What to do if your startup is suffering Founderitis

Founderitis rips a blade across the throat of opportunity and buries potential in the soft sand of ego

This is part 6 in our series Closing the deal

Warren BergenThink of entrepreneurs as explorers.

To survive and thrive, they have to confront an ever-changing world and wrestle with the future. If they don’t, they die. They often do not and cannot know the exact course that they must take to successfully realize their vision, but they have the courage to leave shore anyway. You gotta love them.

But the entrepreneur suffering founderitis is not the entrepreneur we all admire; he is, rather, the delusional lunatic. He’s the one that’s crazy. Not fun crazy, but lost it crazy.

Lots of investors are nuts too, but I’ll deal with that another time.

For now, let me create a fictional entrepreneur I’ll refer to as ‘Simon’ and tell his story. Sure, this story is fictional. But this stuff happens all the time.

Simon was absolutely brilliant. Unfortunately, his brilliance was strictly limited to a very specific area of technology. Beyond that, he became a maniacal lunatic. His technology was enormously disruptive to the massive petrochemical industry and it didn’t take long for an active angel investor to get him setup with some cash and a small board. One investor brought in some team members who could take his concept and make it a reality. Once it reached beta, another investor then tried to set up a meeting with three former C-suite executives from the sector. They were very interested. The interest between the three of them varied between investment, introductions to top level market participants, management and board seats. But first, they needed to set up a meeting.

After a ridiculous amount of emails and phone calls, he gave up. Simon wanted a non-disclosure agreement signed ahead of the meeting. Of course, they wouldn’t sign something like that. They just wanted to first meet the guy to see if he was someone they wanted to work with. There was no reason whatsoever to get into the technology at this time. What they already knew was that it was a game changer, so they wanted to talk strategy.

‘If they don’t want to talk about the technology and do a deal right there, then there is no point in meeting. Find new guys.’ Simon said.

Realizing that Simon was seriously infected with founderitis, most investors stopped trying to help the deal. Several friends were deep into the deal. One of the angel investor was beginning to also realize the severity of the situation but from a much more serious and problematic standpoint. The team had set up meetings with the industry giants. Simon would make his presentation. Sometimes, they wouldn’t get it right away and other members would step in to more clearly explain while Simon sneered arrogantly in the background. When they did get it, jaws dropped and, without fail, they would want to set up a pilot project to see if the technology could work reliably.

You would think that the investors were all excited by the prospects of big deals with industry giants. They weren’t. By this time, Simon had changed his mind. He didn’t want to sell or license the technology to them, he wanted to take them on and become their competitor. This might seem reasonable until you understand that he would have needed about $20 billion and 10 or more years to even become a very minor player in the industry. It was the near equivalent of stating, ‘Because I’m so smart, I can take down ExxonMobil and everyone else with a fraction of the resources that they have.’

‘Raise the money.’ Simon said.

One of the investors had spent an enormous amount of time on the company. He was the entire reason that the company had a chance. He helped the entrepreneur personally by providing office space within his own business and provided a personal ‘bonus’ so the entrepreneur could take a vacation with his wife and four kids. Later, Simon viciously attacked him by calling him stupid and asked him to stay away from the business.

Eventually, Simon decided that his team was no good. He fired them. He fired all of them. Then he decided that his board was no good, so he decided that he would simply take the technology and start again.

Of course, the board did not let that happen. They agreed to sell the patents to a natural resources company for a fraction of what had been invested. The very sad end to what could have been was that the technology never made it to market, investors lost money and more investors went back to investing in later stage companies and real estate, never to return to early stage investing.

There are lots of reasons for start-ups not to work. You don’t have to look hard to find errors of management and market timing or missteps of strategy. Access to capital is frequently cited. But founderitis is real and the frequency by which it rears its gruesome rotting head from the steaming cesspool of ignorance, arrogance and greed is truly shocking. And it’s more than not funny.

Founderitis is the reason that entrepreneurs micromanages everything to the point that the whole company grinds to a halt. Founderitis is to blame when the entrepreneur affixes a sky-high valuation to his start-up, to the point that no one invests ever. Founderitis is hard at work when the entrepreneur refuses to listen to advisors despite a current course leading to destruction. Founderitis is at fault when the Ph.D. won’t relinquish control of ‘his’ science and would rather leave it in a drawer and die alone than cut others in on the deal or hand over business-related functions to a professional.

Founderitis manifests itself in innumerable ways, but the result is generally similar in every case. When founderitis infects a life science company and it dies, those medicines will not make it to market and people will remain sick or worse. Founderitis affects us all because, in every industry, there is some technology, product or service that would have made our lives better. Founderitis rips a blade across the throat of opportunity, defiles possibility and buries potential in the soft sand of ego.

If you work for such a diseased individual, I hope you are quickly seeking new employment. If you have invested in such an individual, please make sure you don’t encourage their behaviour by advancing any more funds. If you are just this sort of individual, seek help and get out of the way of real entrepreneurs.

‘Simon’ may sound like an extreme and uncommon example or even an exaggeration. He isn’t.

Warren Bergen is President of Alberta-based AVAC Ltd. and author of Swagger & Sweat, A Start-up Capital Boot Camp


Founderitis

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One Response to "What to do if your startup is suffering Founderitis"

  1. Ron Lester   January 29, 2018 at 5:18 am

    Warren, you hit this one on the head. I, personally, have seen a couple major deals get blown out of the water by guys like “Simon.” I never thought of it as founderitis. I simply thought it was a case of overblown ego devouring common sense.

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