Startups Fail Because Founders Are "Monsters"

Jerry Colonna, a successful VC, who turned into an acclaimed coach for the founders and a compelling speaker on topics ranging from leadership to starting businesses, very aptly calls his blog “The Monster in Your Head”. Very few terms or expressions could be so curtly precise and boldly naked in its realism.

Having been associated with two startups in the past one decade, with not so enticing and grandiose experience, and having taken the plunge once more – the third one –, I’ve been quite bothered about what all could again go miserably wrong. Failures are no doubt the pillars of success, but a monument of only pillars of various forms and styles wouldn’t be an interesting thing either. So I was trying to do some introspection, not as much to discover the Holy Grail, in the form of another startup, as to douse my basic curiosity about the reasons behind the failure of a startup.

A cursory Google search yielded a lot of material, in various forms, highlighting top five, ten and 20 reasons behind the failures of startups, backed by numerous surveys and credible post mortems. More often than not, the top reasons were similar: No Market Need, Running out of Cash, Not the Right Team, Get Outnumbered, Cost Issues, Poor Conduct, Lacking Business Model, Poor Marketing, Ignoring Customers, Product Being Mistimed, etc. One of the articles even accounts for the probability of each of these to be the main reason behind a failed startup. It says “No Market Need” is likely to cause the failure in 42% cases, and that “Running out of Cash” in 29%.

One very pertinent question came to my mind. When I’m the founder, I myself having done the market study sometime back, and now if suddenly it’s so that my idea or product doesn’t seem to have any market need, then who’s to be blamed for this? I remembered an incident from my previous startup. If I’ve to talk about it in terms of a more generic analogy, it’s something like this:

I’m an ice candy seller. I sell candies to the kids of a particular neighborhood. I personally know the rich parents of one particular naughty kid who buys the most candies. The kid has a disproportionate appetite for candies and she buys them from multiple candy sellers. One fine day I coax her rich parents into buying all the candies from me. I assure them I won’t sell to any other kid and that she should get all her candies only from me. For some time I have a peaceful life, taking all my candies to one house and selling all of them in one shot. In doing so, I ignore the other kids. Then one fine day, she suddenly catches cold and her parents return all the candies to me. Neither would any other kid buy a single candy from me, as they have started hating me. So suddenly I’ve no market for my products. Eventually I have to wrap up my business.

So in this case, the reason behind the failure of my business is indeed “No Market Need”. But if I ask myself the question, “Why No Market Need?”, then what would be the answer? It’s not that I didn’t know selling my candies to only one kid was the most stupid thing to do – all eggs in the same basket is a well-known cliché. But then, why did I do that? I may be in a state of denial, but the reality is, I did so because I have been a stubborn, headstrong, control freak and arrogant person who have lost his basic wisdom. So a single “why” points to a totally different reason for the failure.

Not only this, the same “why” would eventually lead to different reasons which would all point to me.

Why did my venture run out of cash? Because, my candies were not selling and my revenue dipped suddenly.

Why didn’t my venture have the right team? Because I was arrogant, stubborn and didn’t listen to anyone in my team, thus making the team indeed a defunct and useless one.

Why did my venture have cost issues? Because I myself did the bad math…

So, whenever a startup fails, it’s always because of a monster in the minds of the founders, which has manifested itself in various forms, as rightly pointed out by Tom Eisenmann in an article titled “Ego & Startup Failure”.

It’s essential to know about this monster that’s in the head.

Eminent psychologist and a Professor of leadership development and organizational change at INSEAD, Manfred F.R. Kets de Vries, says, “Entrepreneurs can have personality quirks that make them hard people to work with.” He adds, “Moreover, some entrepreneurs I have known have had great difficulty taking direction.” In an article he quotes Derek F. du Toit, from the latter’s book Confessions of a Successful Entrepreneur, “The entrepreneur who starts his own business generally does so because he is a difficult employee. He does not take kindly to suggestions or orders from other people and aspires most of all to run his own shop… The biggest burden a growing company faces is having a full-blooded entrepreneur as its owner.”

