Over the years, I’ve worked with dozens of startups—from small pre-revenue and pre-seed startups, to large startups that have been around for 10+ years, and everything in between. I was also the technical co-founder of a failed startup in 2009. I have noticed a few commonalities of startups that tend to succeed and ones that tend to fail.
As you probably know, a startup is generally considered successful if they’ve exited, meaning either through an IPO or through an acquisition. I don’t consider an exit to be the only metric of success, but it’s a milestone that can be easily quantified. I’m not going to enumerate all the ways a startup could be considered a success or a failure. I just want to list some first-hand observations about startups that have either been what I consider successful (primarily that they are in the black) or have been catastrophic failures and had to close up shop.
Again, this compilation of some of my observations. Obviously, there have been startups that have exited that didn’t exhibit some of these traits. I’m well aware of that and simply want to share my experience.
My aim is not to make fun or hurt anyone’s feelings. Hopefully, some founders will come across this information and do something useful with it. I’ve outlined more factors contributing to failures than ones contributing to success simply because I’ve seen more failures. Statistically, this reflects reality.
Startups and founders tend to succeed when they:
- Are product and user focused
- Care about their user’s experience
- Talk directly to customers
- Crave feedback
- Are singularly focused on their primary offering
- Are good at prioritizing highly impactful features
- Are ok with imperfections
- Bring their MVP to market within 2-3 months
- Have a sense of urgency
- Know to how to simplify
- Are able to attract and retain highly talented employees and loyal partners
- Value their workforce
- Are low drama
- Are self-aware
- Are not trying to get rich quick
Are product and user focused
This is the number one attribute I’ve noticed successful founders have that sets them apart from failing founders. Early on, they know that all the other stuff is ancillary to and dependant upon the product being deliverable. As a startup becomes more mature, successful founders change focus from time to time, however, they always return product and solving their user’s problems.
Care about their user’s experience
I’ve seen a few founders of successful startups that participate in UX meetings and offer feedback. I knew one founder who was a UX designer at a prominent design firm before starting his first company. He built incredibly thoughtful and successful products.
Talk directly to customers
Successful founders I’ve known are in contact with their customers. They built relationships and made themselves available to get insight and feedback. With solid customer relationships, those founders made decisions that had the highest impact for the people they served and still serve to this day.
Some startups I’ve worked with have everyone on the product or engineering team interact with customers in some way. I’ve participated in some of those customer conversations, and it can be uncomfortable at first, especially for an introvert. As I connected with them, I had a closer connection to the product and really wanted to build something special.
I’ve noticed that really good startups, and even well-established companies, have feedback mechanisms in place. The mechanisms may either be manual or automated. They gather feedback early on and iterate based on what they learn. They eat feedback for breakfast, lunch and dinner. They brush their teeth with feedback. They wake up and smell the feedback. Feedback, feedback, feedback.
Are singularly focused on their primary offering
Successful founders and startups are careful not to allow anything into the workflow that deviates from their primary objective. Companies are idea factories and when you have a lot of talented folks around, they get excited about their ideas and want to build. Founders I’ve known who are able to recognize when an idea for a new product or feature isn’t related to their primary offering, they nip it in the bud quickly. They have various ways of cutting off ideas, and some techniques are better than others, but they always measure an idea against the main objective.
Are good at prioritizing highly impactful features
Pruning or distilling features is extremely important at an early stage, especially pre-funding. Not only does it help founders go to market sooner, it also helps them hone the skill for when they have capital and need to mitigate waste. Through their connection to customers, they know which features are high-priority. This leads to early releases, feedback, and returns.
Are ok with imperfections
Building a polished product takes a lot of time—sometimes years. If there are styling issues, minor functional issues, and minor bugs, successful founders don’t let that prevent them from releasing. They know that what’s important is that the core functionality works and the product as a whole solves their customer’s problems. They smooth out kinks with customers and use their emotional capital wisely when dealing with mistakes.
