding rounds to success due to founders vision, brilliance and skill it might actually be luck & timing and in reality, these founders do not deserve the success they have achieved. For many such founders, these dreams then turn into nightmares. Every founder will be able to relate to one or many of the above traits & can understand how these pitfalls could have been avoided.

Founders, do not end fool yourself, you will fall into one of these traits at one point or another. Make every episode part of your learning experience and get back to business as fast as you notice these traits in your journey.

Startups are not for the faint of heart!

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

Author

Sanjay Mehta

Influencer
Founder and Partner at 100X.VC and Early Stage Investor

Sanjay Mehta is a venture investor, founder and partner at 100X.VC, India's first fund to invest in early-stage startups using iSAFE - India SAFE Notes and aims to invest in 100 startups in a year. He also runs family office investments through a proprietary fund called Mehta Ventures.

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