Human signals that a startup is failing — a guide for people on the ground

Sharlene McKinnon
Feb 14 · 6 min read
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Photo by Matthew Henry from Burst

One friend once said to me: “working for a startup is like flipping a coin into the air and waiting breathlessly to see how it lands.”

There is a moment when the coin spins and you don’t know what is going to happen next. At this moment, the fate of the company is preparing to show itself. When it lands, it can reveal greatness or a colossal failure.

During the moment of flipping, people rush around desperately trying to make the company work, all while holding their breath for the outcome.

I don’t believe you have to wait. After working with a handful of startups, I’ve come to recognize some key human signals that predict what this coin will reveal.

These aren’t the financial or market signals (there are plenty of posts out there about this), these are human signals, which often get overlooked or chalked up to “culture.”

#1 — People Start to Leave in Droves

What this indicates: The people no longer believe.

That thing that attracted people to a startup has become lost, and the folks on the ground are no longer able to find it. And, without a light to guide them during chaotic and challenging times, people burn out.

Unfortunately, a company cannot succeed without its people. This statement is especially true when your best people and biggest believers leave. These are the champions that guide everyone else towards the light.

If your most passionate “believers” see something that scares them enough to leave, the market will notice. At this point, it’s time to open your eyes and take stock of what is happening because it’s the beginning of a downward spiral.

#2 — The Motivational-Marketing-Machine is on Overdrive

What this indicates: the company is working hard to convince people to stay.

Let’s face it. A company that is fun, exciting, doing well, has excellent leadership and a reliable, profitable direction doesn’t need a motivational-marketing-machine to tell you that it is an awesome place to work. You know it in your bones!

Unfortunately, when you get mired down by the day-to-day chaos of working in a startup, you lose sight of this. But, when you feel something is wrong and start to drift, the motivational-marketing-machine jumps into action to gaslight you.

A motivational-marketing-machine is not a department. It is people in a variety of different roles (management, HR, sales, leadership) that see it as their job to control internal messaging, so it is positive and motivational.

They say things like, “it’s supposed to be crazy, it’s a start-up.” And, “just think of the potential to do great things.”

This messaging is unnecessary because we, as humans, are all very good at countering fears with hope; it’s a survival mechanism. When hope starts to fade, it’s your body’s way of telling you that it’s time to listen. And, if the motivational-marketing-machine kicks in to continually pull you away from your own internal messaging, it will lead to a break down of your mental support mechanisms.

Always remember: a good company does not need to convince you that they are a good company!

#3 — Silence Becomes Prevalent

What this indicates: people are struggling with the reality of what is happening.

In consulting, when silence happens, it generally means that managers have “need-to-know” information that you don’t have, and they are struggling to process this information.

In a startup, silence indicates the same thing.

The higher up the food chain the silence goes tells you the gravity of the situation. When silence comes from executives, the company is in trouble, and they are looking for the funding needed to keep the company afloat.

When the humans on the ground become silent, it means they are looking for new employment options because they no longer believe (see #1).

#4 — People are Constantly Running in Circles

What this indicates: there are too many people or too many people with the wrong skillsets.

People running in all directions is worrisome because it creates unnecessary noise that distracts from what is truly important: achieving product-market-fit, growing a sustainable company, or generating revenue.

There are periods in a company’s lifecycle when you need to grow to achieve goals. And there are periods in a company’s lifecycle where you need to evolve roles and trim back to reduce unnecessary noise.

When you’ve hired too many people with the wrong skill set, especially if they are bright and motivated, they will create unnecessary work and run in any direction to show their value.

It becomes a bigger problem when people don’t understand the vision or direction. Brilliant people will find direction, and it’s likely at odds with the rest of the company.

Unfortunately, at some point, that brilliant light burns out as people realize that they’ve been running at nothing. This is the moment when people become disenchanted, know they are underutilized, and leave (see #1).

#5 — No One Understands the Mission

What this indicates: the company is trying to achieve too much, and the original mission is lost in the chaos.

One of the critical things a startup needs to achieve is product-market-fit. If they are unable to do this, the company will fail because it has no means to generate revenue.

If a startup is unable to find product-market-fit or adapt its mission to achieve product-market-fit, they try a scattershot approach. They shoot at the tree with everything they have and hope that something profitable falls out.

In reality, this is no way to run a business. In the beginning, you need to focus on one thing until you have the necessary revenue stream to support the folks on the ground. And, you grow, expand and evolve from this point.

This one thing is your mission.

Without a clear or attainable mission, you will not be able to attract or retain those things that are necessary for the survival of a startup: talent, investors, and customers.

#6 — Financials are Shrouded in Secrecy

What this indicates: the financial reality of the situation is serious.

If you want to see what is happening in a company, follow the money. And, if financials are shrouded in secrecy, it means that the company has something to obscure.

This secrecy includes obscuring information about fundraising, stock options, burn rate, revenues, and debts. In a worst-case scenario, company leaders don’t even have this information!

It’s human nature to want to hide bad news instead of face reality. Transparency is difficult. At one company I worked for, I exercised my options in what I thought was a strangely manual process.

This company quickly took the money but hid information related to these options. It was a head-scratcher, but I think this was because the options were underwater and the company in financial trouble. And, if they tell you this, you won’t invest!

Can a Startup Bounce Back?

It depends on the courage of leaders who have the power to make changes decisively. If they can be honest, make hard choices, and address many of the issues above, then there is hope.

If they cannot resolve the peopling issues quickly (all paths lead to #1), then the answer is no, and it’s time to be one of the people exiting the company.

Why? Because without talent, it’s tough to quickly execute on a mission. And, if you can’t execute, the company will fail.

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Sharlene McKinnon

Written by

Geek. Multiplier. Leader & Mentor. Digital Humanities. I work at the intersection between humans + technology.

The Startup

Medium's largest active publication, followed by +668K people. Follow to join our community.

Sharlene McKinnon

Written by

Geek. Multiplier. Leader & Mentor. Digital Humanities. I work at the intersection between humans + technology.

The Startup

Medium's largest active publication, followed by +668K people. Follow to join our community.

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