Bring their MVP to market within 2-3 months1
Founders who do this understand that their offering is nothing without the market. Their plans are tightly coupled with their customer’s needs. They listened to their problems and they heard them. They understood and empathized.
They also understood, or at least had intuition about, the amount of work involved when creating an MVP. I’ve worked with large companies that have dozens of offerings and thousands of products. Each product they built in house followed this pattern of setting a 2-3 month timeline to build an MVP. It works.
Have a sense of urgency
Successful founders are constantly keeping things moving forward and they convey a sense of urgency to the team. They know what is at stake. Being around this type of energy is fun and motivating.
Know how to simplify
Startups that trim the fat get to market fast and get feedback. They set the tone and ensure people think twice about adding features. They ask questions and help teammates discover simple solutions. They do things manually before automating.
Are able to attract and retain highly talented employees and loyal partners
Successful founders set the stage and form the company with people they like, admire, and respect. Successful startups don’t rush the process when deciding who to hire and who to partner with. I’ve found that the most successful startups and companies don’t hire exclusively on skill. They hire based on who they like, admire, and respect. They partner with companies they trust and have relationships with.
They get loyalty by showing respect, having integrity, and being resolved.
Value their workforce
Successful founders and startups know the value of their workforce and they never take it for granted. I’ve seen how motivated people can be when they feel appreciated and are compensated well. These founders make a point of talking to people on the team and get to know them. They value the relationships inside the company as much as or more than relationships outside the company.
Are low drama
Companies that are calm, cool, and collected do great work and are enjoyable to work for. Startups that I’ve been a part of that have exited had professional environments with little or no drama. There was the occasional gossip and whatever, but no yelling, name calling, or other childish behavior.
Founders who are self-aware are rare. Probably as rare as successful startups. By self-aware, I mean they can take a look in the mirror and be honest with themselves about what they see. The most successful founders and startups seem to be keenly aware of their strengths and weaknesses. They aren’t afraid of hiding it. They are honest. Honesty breeds trust. Trust breeds customers. Customers breed.
Are not trying to get rich quick
Successful founders and startups are in it for the long-haul. They’re not interested in selling to Big Co. and they’re not interested in an IPO. They’re interested in delivering value to their customers. They know the money will follow and know it takes time. They aren’t worried about it.
Startups/founders tend to fail when they:
- Think their startup is worth more than it is
- Spend a lot of time on tasks that are not product related
- Are afraid to bring their product to market before being perfect
- Have raised money who but it on things of little importance or value
- Hire contractors or consulting firms instead of full-time employees
- Don’t contribute to product development
- Don’t properly incentivize their early employees
- Spend a substantial amount of time and money on building the product before launching
- Pivot and don’t give time for the pivot to run its course
- Are indecisive
- Prioritize investors over users and employees
- Focus on selling their company
- Are disorganized, late to meetings, don’t take notes, and are always in a hurry
- Can’t trim the fat, i.e. reduce complexity and deliver an actual MVP
- Use terms like Agile and MVP but have never read anything on the subjects
- Call themselves CEO, CTO, COO but there are only three people involved
- Have contempt for their customers
Think their startup is worth more than it is
When starting a new venture, founders often shoot themselves in the foot by overvaluing it. Your company isn’t worth a rock on a stick if you don’t have paying customers, assets, or an investor. Failing founders who overvalue their venture have a hard time getting people to take them seriously. A big part of raising money or getting customers is that it is another form of validation, lending confidence to the project. Forming a corporation doesn’t add value. Having a lawyer doesn’t add value. Having a website doesn’t add value. Having a partially finished MVP doesn’t add value. Founders that don’t know what point A is will never be able to get to point B.
Spend a lot of time on tasks that are not product related
Depending on the stage of the startup, this can differ in terms of actual tasks, but if most of a founders time isn’t dedicated to making the product, they’re in for trouble. I’ve seen founders spend an inordinate amount of time and money on things like their marketing materials, technical documentation, onboarding procedures, etc. — sometimes before they have customers or, in the worst case, something that resembles an MVP. This is disturbing to me and is usually an early sign that bad news is on the horizon.
