Self-Appointed CEOs In Early-Stage Startups: How To Lose A Company In A Week

Photographer: Nicky Loh/Bloomberg

Destroying a company in a week is a bit dramatic. Still, even if you have a killer idea, it’s pretty easy to wreck a company before you even get started—especially if you don’t put the right leadership in place. Over the years, I’ve seen many startups with great potential flounder and fail because the CEO, who also happens to be the founder, had limited experience. Self-appointed CEOs are one of the major reasons that many startups go under. Yet many entrepreneurs don’t realize or believe it. Instead, their egos consume them. I can’t tell you how many times I’ve met the next Mark Zuckerberg.

I meet with hundreds of entrepreneurs each year and deal with many early stage companies. I love this part of my work – engaging with entrepreneurs who have passion, vision, and want to introduce new ideas and change things. Each entrepreneur faces the ongoing challenges of non-stop hard work, late hours, continuous planning, team and culture building, and the ultimate challenge – hunting for money (hopefully, smart money). It takes a lot of stamina to execute flawlessly—and these are just the known challenges.

The unknown variable is the ability of the founding team—particularly the CEO—to consistently execute well. It’s not enough for him or her to come up with the idea; he or she needs experience running a company. The CEO and founding team need to always perform at a high level. If the top position is weak, the company will not thrive. Building a successful company is almost impossible when a self-appointed CEO doesn’t have the minimum required experience.

Often the idea is good and the market is ready, but the self-appointed CEO can’t scale the business. I remember a company that had some revenue and the opportunity to scale, but the founder/CEO neglected a key business tactic – full understanding of operations, sales and marketing cost of doing business. This caused him to lose customers, revenue and, ultimately, employees. Today, that company has old technology, limited resources to secure more revenue, and is worth almost nothing.