I noticed recently that series about tech company scales and fails are becoming almost as popular as real housewives, 90-day courtships and shows involving climbing over obstacles and eating insects.
Rather than demons with fangs and razor-blade hands, founders fall victim to investor demands, team mutinies, over-valuations, ego and overly-rapid scaling.
Every business boom has usually been followed by a slow collapse or total disaster of some kind.
As much as we as viewers love to watch success stories (e.g., the whopping box office success of Top Gun: Maverick), we are equally enamored by tales of titans who have taken steep falls (e.g., the classic Citizen Kane). Among the recent shows that serve as cautionary tales for startups are WeCrashed (WeWork), Super Pumped (Uber) and The Dropout (Theranos).
Tech experts say that we’re heading toward a tsunami of failures. We’ve already seen a number of companies lay off significant numbers of people. On the bright side, that may give rise to even more shows for us to stream on Netflix.
But, if you’re a founder, you might want to heed some of the lessons. Just like the babysitter in a horror film should know by now not to venture into that dark basement, today’s startup CEOs can watch and learn from the “horrors” that came before them. Among the common threads that seem to lead to metaphorical bloodshed at tech startups are:
1. Immature and inexperienced CEOs: These leaders may be more driven by ego and success. They often hire others like themselves rather than seasoned business pros.
2. No sense of the competition: I once worked for a tech startup founder who proudly asserted, “We have no competition!” despite the fact that I had just returned from a trade show where six companies with virtually identical products were showcasing their solutions. That leads me to the next thread.
3. Mediocre or misinformed marketing: Many companies wait to hire a seasoned marketing professional, believing that sales can carry the business. But a lack of understanding of branding and product differentiation is bad marketing. Let’s face it: Tech is a commodity. Currently, just under 10,000 marketing technology (martech) solutions exist, according to numbers from Statista.
4. Little or no market research: How can you differentiate or promote a solution if you don’t really understand the needs and demographic profiles of your prospects?
5. Lack of professional product management and marketing function: Once you understand the needs of your audience, that person can champion product/service development and enhancements to meet those needs. Sometimes tech companies invest in elaborate bells and whistles that buyers don’t really use.
6. Falling back on freemium: When sales are down, tech companies may sometimes start giving away their product. Although 30-day trials are commonplace and make sense, once you stop charging for your technology, you devalue it and attract the wrong types of customers.
7. Lack of customer service (especially human): A true rarity today, live contact can go a long way in building brand loyalty.
8. Inexperienced/wrong talent in HR roles: Creating and building a sustainable and healthy culture takes a village. People issues are more complex than ever, due to remote work and lack of employee loyalty. The right (or wrong) people can make (or break) a company.
9. Hiring too fast: CEOs may believe that if they simply add more salespeople, they’ll move more products. They don’t allow time for onboarding and learning curves. Age bias is also a factor in many tech companies. They erroneously believe that younger workers are less expensive and more agile, although seasoned sales and marketing professionals possess years of quota-crushing expertise.
10. Toxic culture (see No. 1 and No. 8): If you don’t inspire your team and build trust, word will quickly get out, and then hiring becomes even more difficult. Your board and investors will rapidly lose trust. Your internal and external support base may dwindle. You may ultimately end up in a startup body bag.
So, although these shows about tech fails may make for great entertainment, you don’t want to wind up as the star of one of them in real life. If you’re launching a company, pay close attention to the 10 signs that could indicate a bogeyman (or bogeywoman) lurking at your doorstep.