You've heard it many times before - "Startups are hard." There are numerous ups and downs along the path. Customer wins and customer losses are just part of the game. Rejections from investors and potential business partners happen frequently, but the exhilaration of an attractive term sheet or partnership agreement is intoxicating. Managing your team and making sure that they are on the right path can be incredibly challenging. They are human and have their emotional swings. In my experience as a manager, founder and CEO, the emotional highs and crashing lows can be unhealthy, cause unnecessary stress, and often be a motivational killer.
I've made the mistake myself of sharing too much with the team. Probably the most painful experience happened while going through an arduous financing process in which we finally had a signed term sheet with a potential investor for a deal that was to close within a month. We had been cranking away getting all of the documents in order and had already incurred legal fees during the due diligence and drafting process. It seemed that this was a "done deal" and everyone in the company was thrilled, especially me.
Ironically, I was in the green room at a conference 15 minutes before a panel I was moderating in front of roughly 500 people about the challenges of fundraising as a music company. I had prepared notes to encourage entrepreneurs to persevere and not give up. After all, I was about to get funded myself.
I then looked down at my phone and saw an email from the investor. The email read something like this...
"For various reasons, we have decided not to proceed with the financing. I'm really sorry about this and I'm happy to get on a call to explain our rationale."
You can probably imagine my emotional situation at that point. I was beyond upset and frustrated with myself that I had invested so much of my own time, incurred fees, signed a no-shop clause, and even gotten my team involved. Of all of my blunders, the biggest was inserting my team in the process, adjusting their strategy going forward based on the financing and, yes, involving their emotions by getting them excited about the possibility.
I'd like to share four of the lessons I've learned the hard way...
1. Be Transparent, Provide Info When Asked, But Avoid Providing Day-to-Day Updates
In a sales-oriented or deal culture, which is the case for many startups after they start to monetize, it's important to manage the ups and downs of sales wins and losses. I've made the mistake of being overly confident that we would close a deal, gotten the team excited about it, only to see it come crashing down in flames.
Instead, I've found it better to manage your pipeline and try to determine average sales cycles and close cycles. Communicate those metrics to the team early and often. In other words, it's better to focus on changes to the percentages as opposed to winning or losing specific deals like the Company XYZ account. Not all deals will happen and it's important to instill this understanding and perhaps "toughness" into your team so that they are reasonable with their expectations. It's not the end of the world if a deal doesn't happen.
2. Be A "Balanced" Leader
One of my favorite mentors once told me that in the midst of chaos, you as the CEO need to be stable ground for your team. He explained that you can never be the most elated person in the company when something great happens nor be the most depressed when something falls through. "Ideally," he said, "You should be balanced but just always at least slightly positive even in the worst of situations."
Believe me, it's difficult to control your emotions particularly in a highly stressful startup environment. This is particularly important with employees that are early in their careers and have not had enough experience to understand what is a disaster and what can be shrugged off as a mere speed bump. Even your executive staff need reassurance from time to time and a realistic but generally positive attitude is a must.
3. Get Excited About the Wins and Don't (Publicly) Fret the Losses
One of my tennis coaches used to tell me to never let your opponent see when you are upset about a missed shot or an error. He told me that if you absolutely must vent your frustration, turn your back so at least your opponent would only see the back of your head bopping up and down as you chastise yourself. On the flip side, if you make a great shot, celebrate and do so with gusto.
Projecting yourself as a winner creates a lasting impression. As an opponent, it makes you more formidable and seemingly tougher to beat. You have momentum, or at least the appearance of a directional advantage. As a leader, it creates a natural magnetism that attracts others to you. Yes, disappointments happen, but save those for your inner circle, learn from them, and get back on the horse as quickly as possible.
4. Keep the Immediate Results of Financing Activities to Yourself, Board, and Executive Staff
Financing is a job generally reserved for the CEO alone for most startups. In fact, many investors find it strange if anyone other than the CEO is out on the financing trail. Raising capital is incredibly hard and potential investors will typically ask all of the difficult questions that you don't want to answer. In many cases, they are questions you most certainly don't want to answer in front of your team (e.g. what are you going to do if things don't work out, are you willing to cut staff/burn, who is not absolutely critical on your team, etc.). You need to have stamina and a thick skin. Most of the investors with whom you have set up meetings will simply decide to pass for various reasons, many of which have nothing to do with your startup. It is for this reason that it's important to keep the results of these meetings to a small circle of confidants, usually the board or your co-founders. It's not uncommon in tough markets to meet with 30 or more investors before finding ONE that is interested in taking next steps. Since rejection is an inevitable part of the process, there's no need to share the results of each of these meetings with the team. It will only exacerbate the already yo-yo like existence of a startup.
In sum, communication with your team is important, but detailing the everyday ups and downs can be a major distraction and a morale killer. Startups are hard enough as it is. But if you can learn to communicate properly and share the RIGHT amount of information, you'll do a better job as a motivator and leader.