Silicon Valley has a problem that not enough people are talking about. Great companies are flaming out or being embroiled in scandals because founders aren’t asking for help when they need it. After a year of working from home in one of the most challenging economic environments in decades, entrepreneurs, many of them first-time founders, want to talk to someone about how hard it is dealing with all the pressure, but they don’t think they can.
Because in Silicon Valley asking for help is feared to be a sign of weakness. And that hurts founders, their companies, the entire start-up ecosystem, as well as returns for investors. VCs often sense these problems but find it difficult to broach the conversation. As the main people founders look to for mentorship, VCs should make it their job to kill the culture of “killing it.”
Anyone who has started or even worked in a fast-growth startup will tell you entrepreneurship is hard. But very few people will tell you just how hard it really is. People don’t often use the words “depressed, isolated, or paranoid” to describe key attributes of entrepreneurs, but if you get them alone and help them get honest, those are words that come up. And we should know. As executive coaches we have honest conversations with entrepreneurs for a living.
A 2015 study conducted by researchers at Stanford; University of California, Berkeley; and University of California, San Francisco found that entrepreneurs are significantly more likely to report a lifetime history of depression (30% of survey participants), ADHD (29%), substance use (12%) and bipolar diagnosis (11%) than were non-entrepreneurs who participated in the study. For reference, this means entrepreneurs are twice as likely to suffer from depression, six times more likely to have ADHD, three times more likely to struggle with addiction, and 11 times more likely to receive a bipolar diagnosis than non-entrepreneurs.
The sad truth is that many entrepreneurs still think that they can’t talk about the hardest part of their job. They feel they have to be “killing it” at all times, especially when speaking with their investors. They are afraid that if they share any of their weaknesses or challenges, their investors will begin to think that it is time to replace them.
This has led many founders to live in isolation, telling themselves if they show any weakness they could undermine the board’s opinion of them which may affect their ability to continue to run the organization.
VCs perpetuate this idea by not proactively speaking with their founders about what’s hard and helping to get them the resources they need. Starting a company is the hardest thing most of us will ever do in our careers, and not being open and honest about that fact hurts founders and undermines their chances of building successful (and profitable) companies.
Sure, we’ve all heard the stories of the bull-headed visionary who achieved success by brute force and dogged persistence. But according to research we conducted in partnership with Wildcat Venture Partners, those companies are the exception rather than the rule. In our research, we found that the vast majority of successful companies are run by people who purposefully build healthy company cultures around values like collaboration, grit, and transparency. They deal with the isolation of entrepreneurship head-on, not as an afterthought.
While the bull-headed visionary stories are sexy stories to tell, they are not the norm, and they certainly don’t tell the full story. In many of these cases, companies succeed in spite of the founder’s flawed leadership, not because of it.
Taking all this into consideration, here are three things VCs and founders can do right now to help foster the emotional resilience to stay healthy and succeed:
Set Realistic Expectations
There’s no faster way to guarantee you will create distance with your founders and disincentivize them from telling you the truth than by having unrealistic expectations. Investors who ride their founders for bottomline results on unrealistic timelines force the CEO to sacrifice their own sanity and that of the team as the entire organization frantically tries to keep their investors happy.
It is important for founders and investors to sit down together and establish a clear “contract” that sets out realistic expectations. We have found in our work that periodically reviewing this contract at board meetings can be helpful to both VCs and founders in managing expectations.
We find that the best contracts are those that contain both bottom-line results and dimensions important to building a strong team and organizational culture. As coaches, we often facilitate candid discussions between investors and founders about challenges regarding leadership, team, and organizational issues.
Create a Culture that Rewards Transparency
Many VCs think they are the people closest to their founders, but that perception is often one-sided. Founders often tell their investors one story (the one they think the investors want to hear) while avoiding telling the “real” story. Founders often don’t feel like they can tell their investors the whole truth, especially when the chips are down. Investors who are able to establish open lines of communication with their founders tend to build more productive relationships. And a happy CEO who can have an open relationship with you will turn around and build a company with a culture that rewards transparency, as well.
This begins with thanking founders when they share bad news rather than overreacting. We have to reward the behavior we want to see more of. Investors that get upset when things start going bad will not hear more if things start getting worse. And then it’s too late to help.
Get Your Founders a Coach
Investors might think they should be the one their founders can confide in, but given the nature of the relationship (namely that board members can replace the CEO if they really wanted to), founders will never be able to tell their board members truly everything. A coach can be an important partner to VCs in bridging this gap. In fact, a company’s investment in executive coaching realized an average ROI of almost six times the cost of the coaching according to research.
As founders, take the initiative to find a coach to help you navigate the tricky relationship in managing expectations with investors. Work on building a transparent relationship that avoids the surprises that often derail founders. Every great modern CEO has a coach, and if you are a new founder in your first venture, an investment in the right coach can be one of the best investments you can make.
And far from being a signal that something is wrong, having a coach is now table stakes in Silicon Valley. Point to a successful entrepreneur, and you will find a coach working with them.
At the end of the day, entrepreneurs perform better when they are working against realistic expectations, can engage with investors transparently, and have an independent ally in their corner. VC’s that nurture relationships with their founders guided by these three principles help them build better companies with better results. And never again do we have to engage in the culture of “killing it.”
Edward Sullivan and John Baird are, respectively, the CEO and chair of Velocity Group, a leading executive coaching firm with operations in New York, San Francisco, Los Angeles, and London. They are also authors of the upcoming book The Power of Insight, which will be released by Harper Collins in 2021.