In the book The Accidental Billionaires, the fictional version of the story behind the founding of Facebook, the author Ben Mezrich makes it very explicit the main motivation Mark Zuckerberg had behind creating The FaceMash, the precursor of Facebook, while he was a student in Harvard. Mark’s social awkwardness and the series of rejections from girls had dragged his self-esteem to a nadir. Even his closest friend Eduardo, later a co-founder of Facebook, had more access to “hot girls”, the deprivation of what had impelled him to hack “The Kirkland housing facebook—all of the school’s facebooks, as their databases of student photos were known” and create a website where anyone could compare the picture of two girls and say who was “hotter”.

Referring to the founding of Facebook, Ben rightly quotes Honoré de Balzac, the French novelist and playwright: Behind every great fortune, there lies a great crime. Psychologist Manfred paraphrases the same thought in a little different way. He says most founders resort to entrepreneurship not because of any noble idea or thought, but because they can’t get along with anything better, and more diabolically, perhaps to hide their inferiority, their deprivation, their inability to do something better somewhere else in life. So in most cases the founders act out of desperation, to prove to the world that they can’t be ignored anymore. In the melee, the means of achieving something often become unimportant to them. “What” they do becomes more important than “How” they do. Their inferiority complex manifests in the form of arrogance and apparent superiority complex. They become control freaks. They can’t trust anyone. They start showing traits of excuse-making, predatory aggressiveness, deceit, emotional instability, and narcissism – the five attributes of a Bad Founder DNA. That breaks down everything, eventually. The situation is even more disastrous if the founders are not as intelligent and smart as Mark Zuckerberg, Larry Page and Steve Jobs.

There are many examples of the Bad Founder DNA.

Douglas Edwards, the 59th employee of Google, in his widely read book I’m Feeling Lucky talks of an incident about Larry Page, a co-founder of Google. In July 2001, when he was only 28, he announced before the entire Google work force that he was sacking all the Project Managers as he felt they had limited technological knowledge and hence were not fit for supervising engineers. Of course Page was not allowed to have his way. Wisdom prevailed among the investors and they “tamed” the unruly Page. In August Eric Schmidt became the CEO of Google as the adult supervisor for Page and Brin, the two co-founders of Google.

In the above example Page showed signs of

Excuse Making or rather Fundamental Attribution Error – he attributed the reason for the behavior of his project managers not to the prevailing circumstance, but to his preconceived notion that they were all useless, incompetent.

Predatory Aggressiveness and Narcissism – he considered himself superior to the rest of the people at Google, especially the Project Managers; he viewed all of them as inferior creatures and hence his rightful prey.

Steve Jobs too was known for his arrogance and recklessness, most of which were finally manifestations of some psychological disorders, mostly related to inferiority complex and deprivations from the past. Nicholas Carlson, Editor-in-Chief of INSIDER and the author of Marissa Mayer and the Fight To Save Yahoo!, says, “Apple’s board and investors were absolutely right to fire Jobs. Early in his career, he was petulant, mean, and destructive. Only by leaving Apple, humbling himself, and finding a second success – with Pixar – was he able to mature into the leader who would return to Apple and build it into the world’s most valuable company... Larry Page is the Steve Jobs of Google.”

The same goes for Rahul Yadav, the young and reckless CEO of Housing.com, and Travis Kalanick, the tainted CEO of Uber, both of whom had to be “tamed” by the board. But in many cases, such detrimental founders are allowed to continue, thus bringing in sad endings to the glorious startup tales.

Going by the saying, Jo jeeta wohi Sikander, He who wins is the Alexander, we rarely hear stories about the founders or CEOs who have actually failed their companies. If Uber shuts down now, and of which there’s a big possibility, given the number of laws that have been tweaked by its founder, no one will ever read anything of Travis Kalanick. Any kid who would be born now may not ever hear about Nokia or BlackBerry or Webvan or Secret or Stayzilla or Kingfisher Airlines or so many other very high profiles companies started by equally high profile founders and which all have eventually had pathetic demises, thanks to their founders’ temperament, arrogance, shortsightedness, lust for power and narcissism. To use the words of the American historian and an eminent nineteenth century Harvard graduate Henry Adams, their arrogance and narcissism had made them “less adept at seeing things from other people’s point of view”. Otherwise there’s no reason why those at the helm of power at BlackBerry and Nokia totally failed to see that their phones were getting totally obsolete, those running Webvan – one of the most fabled dotcom disasters of the nineties – totally misunderstood their customers and those at Secret, Stayzilla and Kingfisher Airlines believed they would get along with bending the law – after all, law is not football and they were no Beckhams.

