Why Some Founders Fail

Or why investors invest in people not ideas

It’s a common refrain in Silicon Valley: 90% of startups fail. Many companies that fail are building products that don’t really solve a problem for anyone (in Valley parlance it’s known as lacking product/market fit). People like to point those out.

But there’s another type of startup failure: lack of execution due to stupid founders. Yes, I said it. There are stupid people in the world. But you knew that. You just didn’t want to admit there were stupid founders. Admitting it somehow violates an unspoken mantra in entrepreneurship that you can label employees as A’s, B’s, and C’s, but you can never say the same about fellow founders.

The Unethical Kind of Stupid

Many of these stupid founders are downright unethical, which leads to their downfall. Over the last couple of years, I have seen accelerator companies (technically speaking some of the better startups out there) in programs like TechStars, YC, and 500 Startups, do some awful things.

Here’s a sample:

• A founder who turned over his investor’s money to his mom, who used it as her personal shopping account and quickly bankrupted the company.
• A founder who took his investor’s money and used it to buy an $80,000 luxury SUV…and hired a personal chef…and took helicopter lessons…and quickly bled the company dry.
• A founder who decided to take his investor’s money and spend a month on the beach.
• A founder who took his investor’s money and backpacked through Europe for the better part of a year.
• An entire founding team that decided regular trips to a South Pacific resort island counted as “corporate retreats.”

All of these were seed funded, accelerator companies that are now dead. The sampling above is just the tip of the iceberg that I feel comfortable sharing. The level of unethical behavior that I have seen extends beyond that covered in this list. It is mind-boggling. If you ever see anything like it, rest assured that company is doomed.

The Downright Dumb

But there’s also another kind of stupidity, a more quotidian stripe of ineptitude. I have seen countless founders that never follow up on my offers to be introduced to investors, strategic partners, possible hires, etc. Why? They simply forget.

Can you imagine missing life-changing opportunities because you forgot? Because you didn’t write it down? I see this all the time. (Pro tip: have a reliably consistent note-taking method. I never leave my house without my Moleskin pocket notebook and a pen.)

Life doesn’t give you many cracks in the door of opportunity, and it is people who recognize those moments and seize them to the fullest extent who end up winning the game of life. What day-to-day habits do you lack which could be inhibiting your ability to seize opportunities?

TL;DR

It’s easy to say a company failed because it didn’t find product/market fit before running out of money. However, next time you see a startup fail, recognize it may have had an amazing product with true, enormous potential. It just had stupid founders.