I know that a funded startup founder CEO is a long title, but, at least, it’s specific. Sorry for that. 🙂
Contrary to so-called conventional wisdom, where founders declare, “When I get funded, all my problems will solve,” the level of stress afterward actually increases. The pressure is on. You have to prove yourself now. If you fail, you’ll look foolish.
I want to prepare you that this won’t be an easy read if you are a recently founded startup founder. It might be a bit harsh but a good eye-opener. I can promise that I will end on a happy note.
Being a funded startup founder CEO isn’t for everyone
You entered into a new type of partnership where your goals do not always match VCs. Taking an idea to greatness and meeting all expectations can translate as no more life balance. Many founders are challenged at this stage, questioning if all of this is worth it.
But the idea of growth and bringing the business to new heights, with the help of funds and resources, is exciting.
Real-life statistics for startup founders
You’re now following the path of those 1,000 unicorns around the world as of March 2022. Is this shocking to you? Seeing such numbers often shocks founders because if you judge reality by seeing the headlines, unicorns are like jumping out each day like mushrooms after the rain.
Yes, 1,000 unicorns and 2,755 billionaires in 2021.
Do you know the percentage of those billionaires in the world population? It’s a 0.0000…% game. In the meantime, every fund wants unicorns and they are filtering you based on that and you feel obliged to meet those expectations.
VCs on the other hand have their own reasons to seem so pushy and demanding.
“Of the 200 that are funded by top VCs, 15 of those startups will generate nearly all of the economic return. The rest will either go to zero or limp along without generating much return.
Therefore, even the top VCs tank over half their deals. Thus, they have to be very careful and are somewhat paranoid about being wrong.”
“The Total Odds of Success Are 1 in 2,000
If the odds of being funded are 0.7%, and the odds of a funded company succeeding are 8%, the total odds of success are 0.05% (1 in 2,000).”Corporate Finance Institute
Founder CEOs have a lot to deal with
Starting with your deck every step you take, during, and after your raise is set to those expectations. That wouldn’t be a problem if it didn’t change your motivation, energy, and capacity to do it.
With the extra pressure and accountability, the only way for things to happen is by speeding up everything. You multiply your duties, putting the company under a lot of stress without creating or consolidating a solid foundation.
That’s why so many fail during the growth pain period. Not to mention, you don’t have a life anymore.
In addition to the least known statistics,
“By the time the ventures were three years old, 50% of founders were no longer the CEO; in year four, only 40% were still in the corner office; and fewer than 25% led their companies’ initial public offerings.”The Founders Dilemma – Forbes
Yes, many founder CEOs end up without their CEO hats, often limited to a weak position with few shares, no board seat, and sometimes out of the company.
Job growth skyrocketed 960% at VC-backed companies
Recently, I investigated a long list of companies funded last year to see their hiring ratio. Numbers like 30%-35%-45% seem to be the norm. And it’s encouraged by the VCs and others. The headlines are full of such numbers that look so awesome. 8x Compared to Non-VC-backed Companies.
But the increase is dangerous. This is neither healthy nor realistic. A 30% increase over six months can easily change the company’s culture, structure, and fundaments. And so, you, as a founder CEO, can lose control. I know you don’t like it, but keep in mind that you are a born optimist who thinks you’ll figure it out on the way. Such structural changes cannot be figured out in time without significant additional changes that could change your mojo completely.
You’ll be in a hurry to find the right processes and operations, constantly adjusting, and forgetting about the core values that define the company’s mission and purpose. It’s a sort of worshipped madness, and that’s wrong.
Every startup needs a strategy for employee scaling
I saw this rapid scaling happening so many times in companies I worked with during the years. I also experienced this with my own hires as a startup founder. Serious issues happened at a much lower scale, starting with a 10-15% employee increase. Not to mention when it includes management roles.
Don’t hate me for pointing this out, especially if you are in this situation right now. But from the inside of your company, you already know this. Most founded startup founders experience this. Sometimes, bringing one key person is a big challenge.
Above a 20% increase in headcount, you’re already on a sensitive line that needs special attention and treatment before the hiring process begins. Every people-centric professional inside a company knows what a crazy mission is to align in no time new people with a quickly growing company without a solid foundation. It’s like digging a rabbit hole. You might succeed in some way, but your company won’t be the same, and you’ll need to adjust accordingly.
