We’re Not Assessing the Whole Picture
In the world of investing, everyone seems to be looking for similar things:
- An ability for the team in place to scale their company and work together.
- The market that the company is in.
- The actual product that will be sold into that market.
This kind of terminology is very, very prevalent as you talk with almost any startup investor. But when you talk with startups about why they’re going out of business, very little of it has to do with any of these things.
They’re going out of business because the co-founders got into an argument and the company can’t operate without one of them.
Or the CEO gets burned out.
Or the CEO’s family can’t take the stress of the growing company.
Or the CEO can’t keep her team engaged because she cares more about the end goal of getting an exit or being a $100M company than she cares about the actual people on her team.
Or a hundred other things that all have to do with the founder’s “heart.”
Beyond the Business
More often than not, I’d argue that it’s the CEO’s heart being in a bad place that ultimately drives startups to go out of business.
Unfortunately, so few investors are focused on issues surrounding a founder’s heart when they’re deciding whether or not to invest. They’re focused on the potential growth of the company, which is a good thing. But when most of the reasons that startups go out of business have nothing to do with the business itself, it’s a shock that so few investors ask questions like…
- How is your relationship with your significant other and are you aligned in your thinking about the future of this business?
- How are your friendships and do you have a strong community of support outside of work?
- What do you do outside of work for enjoyment and how do you energize yourself?
- What’s a time when you’ve had to tell your life or business partner something that might compromise your relationship (an unexpected loss of interest, a shift in values or goals, an attraction to something or someone else, etc.), and how did you work through that? (i.e., Were you able to speak up and tell your truth, even when it might cost you an important relationship, instead of cheating or bailing before talking about it first?)
And here’s why that matters…
Those questions give some insight into how a startup CEO will lead when times are not just good, but really, really hard. Because in the hard times, it’s the heart of a founder that keeps them going. Their heart will compel them to treat their team with respect during tough times and to give their team credit when things go well. It will be their ethical north star and their deepest “why”…the reason they get up every morning. And it will ensure that a founder has a sense of balance outside of work, hopefully helping them avoid burnout.
We’re Working on This, Too
As my partner Reilly and I continue to work on GAN Ventures and invest in a startup or two every month, we’re getting better and better, becoming pretty obsessed with asking our companies these questions. And we’re also asking them of ourselves, hopefully making us both better CEOs and business partners.
So whether you’re making an investment or receiving one from an investor, I hope you’re focused on the heart as much as the actual business. I think all of our businesses will be better for it.