Guest post by Suhail Kassim

A new startup is like a baby

A startup needs to be cradled and nourished. Even so, there is no certainty that the baby will grow up to be a lean mean fighting machine. In this post, I begin to investigate the phenomenon of some exciting startups which then refuse to grow up — the “Benjamin Button” startups.

Introducing the Benjamin Button startup

A very small minority of entrepreneurs seem to be amazing at finding the right sort of help in their early days. They join rock-solid incubators, find top-notch mentors, maneuver their way into active university forums, win famed business plan contests, know where the hungry angel investors sit. These entrepreneurs are obviously off to an awesome start. Destined for greatness, right?

Not necessarily. Many (if not most) of these startups struggle to fulfil their potential. They stubbornly refuse to scale-up, linger on until they lose relevance, then meet a slow yet inevitable demise. The internet is littered with outdated websites of nascent ventures that never monetized. The chrysalis never transforms into a butterfly. 

I call such ventures “Benjamin Button Startups”, named after Benjamin Button children who refuse to show signs of growing up.

Startups fail all the time, what’s the big deal?

In my personal experience, there is a growing trend of highly promising startups running into the ground. This trend is disturbing for at least two reasons. 

Firstly, this sends a hugely discouraging signal to all other startups: if these poster children fail, despite everything going in their favor, what hope is there for the rest of us?

Secondly, outside startup hotbeds like the Valley, the early stage ecosystem is typically not vibrant. It often has limited resources that can only support a few chosen entrepreneurs at a time. Hence their imperative to succeed — and thereby to return more to the ecosystem than they took out of it — is higher. When they do not, it causes a small ripple. Just a few such ripples could shake up the already fragile ecosystem. The already wary seed investor will turn away, LP funding will ruthlessly re-route to greener pastures, incubators will be left with tarnished reputations, the Fortune 500 executive will politely decline to mentor the university business plan winner. 

What makes a startup a Benjamin Button?

Sometimes it seems to me such startups are victims of their own early success. The founder confuses the “first big win” with the ultimate destination. He/she gets caught up in all the attention, the award ceremonies, the media buzz, the blogosphere hype. Some entrepreneurs succumb to the heady temptation to become celebrities today instead of business moguls tomorrow. They end up doing a ton of calorie-burning activities like giving guest lectures, mentoring other startups, speaking at jazzy forums. As a result, they stay stuck in the “successful-student-startup” mode instead of growing up. And if the founder does not grow up, the startup won’t either.

There is also an element of hubris. Entrepreneurs sometimes think the same skills needed for early wins will carry them through scale-up. This is almost invariably not the case. Early stage success can happen through blue sky thinking, strong personal and professional networks, hyperactive multitasking, good mentors, and a couple of passionate co-founders. There is adrenaline rush after adrenaline rush. Scaling up, on the other hand, needs grit, patience and the ability to fight boredom. It needs long nights out working on a particularly stubborn piece of code while dining on ramen noodles. It needs the founder to hyper-delegate and decentralize or risk falling into the “Founder’s Trap”. It needs a different kind of mentor and adviser — not someone who can ideate but someone who has actually implemented. 

Also, for VC-stage companies, the VC is always more demanding — and less polite — than the angel investor. Unlike a basement startup with three high school friends who are bootstrapping off their pocket money savings, here the money runs out quicker: the VC-stage venture needs to pay its “employees” (it’s no longer just the co-founders) market-pegged salaries (and, gosh, benefits!) — and I’m not even including joining bonuses and annual bonuses and small stock options to the first 100 employees… . In some ways, starting a venture is akin to a part-time Masters program, while scaling up is like a full-time PhD program. Not every MBA gold medalist is suited to do a doctorate in business administration.

Finally, there is the culture of failure. Some ecosystems reward failure — the Valley places a premium on “fail fast, fail early, fail often” — which reduces the tolerance level needed to slowly but surely cultivate a fledgling startup, leading to premature demise of ventures that should have succeeded. Other cultures punish failure — and in such places, the founder is tempted to grab whatever minor victories he/she can — whether it be to speak at a forum or give a newspaper interview — at the cost of focusing on the core business itself.

See also Time To Start a Business – or Not. Illustration: covenant-harvest.org

Have you witnessed instances of Benjamin Button startups? If yes, do you agree with the reasoning above? What are the other explanations as to why this happens? Leave us a comment and let us know your thoughts!