This article goes under the category of “investor mistakes”… as well as “my mistakes”. Startups are not just run by the people working in them. They are not just owned by people. They ARE people. The individuals behind the company mean everything. In larger, more established companies, there is a bit of wiggle room for people to be unhappy. There is even some room for people to be unproductive. Interpersonal conflicts can occur without disrupting the whole organization. Startups cannot survive the same setbacks, though. Much like a lifeboat struggling to make its way to the nearest shore, a startup must have all people working in the same direction… and trusting each other deeply.

A mistake I have made is to think of a startup like a business too much – to the extent that I forget to factor in all of the personal interactions that will be impacted by my decisions. If running young companies was only a matter of getting the numbers and strategy correct, it would be an awful lot easier to get one off the ground. Investors sometimes make the same mistake, putting the returns of their investment and the performance of the firm ahead of everything else.

It makes sense to be concerned about the performance of a company as a business. Why else would you invest in one or help start one? I’m not suggesting that anyone abandon the process of focusing on business results. Better business results come from proper treatment of people, though. The two concerns are deeply intertwined.

Being in business with someone is like being married. Communication is critical, and honesty is the only foundation that will last over time. When the business arrangement no longer works for one person in the situation, then either the situation must change or the partnership must collapse. Expect the business relationship to be fluid and dynamic, requiring frequent updates and maintenance efforts.

Here’s a real-world example of this mistake. As a company was beginning to grow, the duties of the partners needed to be divided up so everything could be handled on time. The division of duties meant one person would focus on the legal and finance matters of the firm while the other would focus on the sales and operations. This division seemed perfect, and it certainly worked in terms of workload and personal skill sets. The part that didn’t work, however, was the breakdown of communication once duties were split. Decisions were previously made jointly regarding larger issues. Under the new arrangement, both parties were receiving information about important decisions only after the fact. This started to create resentment and distrust. Imagine if a married couple agreed that one person would take care of the children and the other would take care of the finances and housing matters… and then they stopped discussing their challenges and decisions with each other. It would likely result in the same schism of trust and well-being.

In the business situation, the repair required understanding that the people operating the business together were not machines that could tolerate running point on a particular topic and going without the interaction of the previous partnership arrangement. Once it was figured out, it wasn’t too difficult to solve. Everything had to go back to the original state of cooperation and then grow into a division of labor that retained the interpersonal communication that made the damn business work in the first place. The relationship had to be reset, in other words. I only wish other relationships could be repaired so easily.

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