The Myth of Founder Fanfare and How to Live Up to the Madness
Empowering founders to succeed in a company that grows exponentially, even while their skills grow linearly
The frequently cited Start-Up Law of Physics says:
humans grow linearly, companies grow exponentially.
The Start-Up Law of Physics can be summarily stated to mean that humans generally cannot learn as fast they need to be able to keep up with the changing demands of a rapid growth start-up. It is widely publicised that the Start-Up Law of Physics doesn’t apply to founders. Founders are excluded on the basis of ethereal claims like “Founders are unique in [their] capacity for vision”. To be candid, in my respectful view, this is wrong. Let’s be honest, we are all human. Acknowledging this empowers founders to develop strategies for success as leaders of a company that grows exponentially, even while their skills grow linearly.
In a world where founder fanfare is ubiquitous, it’s hard to live up to expectations. One look at that websites of Australia’s best known VC funds will show you how funds hold founders out to be superhuman. EVP itself is backing “founders with the vision and tenacity to build ground breaking companies”. The pressure is on for founders.
That’s all good and well but chances are, if you’re a founder, you’re ‘just’ a smart, hard-working person with a vision, solid experience and truck load of grit. You’re probably not Bill Gates, at least not yet. VC funds publicly idolise founders because they want founders to want to work with them but no matter how exceptional you are (and some of them are EXCEPTIONAL) this is BS and after all, this is No BS VC. There isn’t a VC fund in the world that’s been around a while and hasn’t hired some number of professional CEOs over founders. So let’s cut the BS. This article acknowledges the reality of founder fanfare and gives some suggestions for how to live up to impossible expectations.
Our promise at EVP is to keep it real and work with you to give you and your business the best chance of personal, professional and financial success. We can only do this if we have open, honest and transparent communication, and we work hard at that.
The only objective difference between a founder and any other highly capable person is that the founder has better alignment with business outcomes than employees. Put simply, the founder has more equity and makes more money than many others if things go well, as well as having more at stake, both financially and socially, if things don’t. This is essential to business success but founders are not super human in the literal sense and implying otherwise is unfair. Like all of us, founders have families and friends and setting them up as super human sets them up for behaving in a way that is inhuman and can lead to personal hardship. Strong alignment with the company may lead to superhuman feats on occasion but they themselves are, believe it or not, human.
The importance of the founder and ‘founder mentality’ is not to be underestimated. Founders are critical to success. The vision, tenacity and passion they bring is often the difference between success and failure but if a founder is going to succeed we need to find ways to mitigate the ‘Laws of Physics’ because like it or not, the laws of physics apply.
Founders are generally leaders and often CEOs. It takes a lot more than vision to be a successful founder. It requires learned hard and soft skills and critically, skills which are different at each stage of the growth journey. I see the three broad phases of growth and corollary founder profiles needed as follows:
1. The startup, The Hustler
You need a lot of courage to start a startup. It’s hard, it’s risky and the start is the hardest and riskiest part of it all. Founders often leave stable jobs to go out on their own or with a colleague to start a business from scratch. To get from zero to one with almost no resources, you need hustle. You need to be bold and you need to be scrappy enough to make something from nothing. I have huge respect for the founder feats I have seen at the ‘hustle’ phase. In the case of Zaheer from CarClarity, he sold his house and moved his entire family in to his parents to fund the business’ start. In the case of Jack and Dani O’Rielly from Funding.com.au, they got started by working unpaid for years, making end meet for both themselves and the business by lending their own money to customers. To get started you need mountain of the key ingredient, hustle.
2. The scale-up, The Builder
The Builder’s core function requires is a blend of startup hustle, knowledge about scaling frameworks and charisma. During this phase you hire literally hundreds of people and to attract the best talent, you need to be the type of leader that people literally want to pin their future to. The type of person that makes people say, I’m taking a pay cut to go work with that person. Beyond this, you need to know the frameworks that allow you to create a high performing team in a rapidly changing environment. To drive scale and repeatability, you need to be a Builder.
3. The growth stage, The Executive
Sankar somehow manages to straddle being one of Australia’s best known Executives whilst also being one of the nicest people I have ever met. He left Xero to join Siteminder in 2018 as CEO, ahead of its IPO in 2021. He’s about as seasoned as you get as an Executive having previously been CFO of Virgin, Fairfax and Foxtel.
Once a company has thousands of employees and investors, the profile of the leader must change dramatically. The role of the CEO transitions from the hustle required to build an underfunded growth company to a leader that understands stakeholder management, capital markets and risk, has deep relationships within aligned organisations and has a pedigree that engenders trust with the numerous interested parties. This is The Executive.