Startup Founder Dillema
Now, the question is, how willing you are to change your dreams and desires to match the new reality. If you are a high-growth type entrepreneur, also called an Investor-backed Entrepreneur, you might survive and even thrive. Your company won’t be recognizable to you compared to the beginning, but you’ll be fishing in the new water with excitement. If not, it won’t be fun.
What do VCs look for in founders and founder CEOs?
Back to more personal stuff. You should only breathe the business, according to conventional wisdom.
Don’t get fooled by the new wave of promoting the illusionary life-work balance that doesn’t exist as a multipliable formula for all. When you are on track to become a Unicorn, otherwise, you wouldn’t have got the funds, you’re expected to be fully committed. That means giving up everything outside of business.
In this stage, even when you’re with your family, your mind is heavily working on your current plans, daily issues, clients, employees, and expansions. If you are not a meditator, you’ll find it hard to ever relax. The roller coaster metaphor will seem very familiar to you.
And if you mistakenly gave up too many board seats to VCs or people who are not very close to you, like advisors, things can shift very quickly if you don’t deliver and don’t do the expected. Getting your founder CEO, or executive title away can be like a sward constantly over your head.
Founder, CEO, or both?
I’d like to add that it’s a big difference between the two roles, a startup founder and a CEO. A good founder is not necessarily a good CEO and needs to grow into this role. The mindsets are different, and while you as a founder go for expansions, dreams, and amazing things, the CEO needs to be on top of everything, from operations to acting as a true leader for the people and mediating or uniting them when is needed.
First-time founders need some work to grow into this role and can fail. Serial founders know how it works and what’s at risk, although there is the constant truth that no business is ever the same.
With all the buzz and glow from the outside in a growth stage after being funded, you find yourself facing entirely new challenges. Not all founders are up to it because it involves much more than you imagined at the initial stages.
I want to take a pause here. I’m also a VC partner and got to know this world during the last two years. There are also good ones, and more are coming to the market ignited by the right things. The role of VCs is crucial to allow good companies to create that change in the world, where more and more people can benefit. But they are also playing a number game.
The smell of money and their duties to the stockholders gets in the way of many hearts felted VCs. When you’re desperate to get financed, it’s not always easy to uncover the right ones. Many startup founders caught themselves in bad deals because of it. Research is important, but so is the initial power play. It’s a lot of bluff and testing with you before receiving the money. You need to do your due diligence on them.
OK, but you are founded already, and you’ll get mad at me by pointing out those pain points you don’t want to face much. “Hey, Cristina. What can I do with what you’re saying here if I’m in this mess already?”
My views and solutions
I wish I could provide a perfect solution for everyone, but there isn’t one. It’s like with your uniqueness. You’re unique, and there is no other person who’s been through the same experiences as you. The same is true with businesses, and to be honest, this is just common sense. All those flashy formulas you see out there aren’t 100% replicable, only partly. Otherwise, we would be full of unicorns around.
Now, if you’re asking me if there is a way to get what you want and solve your founder issues, the answer is a clear yes. About the strategies to consider, though, I could talk for weeks without stopping.
The way I approach such situations with the founder CEOs I work with starts with crystal clear clarity about what they truly want. Those things make them so thrilled, excited, and fulfilled by thinking and dreaming about those specifics that can occupy their next years without any doubts.
Once we figure this out, together, we can finally start shaping the best strategy by priority and importance that will solve one by one the issues that went downhill.
It’s like a beautiful chess game where your moves will be drawn and changed accordingly. Once you have the clarity, the most dangerous things to handle in the right order, you just set up your perfect game to play. The unfolding can get exciting.
I’m a true believer that our life should be fun. Well, when you work with quantum fields, it cannot be otherwise, but let’s keep it general this time. No matter what you believe, life shouldn’t be miserable by worshipping pain and sacrifice to make you feel worthy of the goods. Why not consider life as a stage or a playground? Because you’re in charge, you can’t lose.
It doesn’t matter if you use the quantum model of reality to create a new reality or more traditional methods, you can solve all issues.
People and businesses are unique
The biggest secret here is that all your problems are directly related to people. So, with the right people skills and strategies, you can turn around even the most disastrous situations you might ever consider. People have keys, and when you open the right keys, the impossible gets possible with only one extra caveat. You also need to prepare and change a bit to open those keys.
My conclusion is this. You can make it if you’re up for the game. What’s even more beautiful is that this time you’ll make it in a very conscious way that will bring you even more satisfaction than you thought because you’ll see that after all, the solutions are in your hands as the Founder CEO.
Are you interested in working together?
If you’re ready, check out this page and schedule a call.
Cristina Imre – The Founder Coach