I’ve been hired by founders who’ve never had a user on their platform and haven’t gotten any real feedback other than a few demo sessions with friends or potential customers. It always ends up in a disaster2 with time and money depleted and hope fading. They never found product market fit because they were too busy working on something completely useless at that point in time.
Are afraid to bring their product to market before being perfect
Some founders are perfectionists and need to have everything perfectly together before launching. They don’t launch unless they have a perfect product, a perfect website, and a perfect team. I’ve been part of rescue projects and this is usually the case. They built a big beautiful product but it had some minor issues with it they couldn’t resolve. More issues were discovered that “had to be fixed” and they ran out of money before it ever saw the light of day.
Have raised money but spend it on things of little importance or value
For example, I built a billing dashboard for a client that wanted to automate their billing/invoicing cycle. They had a billing solution already but felt it was too tedious to work with. They spent a lot of money building it out only to realize that it wouldn’t do everything they wanted it to do without substantial further investment. The project was dropped and there was virtually no ROI. I’ve seen other companies do similar things. Their investors lost confidence and pulled the plug.
Hire contractors or consulting firms instead of full-time employees3
I’ve seen several startups fail because a contractor was no longer available or the firm they were working with didn’t fully understand the industry, business, or product. Contractors and firms aren’t as committed and invested in your venture as employees are. It’s ok to hire contractors and firms, just don’t let it be the primary source of development. They should supplement what you are already doing.
Don’t contribute to product development
This is another big one. Failing founders aren’t interested in product and think they can hire their way out of having to do product work. It’s easy for them to get caught up in sales and marketing because it’s exciting and thinking about all that cheddar coming in can be a big motivator. When they focus mostly or entirely on sales and marketing, product development lags behind. Sometimes they end up with people ready to buy, but the product isn’t ready. It’s a classic circumstance of putting the cart before the horse and they often run out of money.
A sly remedy I’ve seen is they try to sell the product before it is finished hoping that the revenue injection will push it over the line. That technique brought up other issues, like being beholden to a customer and they start building the product tailored to that one customer. The product takes a dump and no one else wants to buy it.
Don’t properly incentivize their early employees
Starting a company is hard. I’ve been through it myself and there are a number of challenges, big and small. Some people who want to join a startup are aware of the challenges, and some aren’t. If you are the latter, it will become apparent at some point and you’ll think to yourself, is this worth it? If it’s not your first rodeo, you want to be fairly compensated for the risk you are taking, right?
Noob founders are the worst to work for and be involved with unless they are incredibly empathetic, smart, and have integrity. If they have those traits, they quickly pick up on the fact that it is hard for everyone involved and they compensate everyone very well. They do what they can to help ease the pain. When they don’t, nobody wants to work for them.4
Spend a substantial amount of time and money on building the product before launching
I don’t want to make any hard and fast rules, however, ideally you’d shape your MVP in a way that you could deliver it in 3 months or less. Of course, there are many exceptions to that, especially in B2B, but if you don’t have substantial funding in place to build out a larger product and you haven’t done something similar before, you shouldn’t entertain building it, let alone start. A lot of founders who want to build a big, full-featured product either don’t understand the level of effort it will take, or they are lying to themselves and everyone else involved. If you are the latter, shame on you. If you are the former, also shame on you but I hope you’ll learn from the mistake.
The big takeaway here is—if you can’t distill your product down to one or two primary features, then you are taking on too much. I’ve seen this so many times and not just in startups. Big companies fall into this trap as well. They spend a ton of money and resources only to discover their product doesn’t work as intended (e.g. bugs, irrelevant features), it is bloated and confusing for users, or it takes too many resources to maintain and falls off the priority list.
Pivot and don’t give time for the pivot to run its course
Admittedly, I’ve only seen this once. The company failed because the founder couldn’t raise capital to sustain the pivot because investors were skeptical and lost confidence. If you are going to pivot, make sure everyone is on board first and make sure you have enough runway to see it through. If you are at the Hail Mary point, it’s already too late.