The challenge is this. An Executive can’t be a Hustler. If they were, they couldn’t be an Executive (risk, remember). A Hustler, probably has never been an Executive because if they had been, they are unlikely to forgo their high paying Executive career to start a start-up and a Builder is someone that has knowledge of how to build, something most people in general don’t have unless they have done it before. So what are you meant to do if you’re a founder that expected to be at least 3 completely different people at different phases of the business lifecycle?
1. Know your blind spots, know you ARE human.
Understanding your blind spots, whether it’s in GTM, product, leadership, strategy or whatever the case may be, will allow you to deal with it. Nothing makes you more resilient than knowing that you know where there is room for improvement.
2. Hire people smarter than you.
David Shein, Founding Partner at OIF and successful founder refers to himself as: “The Dumbest Guy at the Table”, indeed it’s the title of his book. The most successful founders and CEOs aren’t necessarily the smartest. They are the ones that are able to attract the best and brightest to help them. If you’re not a marketing expert, the worst thing you can do is hire people at your level. Don’t try to own it all, hire the best.
3. Empower your staff.
The key reason you raise venture capital is to attract talent. That opportunity is wasted if you don’t empower that talent to perform. If you nail points 1 and 2, the next step is to empower your people. If they are better than you at something, let them own that thing. In most successful start-ups, key person will have direct access to the Board because the best founders and CEOs know when to make way for those people to run.
4. Have open conversations with your Board
I recently had 2 founders in my portfolio reach out the me and tell me they wanted to appoint a senior staff member as CEO. I challenged this suggestion but the individual facts here are irrelevant. What these founders had done well was communicate openly about their personal growth. This precipitated and will continue to precipitate conversations about how the company and the Board can serve them to help them to learn and grow as fast as possible as well as what the company expects of them. As a business matures, founders often also do things like write JDs for themselves so that they can better understand what the company wants from them. Have these open conversations. They will arm you to deliver as a leader.
5. The C-Suite
At some point just having a great team isn’t enough. You might be able to personally hire 40 great people in a year but you won’t be able to hire 100. To do this, you need leaders. You need people that will hire the great people. The realisation that you need more than ‘executors’ pays dividends. Typically you need your first C-Suite when you reach about 30-60 people but it’s different for every company as is the type of person you will need as your first Executive.
6. Develop the softer skills
A lot of founders obsess over content, metrics, frameworks and the other content necessary to build a high performing team. This is great but don’t forget that as you scale, less of your time will be spent on operations and more of your time will be spent with investors, shareholders, strategic partners, key execs and other major relationships. Knowing how to navigate this is a learned skill. Mentors, other founders and professional coaches can be an asset to help get you there. Companies are often very happy to pay for a founder’s professional development, don’t waste this.
7. Know when to put down the tools
My good friend Aidan Lister, Founder of Uptick, will painfully remember his Board, including me, begging him to stop coding. That’s hard to do if you’re one of the best and most passionate product leaders in the country, but as a company grows, it is simply impossible to be an executor and a CEO. To grow from a Hustler to beyond, you will have to be more selective with when you’re ‘on the tools’. As a now global business pushing towards 100 staff, I am pleased to say Aidan is no longer coding between 12am and 4am (so he says).
8. Use your Board
Being a founder, particularly a solo founder, is a lonely experience. As a founder you don’t have to make all decisions alone. The directors of your company, including the founder, are ALL ethically and legally responsible for the company’s decision making. Your Board isn’t there to watch over you, it’s there to help you make decisions and to provide the resources you need to deliver. Tell your Board what you need and make decisions as a Board. The directors you want are the ones that want to help you. There is a lot of content available about how to run a successful Board. Invest in this and it has the potential to both reduce the emotional burden on you and help you scale by using collective brain power and resources.
9. Own the vision
The Start-Up Law of Physics says that a founder sets the vision and, given that a vision is a view on the future, it is something a founder can do at any point in the journey. It doesn’t matter whether you are a Hustler, a Builder or an Executive, the vision is something that you can always own as a founder. Although this entirely disregards all of the other things that a founder often has to do in a functional role, I agree that this aspect of being a founder is excluded from the Start-Up Law of Physics. Lean into this by owning and setting the vision. This is critical to business success and something that founders usually do better than anyone else. They intimately know their market, customers and their product and they are the ones that started it all for a reason.
That’s it for now… would love to know if you enjoyed the content!
If you’re the founder of a software business in the post revenue Seed - Series A phase, I would love to chat to you. Reach out to me at: daniel@evp.com.au
Happy investing!
Well written. Having worked with EVP as a founder, they have been very supportive in all aspects.
Thanks Dan