Floundering, Foundering Founders

Dr. Earl R. Smith II, PhD

(Read More From My Blog)

Now, there’s a mouthful for you. Try saying it five times fast. This tin tin tabulation of a tongue twister is less a game piece than a door to understanding a fundamental lesson that many entrepreneurs completely skip over – at the peril of their company, customers, employees and personal interests. Its the first fundamental fissure (sorry, couldn’t resist) that opens up and swallows many start-ups. Perhaps three brief stories will set the stage.

Company #1 – Everybody Gets In

This story starts in a dorm room. The founder came up with a very good idea for a company and discussed it with his roommate and two guys in the room down the hall. After kicking ideas around, our founder decided to launch a company. Then came the misstep. You see, he distributed equity – substantial amounts of it – to the other three guys in the room. And it was worse than that. The equity was vested immediately and without any performance metrics attached. In other words,they got substantial interest in the company just by being in the room at the time. The worst of it was that one of the guys who got shares was the founder’s future ex-brother in law!

Company #2 – The ‘Idea’ Gets It All

This founder took a different approach. She was an ‘idea’ person. Her elevator speech was very clear. She was terrible at implementing but, according to her, a veritable dynamo when it came to generating good ideas. This founder was mother to a string of start-ups all of which had, more or less, the same characteristic, history and eventual fate. None of the team members got any equity – even in the form of earn in opportunities. The teams that she formed were made up of people who would not force the question of participation. The companies were financially starved because she would not consider ‘giving away’ equity for inward investment. And they were all failures – went out of business before their second anniversary.

Company Three – Let’s Not Talk About It

There once were three very different people who decided to form a company. One was an engineer. The second was a salesman. The third was a banker. This odd trio shared a common passion for one of the splinter sports – it doesn’t matter which one. They had been friends for years prior to launching themselves and dreams onto the sea of entrepreneurialism. The organizational chart which was produced early on was predictable. Roles were assigned based on logical (read assumed) capabilities. Pressure grew as two of the team members consistently fell short of delivering. The company eventually imploded and the resulting lawsuits bankrupted two of the ‘friends’ and left the third with a crippling debt-ridden company that eventually went out of business.

What knits all of these stories together is the underlying tendency of some founders to finesse basic issues – avoiding having the tough, adult conversations that are so critical to the success of a start-up. In each case, and in more others than I care to mention, the dynamic was the same. There was an underlying, if unspoken agreement. “I will not press these issues if you don’t.” In other words, by mutual agreement, a vital area was roped off as a ‘let’s not go there’ zone. I have a name for this syndrome. I call it the ‘I’ll buy your crap if you buy mine’ conspiracy. It has killed more companies than all the rest of the reasons combined.

OK, that may sound odd at first but follow me for a bit and the sun may come up. First a thesis. I believe that there is a fundamental foundation for this foundering – a limiting emotional immaturity mounted on a worldview that is entirely ‘me-centric’.

This emotional immaturity keeps the individuals involved from having adult conversations. Founders avoid such discussions because the only alternative they see is to avoiding is to confront them. There are two drives of this behavior. The first is a radical assumption of self-bad-faith founded on a deep seated insecurity. The second is a strongly held suspicion of insidious intent on the part of others. (The current political culture in Washington is a poster child for this confluence of adolescent stupidity.) The idea that mutually conflicting theses can combine via synthesis into a coherent, and mutually agreeable, new thesis is a non-starter here. That simple-minded formulation – purely repressed adolescence – is a major character flaw in much of the newer generations of founders.

Then there is the world view – ‘me-centric’. I often encounter founders who have yet to find a non-instrumental reason that there are other people on the planet. Many of these founders describe themselves as type-A (an old term that, mercifully, has morphed until the letter ‘A’ now refers to an anterior orifice). As a result, they are strongly antisocial and generally buy into the predictor-prey vision of the world – which is amusing, were it not so pathetic, because they are such little fish in such big ponds. To paraphrase Marcus Antonius, “predators should be made of sterner stuff.” In the end, their failure – the floundering and foundering – is driven by their faux predator behavior which turns, inevitably, on their own team.

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