When Great Companies Self –Destruct

By Michal Tavrovsky, founder of JFE Network.

Last summer, there was a great startup that rushed into the San Francisco tech scene from Israel and everyone got super excited. Good technology, huge potential, super smart founders, you name it. One year ago, it seemed that everything was going for them. EVERYONE was excited and wanted to be a part of that company. Within 3 months they raised a good amount of VC money, tripled their team size, and amassed over 50 paying customers. And then the most unexpected happened. The company exploded and burned down almost as quickly as it flew to SF in the first place. Its two founders, who once were some of the smartest and creative people I knew, self-destructed within hours and turned out to be completely incompetent, immature, and unfit to run the company.

What was left of its one time greatness was a long trail of shocked and disappointed people. People it betrayed and left behind. People who worked hard to realize its vision. People who took a chance on the founders. People who put a lot of money and energy to make this company grow.

And perhaps, it wouldn’t have been so sad if it weren’t so stupid. If only those founders were a little more mature and had the understanding and desire to internalize these 3 vital concepts about running a startup

1. Prepare to make sacrifices.

I’m not just saying here (which I am saying here) that running a startup is a conscious decision to sacrifice for an indefinite amount of time a lot of important things like sleep, social life, and personal freedom. The real startup life is by no means fabulous. Everyone knows it, but not everyone truly understands it.

Many aspiring entrepreneurs, especially the ones in their 20s (like the guys in our story), just don’t get it and think that they will somehow be able to balance work, play, and everything else in their lives. It just doesn’t work that way. When founders don’t have a good understanding of what to expect when they are building a company, reality eventually catches up with them, usually unexpected, and founders often times start making wrong choices, destroy their mental and physical wellbeing, which in turn ruins their company.

If and when you do decide to plunge into startup life, make sure that you are truly and fully committed in this relationship with your startups and that you’ve got your priorities straight. It will then be much easier to not give a sh^*t and avoid FOMO issues when you’re not taking time off for Coachella or going on that romantic date because you’ve got more coding to do, or server problems to fix, or customer service emails to answer, or whatever else you might have to do, which is far more fabulous and exciting than everything else out there.

2. Always maintain accountability and control of your company.

As a founder you are responsible to your customers, your team, and your investors. You can’t just quit cold turkey or say that you don’t care because you got up on the wrong foot that day. Here are some of the common mistakes, which the company from our story made.

Its founders were young and they got very intimidated by a couple of their investors who were Silicon Valley veterans and of celebrity status. Those investors had their fun by getting very involved in the company’s day-to-day operations and telling the guys what to do and how to run their business. The founders did not find the strength to push back and say “no” to some of the very questionable decisions like complete rebranding of product and offering, downsizing the team size in half, and focusing on building new features as opposed to scaling their enterprise sales.

Founders not only lost control of their own company and made stupid business decisions, they also lost all traces of accountability and moral dignity. They hired a whole sales team and then fired them 2 weeks later and didn’t think twice about those people, their families, their expectations and dependencies on those paychecks, which were cut short. This incident paved the way to more irresponsible behavior and when the “right” time to hire came, it became harder to find the “right” people.

The founders were young and they prioritized personal relationships above the wellbeing of the company. They couldn’t say “no” to a friend who just wrecked his own company and was in the midst of planning his wedding. Instead they hired the guy and gave him a very high executive position. This created all kinds of internal problems. Other team members found it unfair, got really pissed, and some of the best ones quit. At the end, the job was not getting done. The new guy was not really doing anything. Everyone else (the few who were left) didn’t know what to do and didn’t care. It is absolutely crucial for a growing startup to have good team composition, dynamics, performance, and culture. One wrong hire can kill your startup. Execution is everything.

3. Kiss your ego goodbye and never see it again.

This is a big one. How do you deal with a situation when you are asked to step down as the CEO of the company you’ve built? Or how do you deal with not being able to “divorce” your co-founder who just blew half your bank on some stupid marketing gimmick and who you now hate with a passion? Or how do you deal with your employee/customer/lawyer telling you that you were wrong and you have to admit it to the whole company?

At the end it is the ultimate personal sacrifice where you have to put everything personal aside, and realize that you are no longer you by yourself. You are now synonymous with your company, with your team. You are part of its brand. You are part of its identity. And it’s not just about you anymore. It’s now about everyone else. It’s about people.

At the end, wouldn’t you rather have a small part of something big rather then all of nothing?

What was unfortunate in the case of the startup in this story, was that both founders had overinflated egos. They fought. They blamed each other. They blamed everyone else. They did not want to get help (which initially everyone, especially the investors offered). They burned out. They quit. Would they have thought a little more about other people, perhaps their company would still be alive.

4. Problem number 4 that nobody likes to talk about.

And just like in the case with this startup and many others there was a 4th problem, which might have been the most destructive of them all: Too Much Partying and Drugs.

Many founders who often times find themselves trapped with work and operating under heavy loads of pressure, revert to partying and drugs as a means to deal with their constant stress levels. It’s a big problem nobody likes to talk about and acknowledge.

I have seen way too many founders never recover from burning man/some other “spiritual” festival/retreat type event. Just as I have seen way too many founders that develop an addiction to stimulants, which help them stay up all night to code and stay focused (or so they think). It never ends well. I doubt, those statistics will ever get published. Drugs are a huge problem. Nobody talks about it. It destroys a lot of great minds. It’s very hard to succeed when your senses and perception of reality are blurred.

5. The sad ending to that banal story:  

The guys went back home to Israel. Their Silicon Valley careers are over and they might never get another chance to come back.

Here in San Francisco people have almost forgotten about them. It was the talk of a few weeks, but then that’s done with. We do not like losers here in SF and when bridges burn, all gates close. Silicon Valley tech community is small, much smaller than people think.

Everybody has moved on. Their former employees all found cool new jobs, because there is never a shortage of great opportunities for good coders and salespeople. Investors are doing just fine; it wasn’t their last money and other investments will make up for this loss. Their former customers will be fine because there are already dozens of other new startups that are filling the void. Whatever they invented a year ago and everyone thought to be disruptive, has already become overused, overdone, and oversaturated.

 

[author] [author_image timthumb='on']https://wordpress-124521-655132.cloudwaysapps.com/wp-content/uploads/2015/02/michal.jpg[/author_image] [author_info]Michal is the co-founder and COO of JFE Organization, founded in 2009, with the mission to accelerate entrepreneurship among Jewish and Israeli founders. She heads JFE Accelerator’s East Coast New York office and manages day to day operations. Michal is an entrepreneurial spirit who has successfully launched two non profits and an art gallery in Silicon Vally and expanded them to the East coast in under four years.[/author_info] [/author]