There are many psychological analysis of why founders often lose common wisdom, but I felt two verses from the Bhagavad Gita, an ancient Indian treatise on common sense wisdom and spirituality, capture it very well. The verses 62-62 of the second chapter of the book says, “While contemplating the objects of the senses, a person develops attachment for them, and from such attachment lust develops, and from lust anger arises. From anger, delusion arises, and from delusion bewilderment of memory. When memory is bewildered, intelligence is lost…”

Going by the observations made by many psychologists, the Bad Founder DNA is something which impacts all founders. The only difference between Bad and Good founders is that the “monsters” in the heads of the latter have been tamed, and that they all have gone through a phase of grounding. We hear about the founders, only when they have been grounded. It’s this second innings of these founders, whether Jobs or Page, which is apotheosized, or glorified into a fable. Hitler never got the second innings, so didn’t Germany, till he was alive. Neither did the founders of the failed companies.

We should take inspiration from the second innings.

I was a part of a startup where I witnessed many typical traits of Bad Founder DNA. An elder co-founder of the startup, having had a disgraceful exit from a big business house owing to his interpersonal skills and arrogance, had to prove a point to his ex-colleagues. Hence form the beginning, as a co-founder in the startup, he suffered from the insecurity that if he failed again, his reputation would be at stake and that he wouldn’t get a chance to vindicate his ways which had brought him at loggerheads with his ex-colleagues. His frustration arose from the fact that despite being technically very sound, a strong and reputable SME, Subject Matter Expert, in his field, he had been left behind in his previous organization, just because he didn’t get along well with almost anyone.

The younger co-founder of the same startup, a very hard working and passionate person coming from a very humble background, had had a very disrespectful tenure in his previous organization, where his narcissistic boss would treat him like a doormat. He too had a dying zeal to raise his self-respect and put a balm on his past disgraces.

Professor Manfred says such founders come in two varieties. One is ambivalent – irresolute, weak-willed, indecisive and wavering –, and the other is obstinate – control freak, headstrong and arrogant. In this case, the younger co-founder turned out to be ambivalent and the elder one obstinate. And both showed typical traits of Bad Founder DNA.

Excuse Making / Fundamental Attribute Error: Being fickle minded and indecisive, the ambivalent one would always abstain from taking a stand and always depend on the obstinate one to do so. Being suspicious of everyone, and more perhaps insecure of losing control, he would rarely involve his team in anything. But he would always claim all the credits for anything good and blame the failures or goofups on the inefficiencies of others, whatever the circumstance.

The obstinate one would even create hypothetical scenarios of failures and attribute those to anyone around. He once ridiculed someone for not setting up an important client meeting on a Thursday, his lucky day, and attributing any future mishaps with that client to the one who had set up the meeting.

Predatory Aggressiveness: The obstinate one would call everyone an ass in front of all. He felt no one was competent enough to do anything. He didn’t trust anyone and wanted to interfere into everything, from deciding the menu at a company dinner to the auspicious day a senior director should join the company. He didn’t show any respect to anyone and would humiliate everyone for no reason. When I confronted him he said, “I’ve all right to humiliate anyone, because without that no one would work.” People would feel so dejected and low esteemed after talking to him that they started avoiding him. He wouldn’t even spare his co-founders, one of whom started coming to office only when he would be out. “I don’t want to see his face,” said the co-founder. “My day is ruined if I see him.”

The ambivalent one, on the other hand, would try to hide his inferior and very humble background with deceitful stories of success. He would try to emulate his obstinate partner and show disrespect to others. He would often speak very abusively and uncouthly about almost everyone, in an apparent attempt to thrust his superiority on others.

Deceit: Both the ambivalent and the obstinate ones wanted to deceive the employees by forcing them to sign wrongful bonds. They both showed scant regards for ethics and legalities. The ambivalent one would resort to deceit more than the other, both with the clients and employees alike.

