Resilience is good, these 3 startup traits are better
Why passion, agility & decisiveness matter more for startup success
Death is in the air! Okay, probably not the most uplifting thing to say. If you have read any of the recent news in the VC industry though, there’s a lot of doom and groom right now.
The rumblings turned into a tsunami of misery when Tom Loverro, General Partner at IVP, wrote a Twitter thread on the startup mass extinction event. His argument rests on three points:
Most startups raised 2 years of cash in 2021 and 2022, and cut burn to extend that
These startups will need to raise, sell, or wind up zombies in late 2023 or 2024
Survey of early-stage companies showed 4 out of 5 have under 12 months of runway
His conclusion is that late 2023 and 2024 will make the 2008 financial crisis look quaint. Yikes!
I remember 2008 quite well as that was when I had my startup. Within a course of a few short months, we went from serious discussions with VC’s to dead silence. The entire funding market evaporated along with the hopes of scaling our nascent startup.
Eventually we threw in the towel and sold. It felt like failure though because we had these audacious dreams of changing the HR industry. Could we have keep going? Should we have grinded out a few months more on the faint chance of a white knight saving us? Did we give up too soon?
The case to sell was pretty clear. We had little revenue, new customers were hard to come by, and our development and server costs were escalating. Enterprise sales deals took ages to close. We were still far away from product-market fit. None of us had taken a paycheck in years.
None of those reasons however gets to the core of why we folded. All of those are factual statements about the business, but there is always an underlining root cause. For us, the real reason was we lost the passion and will to keep on fighting for our startup.
No one wants to ever admit the reason had to do with passion. Most startup post-mortems talk about running out of capital or co-founder discord or lack of product-market fit. To admit you lost the passion makes it look like you lacked commitment and resilience.
Resilience helps, but there are other critical traits for startup success.
Resilience is a funny concept. The word means an ability to recover from or adjust easily to misfortune or change. That certainly applies to life as a startup founder where every day is a roller-coaster of highs and lows. To deal with the swings of my own startup, I developed “situational forgetfulness” to avoid falling into the pit of endless negativity.
Founders do need to be resilient to get through the day by day trials of building a startup. The danger is when resilience turns into stubbornness. Something Jeff Bezos said rings true, “Be stubborn on vision and flexible on details.” Often founders forget the other part of resiliency is the ability to adjust.
This was one of the mistakes with our startup that we realized too late. We were too stuck on the way we were collecting skills data for our analytics, so implementation was slow. We also focused only on enterprise markets. Adjusting either strategy earlier on could have boosted our chances of success.
That is why resilience is important, but not the most critical trait for startups. It helped us push through bad news, but it also gave us blinders that led us down the wrong path. When it comes to why startups fail, it is never because a founder wasn’t resilient enough.
What matters more then for founders and startups? From my experience and the many hundreds of startup founders we spoke with as the AWS Startup Advocate team, these three traits came up the most; passion, agility, and decisiveness.
Adeo Ressi, founder of Founders Institute, said it best, “There is only one thing that kills a company, that is when the founder gives up.” All the resiliency in the world will not pull you through when the passion tank is empty. But when a founder cares too much about their vision, they will find a way to survive.
I worked with one startup several years ago that was close to dead. They ran out of cash, could not pay their fifteen employees, and was far from product-market fit. Then they raised a bridge round, pivoted, and managed to grow. Passion for the vision was what keep the founding team going when things were at their bleakest.
When you watch startups at scale, you notice their pace. They move incredibly fast, iterate non-stop, and constantly learn. This is what is meant by agility.
Peter Drucker said, "A large organization is effective through its mass rather than through its agility. Fleas can jump many times their own height, but not an elephant.” This is why startups can out-innovate and beat established incumbents. More than any other trait, the ability to be agile and operate at speed is a superpower every startup has if they embrace it.
The clearest sign when a startup is in trouble is they stop doing stuff. Investor updates stop, content marketing withers away, sales dry up, and product updates stall. The root cause though is often the painful death of a thousand small non-decisions.
Paul Graham had a great analogy, “Startups are like sharks. They have to keep moving forward or else they die.” A startup that is not doing is dying. Experienced entrepreneurs know this, which is why they optimize the culture and empower teams to be decisive. As we say in AWS, most decisions are two-way doors. This means you open a door to learn what you can and make an informed decision, rather than wait in the purgatory of analysis paralysis.
Do you agree these are the most important traits for startups? What other traits have you experienced as a founder that were critical for your success?
In doing research for this post, we found this graphic from CB Insights on top reasons startups fails based on public startup post-mortems. It is no surprise that the number one reason cited is running out of cash which accounts for 38% of all startups. It’s also not surprising that passion is last at 5%.
Top reasons startups fail via CB Insights
Running out of cash and failing to raise new capital are more symptom though to more fundamental challenges startups faced. Post-MVP (minimal viable product) failures such as business model, product timing, pricing, and a poor product are all strategic decisions that took longer to resolve than available capital could support. This speaks to a lack of agility and iterating fast enough to adjust.
Pivots gone bad is an interesting one since it is rarely about the choice of direction that is wrong. Rather the issue is a poorly executed pivot, or pivoting too much. According to the Startup Genome Project, startups that pivot 1-2 times had 3.6x better user growth and raised 2.5x more money over startups that pivoted more than two times.
The messiest failures are by far the ones that involve people. Founder breakups, investor fighting, and blaming the team are brutal to watch and experience. Even when all other aspects of the startup are going well, people challenges are nearly impossible to survive. If the startup does manage to live, it has lost time, capital, and momentum to get back on track.
Possibly the only true startup killer in the list of failure is the regulatory and legal reason. But as we have seen with Uber and Airbnb and many other startups, when you are small, no one notices. It is only when you are big enough to defend yourself that the regulatory hammer falls.
The AWS Startups page has a refreshed home! Now all information you need about how AWS helps startups is available on its own site. The page also features a showcase for startups to promote themselves, a learning center with business & technical resources, and information about AWS credits.
The Advocate team heads out Indianapolis in a couple of weeks for the first ever Rally Conference! We will be there to speak on a panel discussion "Upsizing Ventures in This Silicon Heartland" and hosting a few “braindates”, which are small gatherings to learn, exchange ideas & collaborate. We will have groups focused on community building, Generative AI, and ways AWS helps startups. Come meet us and say hi if you will be attending Rally!