Editor’s Note: Each week Maynard Webb, former CEO of LiveOps and the former COO of eBay, will offer candid, practical, and sometimes surprising advice to entrepreneurs and founders. To submit a question, write to Webb at firstname.lastname@example.org.
Q. I’ve been working on this idea for a long time. There’s some traction but we’re not yet moving the world. I’m tired. What do I do?
—Founder who’s losing conviction
This might not be what you are ready to hear, but you are at a critical point and you have to make a choice. You have to become a breakout, or you have to figure out how to end it gracefully. Some people are satisfied with what I call lifestyle businesses, companies that pay for salaries that cover their lifestyle. These are the “work to live” people. But most entrepreneurs are cut from the “live to work” cloth because they are trying to do something that makes an impact—a so-called dent in the universe. And, if you are taking venture money the assumption is that you are trying to get breakout results.
Right now, you are in the “tweener” scenario. You’re neither a breakout nor a complete failure. In today’s world, product-market fit happens faster than ever. When we invest, businesses are often one to two years from actual product-market fit. And that’s fine and normal. But if time is still passing after that, it might be worth asking your trusted investors if you look like a potential breakout. It could be an uncomfortable question, but they probably already have an opinion on the subject. And every quarter that passes where your business looks the same as it did three months before, is a quarter where breakout potential seems markedly lower.
Maybe you think you can wait it out. You can’t. You must act with an incredible sense of urgency.
- You need to put strong plans in place to get back on track to become a breakout.
- You need to take a deep look at the current state of things and future projections with the board and management team to assess how viable the strategy is and how bright the future looks. If some aspect of your business is working, consider betting the farm there. Often startups try to do too much and offer a “complete” solution, and that can slow their release schedule, make adopting their technology more onerous, and worst of all, dilute the quality of everything they offer.
- You may need to take significant actions (painful layoffs, redo of product, pivot, etc.) to ensure you have the cash needed to achieve the turnaround.
As an investor, I’m hopeful that all of my companies are breakouts. But I know they won’t all be. That’s ok, because a couple breakouts make up for a lot of tweeners or failures. But as the founder you’re spending all of your energy and time on this one idea. You need to ensure that it’s going to return well for your employees, investors, and yourself. This is your only option.
If you are not convinced that you have a great chance of becoming a breakout you should think seriously about mergers and acquisitions or returning cash to investors. I’ve watched companies burn through every penny without a plan or hope, and I’ve watched companies make a tough decision to return some money to shareholders and move on to something they have greater conviction for.
Expect this assessment to be one of the hardest you’ve ever faced. By now, you’ve invested years, human capital, money, and reputation into this business, and it can be a serious shot to the ego to admit it isn’t working. Founders we back tend to be universally smart and driven, and many of them will never have faced something that feels so much like failure. But it isn’t. Real failure is throwing even more time and capital at a business that isn’t working and ruining your chances to raise again down the line. Take the learnings, take the loss, take some time, and move on.
This is a long game. All of us want to be working on things that matter. I wish the same for you.