Cleaning house isn’t the most linear path to growth, but sometimes it’s a necessary step.
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Tell me if you've heard this one before. Startup A launches, garners a sizable amount of traction and buzz and subsequently flames out before making a lasting impact.
Those in the startup community know this scenario all too well. A Harvard Business School study by Shikhar Ghosh found that 75 percent of all venture-backed startups fail. After five years, U.S. companies have a failure rate of over 50 percent.
There are many reasons a startup might not make it past year five. The company could have a brilliant product or platform, but the funding just isn't there. A CEO might have a vision for a service that will fundamentally change industries, but lacks the technical know-how to make it come to fruition. Some startups have the financial backing needed for success, but the company's strategic focus is at odds and too narrow to scale.
I recently found myself in a situation somewhat similar to the third scenario above and had to make some tough decisions to ensure my startup didn't become another failed statistic.
Restarting a startup
In 2015, I invested $ 250,000 of my own money into the crowd-casting app Surkus because I was impressed by the strong partnerships the just-launched startup had in place with major brands. Six months post launch, I was invited to attend one of the company's first partner events at the Playboy Mansion and noticed the line of attendees who had booked through the app was the longest line at that year's annual Halloween party. I decided to join Surkus as co-founder and COO after realizing the massive global potential the company had to change how brands engage with consumers.
I quickly realized that my global vision for the company — which included expanding into verticals beyond nightlife and focusing on a technology-first approach — didn't align with the other co-founder's vision. I had to make the tough decision to replace 99 percent of the executive team in order to pivot from an LA party and lifestyle business to a technology platform facilitating impactful experiences for brands and consumers.
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It has paid off. In 18 months, we've expanded the company into four new verticals through organic growth and acquisition and our member base has grown from 100,000 to 500,000.
There is no blueprint for success when it comes to running a startup, but below are four valuable lessons I've learned over the last 18 months that have helped shape my approach to leadership.
Leadership vision must align.
If the strategic vision for a company is misaligned at the leadership level, it can't succeed. Leaders are tasked with making critical decisions that shape the growth trajectory of a company, and if co-founders are focused on different outcomes, sustained momentum is unattainable. The vision of a startup might change several times in its first few years, but it is critical that co-leaders work together to come to agreement on the best way forward, and execute on those goals accordingly.
Build your team strategically — don't make fire drill hires.
It can be paralyzing to replace 99 percent of a company's workforce, and I certainly don't recommend it as the first step to get a startup to the next level. However, when faced with this situation it's critical that new hire decisions are not made in a moment of desperation, but rather as part of a strategic plan to get the best talent on board and in the right roles. Identify baseline goals to achieve over 90 days, six months, 12 months and so on, and then build a team that can help hit those goals.
Your product, platform or service is only as good as the technology behind it.
When I joined Surkus, it was a mobile application that connected consumers to nightlife experiences that matched their interests. The technology behind the app worked well for that purpose, but it wasn't built to scale into new verticals or support a massive user base. This was one of the first areas I addressed when I took over as CEO. One of my first hires was a seasoned VP of engineering and I'm proud to say we rebuilt the Surkus platform from the ground up and can truly call ourselves a technology-first company. It's critical that an offering is built on a rock-solid foundation to support future growth.
Don't limit your path to growth by tunnel vision.
It's tempting to find a niche and get stuck on a one-track trajectory. However, that's often how brands fizzle out. No one industry is future-proofed, so market diversification is critical for sustained startup success. When I joined Surkus we were experiencing rapid growth in the nightlife industry, but the challenge that Surkus solved — connecting consumers and brands through meaningful, personalized experiences — was a common struggle across multiple verticals. If we'd stayed focused only on nightlife our growth stats wouldn't be where they are today, and our reach wouldn't be nearly as wide.
Change isn't always easy, but it's essential for growth. An entrepreneur must be prepared to make tough decisions for the betterment of a company or risk the fate of so many failed startups. Aligning leadership vision and values, building a goal-oriented team, establishing a solid foundation for growth and remaining open to new opportunities are four pillars I'd recommend any entrepreneur consider when navigating the startup landscape.