If a founder has a hard time making decisions and/or delegates important decisions to others, it’s not a good sign. Part of being a founder is being a leader, and leaders need to make decisions and stay the course. When they don’t, everyone loses confidence. It’s important to make decisions and be resolute in following through with them.
Prioritize investors over users and employees
I think this single attribute is what sets apart great companies over mediocre or bad companies. The most successful companies I’ve worked with have this hierarchy of prioritization:
users -> employees -> investors -> self. They value users/customers above all else and every major decision made is oriented by their north star (users). Founders who value investors over customers have a bad time and their product, integrity, and morale suffers.
Focus on selling their company
If your primary goal is to build something out just enough to sell it to another company, you will never build anything of value. If you are lucky, corp dev may decide to acquire your company because they want to acqui-hire you and your staff, but that is rare (especially early stage). Besides, founders I’ve met who’ve sold their companies didn’t seem happy when working for Mega Corp after the sale. They were bound by golden handcuffs and suffered from lack-of-innovation syndrome. Paul Graham has a good essay about it.
Are disorganized, late to meetings, don’t take notes, and are always in a hurry
This may be a pet peeve more so than a signal of decline, however, in my experience, founders who do these things tend to not be in charge for long.
Can’t trim the fat, i.e. reduce complexity
Something that is common among founders is they tend to over complicate things, add extra features, and overall try to do too much from the beginning. Doing it this way can put a lot of strain on the team or individual and cause the MVP to either be released late, or worse, not at all. A good rule of thumb for estimating build time and releasing is take your initial estimate and triple it. This is especially true in software. I’ve never seen a project be released on time with a full feature set. Either features get dropped off later anyway after people realize they’re not going to make their deadline, or they don’t make the deadline. Both cases are not ideal. The former is bad for a pile of reasons, but primarily because they have to gut the app or hide incomplete features behind feature flags, which takes more work. Why not just prune it from the beginning? The latter is bad because you missed a deadline and everyone involved on the team and externally is let down.
The worst case scenario for poor planning in this regard is you run out of money and good will. Game over.
Use terms like Agile and MVP but have never read anything on the subjects
There’s nothing inherently wrong with using common terminology in a particular domain. However, if your MVP is a year or two out, it’s probably not an MVP. Read the book The Lean Startup.
Every company I’ve ever worked with that said they were Agile or were “doing Agile” wasn’t agile. Scrum is not Agile. Most companies are doing Waterfall slathered with a bit of Scrum.
Call themselves CEO, CTO, COO but there are only three people involved
If you want to call yourself the CEO or whatever, fine. Just realize that you are taking yourself a little too seriously. Most founders are not CEO material. Just call yourself a founder until you’ve settled into a role when the company gets large enough to have roles. You’ll be doing a little bit of everything until then, so lighten up. Maybe some people think it’s impressive that you are the CEO, CTO, COO of XYZ Tiny Corp, but your employees probably don’t—especially if they’ve worked in a larger company.
Have contempt for their customers
This has to be the worst trait in this list of observations. I’ve heard some pretty gnarly things from founders about who they think their customers are. It usually revolves around the level of intelligence they think they have. If you think your customers are “idiots” then you need to look in the mirror.
I’m primarily referencing software products. ↩
I consulted with a founder who had spent over $1m of his own money and never launched to a single customer. ↩
It’s not to say that you shouldn’t hire contractors or consulting firms, but if your entire go-to-market strategy is hinges on contractors and consulting firms and you don’t have any staff, that’s bad. Having full-time staff that has interests aligned with the project over a long period of time and carries institutional knowledge is crucial. ↩
It’s important to recognize the difficulty of the undertaking early on and to take steps to get ahead of people’s feelings. A common complaint among startup employees that I’ve noticed is not feeling appreciated. Words aren’t enough. Bust out your checkbook, buy a gift, take them out, or whatever. Do something more than just saying, “thank you.” ↩