I saw a tweet going around today suggesting a founder’s identity should be intimately tied up in their startup, and thought I might offer a different perspective on the mindset I’d prefer to see in founders we work with.
I subscribe to the Steve Blank school of startups, which is to say that I see a startup as an organization formed to search for a repeatable and scalable business model. In other words, a startup is a hypothesis, and furthermore, it’s one that the founders, investors, and employees all believe going in may be true.
When it proves true, magic happens. As organizations scale, founders get to have significant impact on their industry and/or the world, employees who made the bet with them have rare opportunities to grow individually in ways they couldn’t outside a startup, and of course as investors we get to make a bunch of money.
The problem is that when the hypothesis we all signed up for is wrong, it’s just not hard to turn $1–2M in venture capital into a break-even business for a small team, so if your identify is tied up in The Business, as opposed to the founder journey, it’s not only easy to keep going, it’s really hard to step back and acknowledge that the hypothesis has been disproven, which we should’ve expected to be the default outcome anyway.
This especially matters to us because our bottleneck as investors is great founders working on businesses that have the potential to be huge, and it’s rough to see talented people tending to a zombie startup because their identity is too closely tied a specific Delaware C corp.
It’s better for us, and I believe generally for other stakeholders, to acknowledge the situation, find the next hypothesis, do it again. Disproving the hypothesis isn’t our preferred successful outcome, but it is a form of success (that obviously feels really crappy).
In fact, some of our recent investments I am most excited about have been in founders who lost every single dollar we gave them in their last venture, because while our shared theory of the world was wrong the last time, the founders were phenomenal. In in literally every case I wish they had quit sooner.
The cardinal CEO sin is to let the business fail, but the cardinal Founder sin is to spend your time on something that won’t matter even if you succeed. It’s easy to identify as the former when your business cards say CEO. But great startups are built by people comfortable with what it means to be a Founder, which in my experience often means learning to be a good quitter.
You are not your startup.