7 Near-Death Experiences Your Venture Will Face Before Its 2nd Birthday

Forewarned is forearmed.

If by reading the headline you thought: “We’re different, these things won’t happen to us”, that’s hope talking and it’s time to stop kidding yourself.

1. A key team member will leave unexpectedly

This will be a dark day whether you see it coming or not. And the darkness will be dialled up if the person leaving carries a disproportionate load of one discipline in the company.

The common story here is the CTO moving on and leaving the non-technical co-founder(s) flailing. The same is also true if the business development founder leaves and all that remains is the technical lead.

Speaking from experience, the stress on the day this happens (and days following) is immense.

What will the team think?

What will I tell investors?

What does that mean for traction? 😳 …

Here’s the good news; the age-old adage that “everyone is replaceable” is true. It may take weeks or months to make the replacement but it’s completely doable.

How to minimise fallout:

The immediate action is to negotiate a handover (if possible) and communicate the departure to the team as quickly as you can. Rumours help no one.

Step two is to maintain continuity of mission critical tech with other team members or freelancers until a replacement is found.

Then use this experience as a catalyst to get off your ass and level up your approach to talent. This includes having processes and procedures in place to central store code and other important intellectual property. And from the very, very beginning of each relationship at the company form an alliance with every team member including co-founders.

Proceed without individual alliances at your own peril.

2. Your runway will come within inches of ending

We’ve all been here. But the reality is that you should know months in advance if your burn rate will end in disaster.

However, if your runway is perilously close to ending you’ll need to think seriously about ‘putting everything on ice’ (read: letting your team go) while you get the house in order.

This option will keep you awake at night because you’re responsible for feeding team members and their families. It’s also an option because there will be alternatives like bridge finance from investors, bringing on new investors or on-boarding new customers.

Your mission is to keep the lights on. If that unfortunately means the team needs to move on and the founders need to get paid work elsewhere while continuing to build the company, that’s also an option.

This conundrum is universal to business and it’s tough but rest assured, it won’t happen once, it’ll happen a number of times.

How to minimise fallout:

No one likes surprises in business so maintain regular, high-candour communications with you team and investors about traction and runway. And ensure this is a conversation. It’s essential that founders understand and respond to the concerns of team members, even if they don’t have all the answers.

It’s also important to remember that team members will be trusting founders to navigate through adversity. If it comes to moving team members on, founders should take a leading role in creating conversations and opportunities for each team members’ next play.

3. A cornerstone customer will cancel their contract

This is a bitter blow. This might also feel at the time like it’s game over.

As difficult as it might be, do whatever it takes to understand the dynamic that led to the customer’s decision and what role your team played and could have played differently.

How to minimise fallout:

  1. Rush to understand and document the learnings from engaging with the customer. This includes each milestone that was achieved and each issue that may have led to contract cancellation
  2. Feed ☝ knowledge straight into product and business development team members to help fine-tune the proposition
  3. Try to renegotiate different terms as a means to recover the contract
  4. Report this event to shareholders with a plan to navigate through the uncertainty which they can weigh in on and evolve with you — they are there to help.

4. Key infrastructure that supports your product(s) will fail

It’s bad enough when your website or service goes down. You shouldn’t be left to find out about it from a user.

Always be on the front foot and set up alerts for each online product that you use so you can be ready to proactively reach out to users when the shit hits the fan.

Don’t pretend they won’t notice. They will.

This is as simple as following the support twitter accounts of services you use and making sure notification alerts are turned on (e.g SquareSpace Help if you use them). You can then use insight from these alerts to drive your responses to users…

…or it might involve a service like StatusPage which helps you communicate updates on issues directly to people’s inboxes.

How to minimise fallout:

It’s pretty simple. Communicate proactively and consistently until the issue is resolved.

5. A competitor will appear (and freak out your team)

Competitors validate market opportunities. They also force marketplaces to become more efficient. These are the words of a rational person.

Try telling that to a fledgling team who are emotionally tied to their product, fatigued by working 100-hour weeks and who think they are the first to see and capitalise on an opportunity.

This happened at AirShr as we designed a bluetooth button for an in-car use case. When news broke about the Amazon dash button (below) our email went nuts.

The majority of emails included a link to a press release from people who developed an instant anxiety about AirShr’s future due to Amazon’s new product.

As we moved beyond the headline and image and read the press release, it became clear that there wasn’t a overlap.

How to minimise fallout:

Determine if there is in fact competition.

  • IF competition equals no, THEN keep pursuing the vision.
  • IF competition equals yes, THEN keep pursuing the vision.

There is next to zero chance that your company is an isolated first-mover and even if you are, expect competition because it’s already on its way.

And before you think there’s a typo in the second IF THEN statement, remember that copying another company’s value proposition will, at best, result in price-based competition and that rarely ends well.

6. Pursuing ‘interesting scale opportunities’ will compromise the core product

Distraction kills. This is as true for texting while driving as it is when building a company. Founders of early stage ventures are exposed to countless suggestions that promise the discovery of product / market fit and scale.

Without a discipline to design, deploy and assess experiments that drive this discovery, valuable time and resources get chewed up, often with very little return on investment. And before long, the core thesis and product gets neglected in favour of ‘interesting opportunities’ to grow.

Less about minimising fallout, more about focus from the outset:

  1. Remind your team to continually ask: ‘Does this activity help us validate [insert core hypothesis]’. If the answer is NO, kill it and move on.
  2. Monitor metrics that reveal the true health of your core product. These aren’t measures only accessible by running a database query that focus only on cohort size or active usage. They are metrics that are one click away and show breadth and depth of revenue, engagement and growth over time.
  3. Share the initiatives you’re pursuing with advisors as a sense-check and listen to their feedback. Given their relationship with you they are likely to call you out on efforts that seem counter-productive.

7. Pivoting a business model will take longer than expected

To ‘pivot’ means to pursue a vision using an alternate strategy. This is simple to say and relies on founders having space to properly reflect on progress and assess pivot options.

The reality is very different.

Pivoting usually happens after the market has responded unfavourably to a version of the product. The almost taboo issue at play in these circumstances is that the organisation has been geared towards a specific strategy for many weeks, months and potentially years. Moving to a different strategy amidst a decreasing supply of capital, increased pressure to achieve traction and fatigue clouds clear decision-making.

The bottom line is that pivoting takes time.

How to minimise fallout:

Ask your team to embrace the idea of pivoting. Give them and yourself a few days to decompress and reflect away from the office. In the meantime, open conversations with advisors and investors to increase your perspective on the situation.

Although early stage investors and advisors don’t like surprises, there’s a good chance they’ve seen similar situations before. And don’t worry about asking for their perspective and support. They are also incentivised to help you navigate through tricky issues. Remember, you’re not expected to have all the answers all of the time, just most of the time 😉.


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