When things get really crazy at a start-up, an entrepreneur needs one person by their side. And it's not their best buddy.
Entrepreneurs are dreamers. They have to be. No sane person would take the risks required to launch a startup. And when these dreamers go down the proverbial rabbit hole, it’s essential that they bring one person with them. That person isn’t their co-founder, and it’s probably not an investor, either.
Instead, you know who has to go down the rabbit hole? A real jerk. Not just any jerk – this one has to be trustworthy, with no ulterior motives, and willing to tell the founder that he or she is an idiot and about to make a horrible decision.
Three-time entrepreneur turned venture capitalist Kirill Sheynkman says he founded his most recent company, Elastra, without a real jerk on board. And he paid the price. Elastra shut down in April, 2011.
Elastra was Sheynkman’s third company, and he managed to bring in more than $14 million from high-profile investors like Hummer Winblad. Flush with money, he forgot how important his own nitty-gritty involvement had been to the success of his previous companies. Back then, he coded the alpha version of the product himself and knew every detail of product development, sales and marketing. This time around, he says, he “thought you could structure an org chart, hire people to spec, delineate what needs to be done, put in some management controls and let the machine just work.” In other words, he’d done it twice before, and he thought he knew the drill.
“At the time,” Sheynkman says, “I was unwilling to admit that this fundamental assumption was incorrect. I should have been a lot slower and careful. The corporate culture didn’t have time to mature on its own. It was externally enforced by me -- here’s the textbook; here’s how things are done. That doesn’t work. The reality is you come out feeling like a little kid who puts on his Dad’s suit and pretends that he goes to work, but looks kind of ridiculous.”
In retrospect, Sheynkman says, he needed a jerk. Often, entrepreneurs just aren’t able to admit it when they’re wrong – so they need someone else to drill it into their heads. “In hierarchical organizations,” says Sheykman, “People don’t tell you the truth, and you need to hear it. You need to surround yourself with people who are empowered to be honest because it’s very difficult to be honest with yourself. It’s an incredible act of self-negation to admit you’ve been deluding yourself.” Very few people are capable of that sort of objectivity without the help of a trusted advisor.
Sheynkman says that his previous successes as an entrepreneur only exacerbated the problem. “If you have a string of successes you can actually start to think it’s because of you,” says Sheynkman. “The truth is you can get lucky once, twice, even four times. That happens.” But at some point, your luck will run out. When that happens, your company will need to have built a strong foundation capable of weathering the storm. The only way to establish that foundation is by being brutally objective about the weaknesses of your business and fighting to fix or eliminate them.
SCHUYLER BROWN is the host of Founders@Fail. He currently works at High Peaks Venture Partners, where he sources and evaluates potential investments. Brown holds a B.A. from Columbia University and an M.B.A. from Columbia Business School.