A few weeks ago, I wrote about the factors that can cause a startup to fail. One of my readers asked the natural question: Ok, so what characteristics correlate most closely with success?
Great question! In fact, based on evaluating thousands of companies and participating in the development of several hundred, we do see a set of factors that cause the best-of-the-best entrepreneurs to stand apart. These entrepreneurs:
- Have a positive relationship with their CTO. The first job of a founder is finding a great technical co-founder. New startups without great CTOs don’t do well. Startups where the CEO views the CTO as a necessary evil, but wants all attention focused on him/herself, suffer from that tension at the top. However, when the CEO is smart enough to recognize the importance of deep creativity and absolute control over the code base, charismatic enough to attract big tech talent, and selfless enough to give that talent the trust and space necessary to do great work, the startup is most likely to rise.
- Absolutely believe but don't believe absolutely. Entrepreneurism is a socially acceptable form of mania. Every entrepreneur feels special, unique, outside the norm. At one extreme, entrepreneurial mania can derive from ego: I’m right; I’ve always been right. I always will be right. Anyone who disagrees with me is wrong. This kind of entrepreneur believes so fully in him/herself that the voice in his/her head drowns out all external input. This kind of entrepreneur will believe past the point of response and will fly the plane into the mountain at high speed.
At the other extreme, entrepreneurial mania can grow from deep insecurity: How did I get myself into this? When will the world realize what a fraud I am? How can I get through this without exposing how utterly weak I actually am? This negative compulsion toward standing apart can be expressed as a lack of belief. Every new idea could be the ferociously sought saving grace. This CEO can jump from idea to idea, never giving any enough time to develop, confusing themselves, the team, the customers and the market.
In the middle is an entrepreneur who always believes—in him/herself, the team, the product, the potential—but also recognizes that there is truth out in the market that must be learned. This entrepreneur has conviction, but is focused on real world numbers and is open to feedback. For this kind of entrepreneur, belief is steadfast at every point, but that belief may be radically different from previous beliefs. The best entrepreneurs always believe, and cause their teams to believe, but are open to change. They know the market is always right.
- Live above the store. The best entrepreneurs don’t focus on press or personal aggrandizement. They aren’t against getting attention; but they only seek attention if they understand how it can actually drive the fundamentals of their business forward. They are totally focused on those fundamentals. They know every detail about their businesses. They are obsessed with how their businesses work and how they can work better. They are deeply focused on their customers, recognizing that what the customer thinks is what matters, not what they think. A great merchant lives over the store and knows every item in stock. So does a great entrepreneur.
- Tell the truth. The best entrepreneurs excel at truth telling—to their customers, their teams, their investors, and especially to themselves. When things go well, they celebrate, but even more so, they learn from that win and aim to replicate the elements that produced it. When failure occurs, as they recognize it will, they don’t panic or get defensive; they stay calm and focus on learning what caused the flop and how to eliminate those causes going forward. They are pragmatic about what their company can accomplish on any given day and focus on making the company a little better every day. They recognize that winning big is just an accumulation of tiny victories. They seek those small wins.
Taken together, these characteristics form startup CEOs who know what’s what, inspire loyalty, can sell because they come from a core of deep belief, attract teammates who are smarter than they are, stay calm in a crisis, husband energy for the long march ahead, and remain focused on truth. Teams love this kind of leader. Customers find confidence in such a person. Investors both admire and trust this kind of entrepreneur, but even more fall in love with the market performance they see.
This is what a startup winner looks like to us.