Ad guru Sir John Hegarty, in a recent interview to the Times of India said, “Deception isn't a great way to develop a brand.” Talking about brand building, he adds, “We seem to believe that the answer to our problem is to deceive people, pretend we are doing something we are not doing... A lot of work done today is deceptive…”

When founders deceive their own people they are actually doing immense harm to the brand they have founded. It’s like doing a same side in football parlance.

Narcissism: It would be always “I” and never “WE” for either of them. The obstinate one would hold himself so highly that he would go around saying, “It’s MY company; I am the BOSS; I alone have created everything; I don’t care for anyone.” Even when people started quitting, he wouldn’t come down from the pedestal he had put himself on and try to retain them. Rather, he would shout at them saying, “How dare you even think of leaving me? Do you know how stupid you are?”

The narcissism of the ambivalent one would stem out from his core belief that if he had partnered with someone like the other co-founder, the obstinate one, with such technical credibility and reputation in the industry as an SME, he was perhaps in a different league altogether. Referring to his partner, he would often say, “If I have HIM, what else should I care for?”

The topic of narcissism and “I”, reminds me of an off-beat Bengali song sung by Lata Mangeshkar and brilliantly written and composed by Salil Chowdhury says, “Now that I’ve removed the “I” from me, I’ve added so much new to my life.”

The most visible aspects of the Bad Founder DNA are the founders’ utter distrust on anyone and the power mania for controlling almost everything. Psychologist Manfred says, “When a strong sense of distrust assisted by a need for control takes over, the consequences for the organization are serious: sycophants set the tone, people stop acting independently, and political gamesman-ship is rampant.” What made things even more disastrous for the startup was the fact that, over the months, the ambivalent one became a sycophant of the other. It was the icing on the cake.

The latest issue of The Atlantic has an article on how power can cause brain damage. It quotes the historian Henry Adams describing power as “a sort of tumor that ends by killing the victim’s sympathies”. Most of the behavior of a “Bad Founder” can be seen as his lack of sympathy, which is a result of his acquiring the position of power. Had Larry Page been sympathetic to his employees he wouldn’t have humiliated them in an open meeting where he announced the sacking of all his project managers. If the co-founder of the startup I’ve been a part of had been sympathetic he wouldn’t have felt he had the authority to humiliate his employees to make them work.

The same article in The Atlantic refers to Hubris Syndrome, which is “a disorder of the possession of power, particularly power which has been associated with overwhelming success”. The article goes on elaborating some of the common symptoms of Hubris Syndrome as contempt for others, loss of contact with reality and restless or reckless actions. These are exactly the symptoms most founders suffer from, especially after some initial success. The same has been the case with the two co-founders I’ve talked about.

In such a case, the only way to save the company or startup is to do what the board did to Larry Page or Steve Jobs at Google and Apple. But the good thing about both of them is that when they returned, they were more confident and grounded and less arrogant and reckless. In other words, the monsters in their heads were tamed. They had been young, smart ass founders, and when they returned, they were leaders.

Speaking of the need to be grounded, Indra Nooyi, the CEO of PepsiCo often refers to an incident from 2001whe she was inducted into the board of PepsiCo. The day she got to know it, she returned home, basking in the glory of the achievement and with a feeling of importance. But even before she could divulge the big news, her mother asked her to get milk. When she got the milk, her mother is said to have told her nonchalantly, “Keep that damn thing in the garage.”

Perhaps that’s the reason she didn’t have to be ever kicked out for a grounding experience.

Founders need to be grounded. Most of them need psychological counselling. Sadly, not many would even accept that they are suffering from so many critical psychological disorders, that they have monsters in their heads.

We may tolerate monstrous founders to found a company. But we surely need grounded leaders to run the company.

It’s not necessary a founder should also be a leader. If that’s not so, the board should get hold of a strong leader, like what the board at Google did when they got Eric Schmidt as the CEO of Google.

Founding is creation and any creation needs disruption. In the Indian philosophy there’s the concept of three stages of anything: Creation, Sustenance and Destruction and there are three different Gods for each stage. A founder is both Creator and Destructor, with monsters in her head. But then you need someone to sustain also. That’s the leader.