Monday, August 7, 2017

Feelings of Failure

As the founder of a high growth successful startup, you may feel like you are constantly failing. You are not alone in this. Most startup founders I know feel like they are screwing up on a weekly or monthly basis, even if their business is growing well[1].

Feeling of failure tend to come from:
1. You are constantly learning and doing new things.
For many startup founders, your CEO job may be your first time managing people, hiring and firing across various functions, raising money, selling a customer, managing your board of directors, or signing a business partnership. There is a lot to learn in each of these areas, and no matter how smart you are you are going to make mistakes.

When a startup grows from 10 to 100 to 1000 people, you have to relearn basic parts of the CEO job. How you communicate to a 1000 person organization is very different from a 100 person organization. So even if you learn how to manage at one scale, each step up in organization size is a whole new learning curve.

This constant learning curve means that even if you are doing well, you may constantly feel lost. You may also feel imposter syndrome or like a con artist. How can people think you are good at running a company when you have never done it before?

Take a deep breath - you started this company in part to feel stretched. Realize that other founders are in the same situation as you. Specific tips on how to deal with this are at the end of this post.

2. Absence of real feedback.
The higher you go up in an organization, the less real feedback you will get. People will laugh at your jokes and defer to your judgement whether deserved or not. As it gets harder to get real feedback, you may feel blind to whether you are performing well or not.

3. Humans inability to understand compounding.
If a company is growing 5X per year, it will grow by >15,000X over 6 years![2] $100,000 in year one revenue will equate to $1.5 billion in year 6. However years 1-3 will feel existentially bad to you. E.g. at $100,000 revenue year 1, $500,000 in year 2 and $2,500,000 in year 3 revenue you may feel that your company is on the brink of failing, even if it continues to grow at a brisk pace.

People find it hard to relate to compounding. One startup I invested in sold early just as they were hitting profitability. I thought for sure they could have been a $1 billion+ company within a few years. When I asked why they sold, the founders told me that they started the sale process 6 months earlier, and by the time the acquisition closed they were profitable. They had been growing at a compounding rate and hit profitability faster then expected, but had not properly anticipated the future.

They were so used to struggling and feeling like they were failing, they did not notice when they were actually succeeding.

4. Rocketship next door.
Silicon Valley has the occasional crazy fast exit where someone sells their company for $1 billion after a few years. This is not the norm, but if your expectations are set on these outliers you may feel like a failure even if you are doing great.

5. Constant crisis mode.
Startups are hard. Even the savviest teams face constant crisis and battles. This can cause founders to feel that they are doing something wrong or screwing up when growing pains are normal. There are ways to add process and executive bandwidth that will smooth out and delegate out these crisis points (see below).

How to deal with feelings of failing.
To mitigate feelings of failure (or prevent them to begin with) you can:
a. Find a series of mentors. Your investors or external industry executives or entrepreneurs can help coach and support you on managing, leading, and various functional areas. As you learn how to manage different team sizes, feelings of failing will decrease. Similarly, it may turn out that your instincts and actions are correct. There are certain things you will need to do at work that will never feel good (e.g. firing someone) but will be necessary. As you gain experience and feedback you will grow more confident in your abilities.

You should also do your homework. If you are hiring a general counsel for the first time, go and interview 3 great general counsel's at other companies to learn what they would look for. People in Silicon Valley are open to helping each other learn - take advantage of this network. Going in blind will both increase your feelings of inadequacy (and rightly so) but also increase the chances of hiring the wrong person or doing the wrong thing.

You will likely need new mentors and new sources of help as your company grows. At each scale of business, seek out new people for feedback, ideas, and support.

b. Hire competent executives. Having great executives in place to own functions decreases stress on you and allows you to focus on the areas you excel at. Startups are team sports and you do not need to be great at everything, you just need to hire a team that is.

Similarly, great executives will decrease the number of fires that both (i) exist and (ii) that you as CEO need to deal with directly. A deep bench is the best way to get leverage on your time, free you up to work on the things you enjoy and are good at, and to decrease feelings that you are screwing up.

c. Institute 360 feedback. Learn what you do well and poorly and have a basis for improving. Just as you may track a net promoter score for your customers, you can track what you are doing well and poorly. Do not assume you will ever be great at everything - no one is. Figure out what your strengths are and lean on your executive team for your weaknesses.

One of the great fallacies of business and management is that people think they should be great at all skills (analysis, management, organization building, strategy, deal-making, engineering, etc.). In reality, most people tend to be good or great at only a few key areas. Eventually you need to learn to play to your strengths instead of developing your weaknesses. Once your company scales, you should be able to hire people who can cover your weak spots.

d. Take a "monthly moment". Take a half day once a month to assess where the company is strategically and how it has advanced since the prior 6 months.  In a startup, a lot can happen over 6-12 months. Many entrepreneurs lose sight of this in the moment. Think through how much progress you have made and what you have accomplished. If your company is growing quickly, you will realize how far you have come in little time.

e. Get some sleep and take a break. Running on fumes makes the world seem bleak. Take a break and prioritize sleep and exercise. This will put things in perspective. Similarly, if you are making progress on another area of life (e.g. running goals, dating) it will smooth out the ups and downs of startup life.

Notes
[1] This post is meant to help with feelings of failure when things are actually going well (whether you as the CEO realize it or not). Often, a startup is indeed failing and you need to decide whether to shut down, exit etc. That is the subject of a future post.

[2] This is meant as an example. Usually high growth companies grow at e.g. 5-10X per year for the first 2-3 years and then slow to e.g. 2X at some point.

Summary
Many first time CEOs feel that they are screwing up or failing on a regular basis. This is driven by circumstance (you are thrown into new challenges every month), the difficulty of running a startup, the need to build an executive bench, and a lack of perspective. By building out an executive layer, pursuing 360 feedback, and getting sleep and perspective, you can mitigate these feelings of failure and focus on the task at hand.

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