AKF Partners

Abbott, Keeven & Fisher PartnersPartners In Hyper Growth

Startups and the Manic-Depressive CEO

If you are one of those people who think that a startup consists of a couple of years of hard work followed by a large payout, think again. Most venture backed companies never make it to that payout and those that do often take much longer than two years to do it. Furthermore, those “years”, be they 2 or 10, are very stressful years packed with a roller coaster ride of emotions that any theme park would be proud to call its own.

 

Life in a startup, especially an early stage startup, is full of ups and downs. On Monday you are on top of the world, having signed a new customer and released an enhancement to your base product; champagne corks pop and party hats are worn by all. By Wednesday you fear that the most recent release from one of your competitors will be the end of your business and you hold an all night product roadmap session to re plan how you will spend the rest of your product manpower and budget through the course of the year.

 

In our experience, the entrepreneurial CEO most often has the greatest emotional amplitude in the highs and lows and the resulting incredible mood swings are not healthy for the company on either the euphoric peak or the abysmal trough. Behaviors and actions vary so widely in many young CEOs that the organization simply cannot react optimally to them. For instance, during the peak, the CEO talks about the IPO, high-fives and knuckles the team and takes them out for drinks. Within three days, people are hearing of layoffs, cut backs and certain business death. During the highs, the CEO talks about what a stellar team he or she has and during the lows he or she complains how no one really works hard enough and how no one cares about the success of the company.

 

Sound familiar?  If it does, listen closely.  YOU MUST STOP!  If you want to lead, then you must be the pillar of the company in both good times and bad.  Don’t let yourself believe that you get a pass on this advice just because its “the way you work”.  Don’t be an enabler of yourself in behaviors that run counter to creating shareholder value.  You must absolutely be the firm guiding hand in good times that reminds the company that there is still a fight for survival going on even as the celebration reaches its crescendo and you must embody the hope that the company seeks in bad times by reassuring them of the strategy and how exactly it will be successful against the competition.

 

While we agree that flexibility of strategy especially in the ability to sense and respond to competition is a key to success, we argue that changing strategy weekly is a lack of strategy and you are suffering from IotD (Idea of the Day) as we discuss in a previous article.   Making course corrections through the year to capitalize on a competitor’s weaknesses or to defend against a competitor’s attacks is absolutely appropriate.  Holding all night sessions the day after a competitor’s release, especially given that the development cycle for any product course correction will likely dwarf the hasty strategy development time is ludicrous and fraught with perils such as a lack of competitive information and a complete lack of an appropriate product discovery phase.

 

What are the lessons for each of you in this?  For the entrepreneurial CEO, recognize this ride is going to happen and monitor your reactions to the highs and lows.  Be the leader for your organization and keep a level head in front of your teams so they can remain focused on delivery.  If you’ve been complaining lately about how nothing ever gets done and no one cares enough about the company, look inward and ask if you aren’t the one causing this problem.  For the CTOs, recognize this behavior in your boss and don’t jump on board the rollercoaster.  Try to get your CEO to read this article, and if that fails, just keep reminding them to stay the course.  The upside if you resist is that you are being the leader your team needs to buffer them from the whipsaw and tomorrow the CEO will probably change his or her mind back again.  For the engineers, ask during the interview how focused the team is and how long projects are given to complete.  If they brag that they change product strategy everyday to keep up with the competition consider this a warning sign.  If they are contemplative, understanding the true cost of changing direction, and reactive only after a well thought out discussions, then consider those as good signs of a mature leadership team.


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