Four Groups

Archive for the ‘Venture Capital’ Category

Team deficiency accounts for startup failure almost 33% of the time, as reported by ChubbyBrain and Bruce Lynn. Although the original research includes 32 failed companies, it’s important to be cautious given the likely possibility of sample bias.

From the research:

Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”.  In some cases, the founding team wished they had more checks and balances.  As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.”  Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

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A great post by Fred Wilson (here) looks at the role culture and fit play in growing companies. Rather than the quality of the products or services a company provides being the arbiter of performance, Wilson argues that it is the intangibles within the organisation that ultimately distinguish between success and failure. What do we mean when we talk about fit? Essentially it comes down to relationships, does person A provide a good fit for a team and will they be able to form strong, collaborative relationships with new colleagues, essentially strengthening the team. For those looking for a definition of culture, I’ve yet to find anything better than “It’s the way we do things round here”. I think that these aspects of organisational development are both hugely under appreciated by the majority, Fred Wilson does seem to be someone who appreciates the significance of behaviour, relationships and culture;

And the people side of the business is harder and way more complicated than building a product is. You have to start with culture, values, and a committment to creating a fantastic workplace. You can’t fake these things. They have to come from the top…If everyone is a mercenary and there is no shared culture and values, the team will blow apart. But if there is a meaningful culture that the entire team buys into, the team will stick together, double down, and get through those challenging situations.

As individuals and even from an organisational perspective we tend to fixate on what we can most easily influence and change, we are naturally drawn to the low hanging fruit, the activities that promise the most visible return for the least effort. With growing companies this leads to a focus on the tangible aspects of business development, ie products, systems and processes. It is no surprise that these complex, often hidden people problems tend to be swept under the carpet.

Even if you do get a handle on culture in the early stages, inevitably as the company grows this is likely to change and morph so what may have worked in one instance may not work in another. I think that many leaders get lulled into a false sense of security, particularly if they get detached from what is happening lower down the ranks and fail to grasp the ephemeral nature of culture. Unfortunately, by the time things start to go wrong, it is usually too late.

Luckily, Wilson’s view is becoming more mainstream and there are now tools such as 4G that are beginning to shed light on these very thorny problems and let both new and established companies get a more systematic grasp of both culture and fit.