The blurred face of growing startups

There comes a day when founders realize that smart money 
is a spectrum. Investors will indeed support their journey, 
but can't help fix the neverending issues delaying and 
preventing startup growth. After all, VCs exist to raise 
and invest money - founders are the ones who execute.

The problem is that inefficient startups will seriously 
deteriorate portfolio value, so both founders and investors 
end up losing. It all gets worse when they have different
perspectives of what is really going on...        

The blurred face of growing startups

Leading a startup towards scale is a complex endeavor. It mixes science and art, requires an impressive combination of soft skills and is strongly susceptible to serendipity. This is why every single decision made by founders can impact the efficiency of a startup operation, opening or closing alternative paths that strongly influence its future success.

A pre-growth startup must pick the right elements to start scaling up. Even after choosing their product, market, and business model, founders can still fall back and replan their strategy: pivot, reposition, or even change completely. As time goes by, substantial strategic changes in may become very expensive (I covered this topic on a recent post).

While capital will take longer to maximize, founders can increase their short term control and focus on operational excellence. Additional help may come from a formal board or occasional calls with investors, when founders can request feedback on big decisions or even the smallest issues. Unfortunately, advice, frequent contact, and governance may still perish against a very common disfunction of growing startups.

Understanding operational myopia

Maybe it has happened to you, or to a founder you know... I call it operational myopia. The condition remains undetected in its early months, but its gradual consequences are devastating on the long term... It is suddenly noticed when founders or investors ask "How could this happen under our watch?" and no reasonable answers are found. It often occurs when headcount grows from 20 to 50, then again 50 to 100 people (precisely at the early scale-up stages). It will definitely happen on mergers and aquisitions, when two startups sum up their assets, exchance stock and cash, and start trailing their path together.

When affected by operational myopia, founders, board members, and investors can clearly see nearby surroundings, but their vision will somehow blur out what lies a few feet away. The business is growing, so now there is more distance between founders and their teams. They start having difficulty focusing eyesight, since they are used to a different operation that is now going through radical structural, managerial, and financial changes.

Founders (and consequently, their investors) end up overlooking a series of issues, such as the overspending that brings no value, the inneficient OKRs, the increasing churn, the quiet quitting, terrible comments on job review sites. The fading connections between founders and managers due to excess work, the lack of confidence between analysts and their new team leaders. Maybe investors trust founders more than they should and founders omit small details that would make all the difference. Maybe the new metrics are misleading, or intuitive decisions are apparently positive but will be proven harmful in the near future. Maybe they have chosen the wrong people to lead and won't notice it until it's too late. Maybe everyone is too focused on what's right in front of their noses and the immediate issues at hand, but forget to take a step back and look at the whole picture.

In the end, founders may redirect their attention to the wrong things, grasping for air and knee down on mud juggling dozens of small problems... not noticing the baby elephants stealthily rumbling at the cafeteria or the secretive group chats.

Different faces of the same startup

If you reached this far, I'll reward you with a very practical explanation. Operational myopia usually produces blurred, different versions of a startup depending on the viewer, curiously all true at the same time. Here are the most common:

1. the founders' view on how they design and execute. The company structure, the designated leaders, exective decisions on weekly calls... anything founders believe they are and should be doing for the sake of the operation, but polluted by all their misconceptions, inexperience, and unconscious wrongdoing. The founders' version of the startup will often vary in specifics according to each co-founder.
2. the narrative they create for investors. No matter how well a startup is operated, founders will often paint a prettier picture than their own view (and definitely prettier than the real thing). The sexy version of any startup is carefully designed and embellished, though it won't sustain a deeper look.
3. how investors perceive that narrative and mold it into their own vision of that startup. That view is selectively chosen because investors are driven not only by their fiduciary obligation - the increasing valuation of that startup and maximized return on investment - but also affected by mundane issues such as fund cycles, budget constraints, internal politics, and even portfolio priority or their personal preference regarding other invested startups. Founders may never really know their startup as seen by their investors - VCs are careful with words.
4. the real world, i.e., how the operation really is and how it materializes in the market. To see this face as sharp as possible, founders and leaders must sistematically ask unhappy customers and churned accounts for sincere feedback. After filtering what's important, they can act firmly to fix what's wrong and then constantly renew their inside view of the real world.
5. how the team feels about it all. That will be certainly reflected on the company's public job review ratings, but it can be detected by creating a culture that welcomes and rewards honesty and transparency. Anonymous satisfaction tools will not help, because some people already don't care about speaking up (and they are the ones founders must listen to). To clearly see the team's version, both leaders and founders must be widely open for feedback - they are the ones who need to build trust.

Final word

Dealing with this problem for many years, I have created a tool to detect operational myopia and eliminate the blur in execution. It gives founders a wide perspective on their operation and ranks their scalability against thousands of other startups.

I'm not saying you should try it...