Now the company is also facing
the number one reason startups fail.
How can founders avoid the death spiral?
A founder’s role is, or at least should be, to continually focus on what actually drives success – creativity, insight, fearlessness, and leadership.
The role of ops people is to create a self-sustaining environment in which founders have the mental ease and time to focus on innovation and new opportunities. For us ops nerds, our joy comes from what bores most people to death: operational innovations.
Operations are a secondary consideration in the world of early-to-mid stage startups because ops don’t drive early success, they merely protect it. Operational weakness, though, is the second most common reason startups fail. The top two reasons why 80% of all startups fail in the first five years are:
1. A product for which there is an insufficient market.
2. Inability to survive the challenges of growth.
An early stage startup can substantially increase the odds of uninterrupted growth if it takes basic ops steps when it hires its 8th or 9th employee.
Mid-stage companies actually face life-threatening challenges from weak operations, particularly if they didn’t take those basic steps. In the middle of rapid growth they cannot scale and must quickly evolve their operations without disrupting growth or ongoing client services, all the while generating enough excess cash flow to fund those efforts.
Now the founder is forced to focus on protecting previous success rather than driving future growth and the company isn’t facing just the number two cause of failure, its also facing the number one. With the founder and leadership focused on survival, two things happen:
1. Product development starts to lag behind evolving market demands; and
2. Competitors have a chance to box you out of the market.
You either play catch up or you have to pivot. The challenges increase exponentially. This is where startups get pulled in the death spiral.
Founders shouldn’t be the ones sweating the boring stuff, continued success demands their full attention.
