Founder strife blamed for startup failures
MANY STARTUPS fail not just due to funding problems but because of unresolved conflicts between founders, according to an expert in the psychology of startup teams.
“There’s a belief that it's about running out of cash or not finding a project market fit,” said Martin Gonzalez, creator of Google’s Effective Founders Project, a global research program that uses people analytics to uncover what makes the best startup founders succeed.
The top people issue that kills startups is unresolved conflicts between co-founders, Mr. Gonzalez told BusinessWorld via Zoom.
“Go slow in finding your cofounders,” he said. “The more stable partnerships... are those with former acquaintances and former co-workers,” he added, noting how seeing people in work settings allows one to discern the skill sets and work ethics of a potential co-founder.
Friends and family, on the other hand, make for unstable partnerships, in part because “the cost of the relationship is so expensive,” apart from the fact that they bring to the table the same skill sets and networks.
“Part of the fact there’s a mismatch between the data and what may be popular among startup circles is because the tech is exciting,” Mr. Gonzales said. “It’s something you can post [on social media].”
About 55% of startups fail because of people problems, according to a 2016 study by Harvard University, Stanford University and University of Chicago researchers.
Active startups in the Philippines have increased to 700 from just 100 in 2015, according to a May 2023 report by the Asian Development Bank.
Mr. Gonzalez said making difficult conversations from the start is crucial. “When venture capitalists see co-founders that split equity equally, they know instinctively that this co-founding team is not able to have those tough conversations.”
A 50-50 scenario does not exist, he added.
“It might seem equal today but as the business pivots, as life gets in the way, your contributions might get imbalanced,” he said.
Deferring a difficult conversation is a sign that the team is not mature enough to handle problems. It also leads to a sense of unfairness down the line.
“That’s why there isn’t really a spotlight on people issues,” Mr. Gonzales said. “It starts very small, so small, it doesn’t even feel worth having a tough conversation over — but then it snowballs and gets really big.”
Poor decision-making and prioritization, hiring and retaining talent and a reluctance to make tough decisions on team members are the other people problems that risk a startup’s success.
The Effective Founders Project found that minimizing unnecessary micromanagement and inviting disagreements could help overcome the risk of failure.
A disagreement among diverse teams leads to more effective outcomes, Mr. Gonzalez said.
He said a way to create quality disagreements is to elevate straw man arguments — an argument that distorts an opposing stance to make it easier to attack — into “strongman” ones, where an opposing point of view is represented in a way that satisfies the opponent.
And while it’s a good strategy to support junior staff closely, it’s also important to give them more autonomy over time.
A hack in micromanagement is when the focus is narrowed but space is provided within the framework. “The best work is done when people are clear about the goal and then you let them control the work and figure out the way forward.”