Dec 16 2021

Top 3 Mistakes Later Stage Founders Make

Last week, I blogged a podcast riff I did about the biggest mistakes early stage founders make and what to do about them. Here’s a summary of part 2 of what I said about later stage founders.

  1. Misreading Product/Market Fit or a lack of Product/Market Fit. Misread it high, and founders end up dumping money into sales and marketing too soon. Misread it too low, and you can fire a good sales or marketing team when it’s not their fault!

    On the high side, Product/Market Fit isn’t just coming from a healthy CAC/LTV ratio or by good early adoption. Early adoption can come from a small group of Visionaries (here I’m channeling Geoffrey Moore’s Technology Adoption Lifecycle curve from Crossing the Chasm), so understanding how extensible your early adopter crowd is — and how easy it will be to reach the next batch of customers and the next batch and the next batch — can be costly to get wrong. The opposite is also true. It’s easy to get caught up in a wave of enthusiasm around early Product/Market Fit and then determine that a slowdown in sales is a sales problem, when in fact, you either didn’t have true Product/Market Fit beyond visionaries in the first place…or maybe you had it, but the market changed over time, and it slipped away. Product could easily be the culprit here, not Sales or Marketing. You have to constantly go back and re-test your assumptions and lean canvas with the market as products mature and more substitutes and competitors are available.
  2. Throwing people at problems. It’s so easy to do this. Building automation, designing new business processes, and implementing new — or worse, changed over — systems are hard, expensive, and time consuming. So yes, sometimes it makes sense to just hire that extra person or two in something like account management or accounts receivable/collections instead of investing in process. But do too much of that, and you will drown in your cost structure.

    Founders have to learn to embrace the tear-down. Remember, you’re an entrepreneur. You’re creative. You like to invent things and disrupt things. That includes things you yourself built! Better to tear down an existing process or system and replace it with something quantum leaps more efficient for scale than to throw people at problems.
  3. Believing that they and they alone must continue to drive their culture forward. Cultures are truly hard to scale.

    But there’s a trick to scaling them. The trick is to stop doing the work yourself, and partner with your HR/People team to build your cultural touchpoints (values, artifacts, etc.) throughout your employee lifecycle so that everyone in the company (NOT just HR/People) becomes a cultural steward. Recruit and interview against your values. Onboard people with founder sessions on values and culture. Bake those things into performance management and compensation.

I’m sure there are so many other top mistakes for later stage CEOs/founders. What are the ones you’ve encountered?