Why Greece is Just a Startup Waiting to Fail
What Lessons Greece Should Learn From Successful Companies
What do Greece and a struggling startup have in common?
(1) Not a whole lot of cash, (2) problems to get its message across, (3) a lack of right talent (4) unwillingness to learn and (5) bad timing. Do you think I am reaching here? In fact, in one form or another, these are the most common reasons why startups fail.
Successful startups, however, are able to learn from these challenges and execute against them. Here are 5 key lessons Greece should observe.
1. Finance and metrics
In its first year the overarching strategy of a startup should be to survive. The Greek government has been in office for about half that time and despite heavy debt to outside investors has already made bold moves to roll back on austerity plans. This is perfectly fine as long as you have your financing metrics covered and alternative sources of income to run your business.
Successful startups understand their main growth and lifetime value metrics and are able to scale their organization effectively.
- Burn Rate: Staying on top of this metric is crucial and also important to investors. How much money do you spend every month and how long can you go before you run out of cash? This includes loans and their due date. If startups can learn to appreciate the criticality of this metric, so can the Greek government. Additionally, unlike startups, Greece doesn’t have the luxury of sweat equity but has to ensure timely payment of pensions and salaries.
- Qualified Pipeline Value: Successful startups don’t ignore pipeline metrics, or at the very least they understand if they will burn through their cash before breaking even or making a profit. If you have accounts receivable, collect them in time. Greece has fallen short in both keeping up with its pipeline and its receivables. At the end of 2014, Greeks owed their government about €76 billion ($86 billion) in unpaid taxes accrued over decades. Most of it has been lost to insolvency, and the rest has yet to be recovered.
- Average Revenue Per User (ARPU): We all know that some customers are more valuable than others, and smart startups go after high-value targets. Greece has so far missed out on the opportunity of going after massive white collar, high-income tax-evasion. An excellent research paper shows how “it is common practice among banks to use adaptation formulas to adjust clients’ reported income to the bank’s best estimate of true income”, in other words massively under-reporting ARPU.
2. Getting the message across
Sooner or later, investors will ask about your mission and vision: where do you go and how do you get there? Successful startups choose clear, concise words, communicate and act accordingly.
Greece chose to differ and bemused its creditors with flowery “founding principles and values of Europe, the values of our common European construction”, but failed to show how this supports its strategy at all. Richard Branson would agree.
3. The right talent
Investors want to be impressed with your startup’s management and dislike unbalanced teams.
- Don’t undervalue generalists: When you start out, fill the core technical skills, but you’ll need people who are able to put on different hats, empathize and see how their roles affect others.
- Don’t hire people like you: If you want to see someone like you, look in the mirror. A good startup develops through cross-pollination of different experiences and philosophies.
- Focus one step ahead: Every hire affects your corporate culture and future hires. No matter how talented or accomplished an individual, never hire an ego — they will do you more harm than good.
Greece could have learnt from successful startups and appointed a more balanced governmental team, comprising of different points of view. One, that instead of pointing fingers, is able to relate to public perception inside and outside its own borders to focus on the difficult task at hand.
4. Listen and learn
Responsible, effective listening is a rare skill. Great founding teams listen more than they talk and it can give them a sustainable, competitive advantage over others, because nobody learns anything hearing themselves speak. Willingness to learn, explore others’ ideas and suggestions helps you avoid mistakes and also shows investors that you are coachable as well as able to find a compromise.
Greece has so far failed to shine where great startups do. In particular Yanis Varoufakis, arguably an eloquent and gifted author and presenter. He often brilliantly vivified a common pan-European future, where noble gestures transcend national divides and lead to the greater good. Yet he also chose to display a flat learning curve when taking into consideration creditors’ needs and motives. He also loves hearing his own voice.
5. Bad timing
You can chalk this one up to (bad) luck, but there have been and always will be great startups that failed because they were ahead or (more obviously) behind their time.
However when you are under-performing on all other counts, such as Greece, and depend on outside investment just to make ends meet, great startups know its time to cut to the chase and pivot, before the runway ends.
In summary
Greece is facing challenges that (almost) every startup is familiar with. It should learn a few lessons from successful companies, who are not only able to measure their key metrics, but exactly know how to react accordingly and execute with poise and clear focus to get things done.
Do you disagree with Greece as a struggling startup? I’d love to hear your thoughts and comments, or follow me on Twitter @dkapitany and get a conversation going on: #greece.
