It is a common scenario. Entrepreneur grows and scales his company, venture capitalist (VC) comes in to take the company to the next level – probably gears it up for a potential IPO. Entrepreneur is booted from his top position, and company hires a more experienced chief executive to take the helm of the company.
When you are outside looking in, you would probably say, “How dare these VCs take over somebody else’s hard work?!” You may also add, “If these VCs are so good, why don’t they just start their own company and not steal another man’s business.”
However, that point of view is not really taking into account the bigger picture. The VCs are not always the bad guys. It is just that most of the time, the person who grew and scaled the company to what it is currently is not always the best person to take it forward to the next level. And vice versa, while these professional executives may not be the best at growing the business from the ground, they are good at taking an already profitable company and making it bigger.
There are exemptions of course. Mark Zuckerberg continues to be the top man at Facebook even after they’ve gone public. RingCentral CEO Vlad Shmunis, is still one of the most respected executives in the industry after a successful IPO. He actually did an interview for Pando.com in 2012 about considerations entrepreneurs must take from day one if they do not want to be shown the door later.
It is a great interview and is something aspiring entrepreneurs should listen to. And as he discussed, running a startup is different from running a bigger, more established company. Sometimes, the things that work for startups become shackles or traps that prevent the entrepreneur from growing. In some ways, this can even be detrimental to the company as it is weighed down by an ineffective leader.
So, if you are an entrepreneur, you have to be mindful of these startup practices that become startup traps that prevent you from growing with your company:
Having a hand on everything
When a business is just starting up, entrepreneurs have a tendency to have a say in every aspect of the company. This is normal, though. With little resources and few personnel, entrepreneurs usually are the final decision makers in most, if not all, aspects of the business.
However, as the company grows and as the number of personnel and resources grow, the entrepreneur must learn to segregate tasks and responsibilities. The informal setup of having the entrepreneur direct everything should evolve to a much more formal business process where redundancy of tasks is eliminated to promote efficiency, and different departments or groups are formed to handle specific business aspects like marketing and sales.
The trap here is when entrepreneurs grow too comfortable with the control he has over everything and refuses to let go of the status quo. As a result, his business does not evolve into something more than a small business because that is how the entrepreneur operates.
Sentimentality over your first team
When a startup becomes successful it is easy to fall for the trap of sentimentality and nostalgia. After all, you and your team have gone through a lot in your quest to make your business profitable. As a result, however, the entrepreneur becomes resistant to change as they want to keep everything as is. After all, why change something that is clearly working right?
However, as Shmunis mentioned in the interview mentioned above, the founding team is not always the team to take when you go to the next level. On a personal level, it would be hard to replace the people who journeyed with you when you were scaling the business, but sometimes when you want your business to grow, you need much more experienced executives.
As the old saying goes, change is the only thing constant in this world, and sentimentality can be the trap that prevents you from adapting to these changes.
Focus on the now
When a business is just starting up, entrepreneurs do not have the luxury of looking ahead to the future. The focus is on how to make the business profitable as soon as possible. It is mostly about short-term goals because, frankly, startup owners do not even know if their business will still be there to fulfill any long-term goals.
The trap here is that entrepreneurs get stuck on survivalist mode when the company already survived. As the company peaks and is ready to move to the next level, the need for a bigger picture emerges. What the company needs now is a visionary. Someone who will direct where the company is going, what type of values the company want to be associated with, and which types of markets do they want to penetrate.
If all the entrepreneur can see is the present, it will be difficult for them to lead the company into the future.
Just to reiterate, these “traps” are not essentially bad things. It is just that they are more suited to startups and small business. When you apply these attitudes to a growing company, it can become shackles that stall your business’ and your growth. So be mindful of where your company is at right now, and adjust your management style accordingly. Who knows? You just might become the next entrepreneur to watch.