Five Lessons for Founders in 2023’s Hard Market

Rather than write a speculative piece on augmented reality headsets or generative AI, I want to share my personal experiences of leading — and sometimes failing to lead — teams during challenging and chaotic times. I’ve worn the hats of both founder and investor in my career, and this gives me access to a perspective that has never been more applicable than in the extraordinary market environment of 2023. If you are presently leading a startup or aspire to build a company, these five snapshots are for you.

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I. Culture

Here we go. Another person who doesn’t bear the weight of fundraising and P&L accountability telling me about the importance of culture. How is an engagement score going to get this deal signed before I run out of cash?

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These were direct quotes from me before I learned my lesson. Culture can feel like it doesn’t matter, right up until it matters deeply.

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When our organizations are under stress, it is the culture we built over the preceding years that will hold our teams together through those moments. Building a strong culture is a complex topic, but it begins with a wholehearted belief that it is essential to your success.

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If you don’t believe that culture is important, you had better be ready to deal with the unexpected by yourself, because you will genuinely be on your own when things hit the fan.

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II. Mission

Cash on hand. Burn rate. Contract value. Collections. Churn. Vendor fees. Price per share. Cash flow. Salaries. Bonuses. Option grants.

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An inordinate amount of time can be spent talking about money when running a VC-backed company. It’s easy for you and the people you serve to forget why we are climbing this mountain.

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If a mission is defined clearly and massive enough, that mission by itself can be the force that holds groups together through turmoil and even toxicity.

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Early in my career, I struggled at defining a clear, large mission. I “led” my teams through the standard exercises of writing a mission statement, sending it to the broader team, and putting it in our conference rooms, but it didn’t become deeply entrenched. I realized later that my ego was the reason for my struggles. My ego was in competition with our mission, and this was visible to my team.

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An organization’s mission can hold people together. It can give purpose in our lives. It is the founder’s job to make this connection for each individual. Great founders distill the passion inside themselves into something about which their teams and stakeholders can become equally passionate. Great founders are aware of their egos and sacrifice their personal wants to the mission, and in turn they inspire their teams to do the same.

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Hard markets, which can be severely damaging to egos, test this resolve. If you’ve installed a mission that can thrive in its own landscape, separate from your ego, you’re well-equipped for the battle.

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III. Stakeholder Management

“Why am I just hearing about this now, Kyle? How did we get here and why didn’t you involve me earlier. I could have helped!”

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My investor was pissed off and it was my fault. I don’t know how he could have helped, but I do know I could have managed the process leading up to this moment in a way that built trust instead of eroding it.

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I didn’t want to bring problems to my investors. I wanted to bring solutions. As a result, I under communicated. My investor updates were infrequent, and I was too optimistic in my forecasting.

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From the investor side of the table, it’s apparent to me that these behaviors are shortsighted. Clear, frequent, and objective communication with stakeholders can improve the likelihood that they’ll have your back when — not if — times are tough.

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IV. Coping

It’s just another Tuesday, and I am at the pharmacy counter getting another refill of sleeping pills. Yes, Andrew Huberman[1], I know my daily cocktail of caffeine, beer, and Ambien isn’t helping, but I just can’t get a grip on sleep.

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This was my failed coping pattern for several years. The weight of accountability a founder feels – to co-founder(s), employees, investors, family, mentors, partners, yourself, and your mission – is ever-present and often overwhelming. Founders, and especially the founder/CEO, feel isolated. No one bears the blame or the credit the way the founder/CEO does. Nor should they – this is the job. But this responsibility leads to a challenge in coping with stress and anxiety.

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Today, I check in with founders regularly and ask about the quality of their sleep. This question usually helps me understand the magnitude of the physical and mental tax they are paying and the strategies they are using to cope. We often need to experiment to discover the coping strategies that work best. In my situation, after overcoming some irrational resistance, I discovered that a professional therapist could help me expand the size of my container much more than I could by myself.

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Take care of yourself so that you can carry the weight.

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V. Support Network

I just cancelled another event with my family for work. ?A shrug and sigh of resignation follows from my eldest child. My heart sinks as I put my head down for another day when Dad’s work comes first.

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I lived this way for a long time. The daily tradeoffs founders make can come with guilt, shame, fear, anger, and sadness.

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I found it incredibly important to have a confidential space, away from the business, where I was personally supported, challenged, and held accountable. I found support through a very patient wife and through a “band of brothers” I met through the Young President’s Organization (YPO).

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Together, they held up a mirror so I could see my biases, become more self-aware, and make transformational personal changes. Your independent support circle can do the same for you. It doesn’t have to be as ceremonial as a “personal board of directors”. It could be as easy as showing up for dinner and describing your day with vulnerability and emotion.

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Passing the Test of 2023

Founding and building a company is one of the most challenging and fulfilling things we can do professionally. It tests us in so many ways, and with the right support, we emerge stronger as leaders and humans.

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More than ever, the journey in 2023 requires us to proceed with eyes wide open. As you build, know that you don’t have to do it alone. Those around us can help us through the challenging moments, and those who came before us can shine a light on them, as I hopefully have here.

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Ultimately, the journey of a founder is a test of bravery, and I have deep belief that the universe rewards the brave. If you are pursuing something you deeply believe in and if you are open to help and support, I bet you’ll be surprised how the world will conspire to help make your vision a reality.

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Kyle Beatty?is a Managing Director with American Family Ventures.

This article is for discussion purposes only and is not intended to be, nor should it be construed or used as an offer to sell, or a solicitation of any offer to buy limited partnership interests in a fund managed by AFV. Should you have any questions regarding AFV’s service, please?contact us?via this site.

[1] https://hubermanlab.com/toolkit-for-sleep/