Can a startup still succeed despite inexpert management? [closed]

Question

I currently work for a tech startup of roughly 50 employees, about half of whom are in the tech/product team. I myself am a developer in the tech team. The company completed Series A funding about 6 months ago. There are several concerning aspects of this company's culture that make me question if this is somewhere I want to work. (It is likely that I will seek a new position over the next few months, though this is not important to the question.)

However, my question pertains to startup long term viability. There are several issues I have observed that I would tend to assume would make a company less likely to succeed in the long term, and yet from the information that is publicly accessible, the company seems to be quite successful so far, at least speaking from a financial perspective. Here are some of the issues:

---

Nepotism

There is a lot of nepotism: key roles are fulfilled by friends of the founders, and friends of the founders do not go through the same hiring process as regular applicants. These friends are also being promoted and put in charge of important projects with more frequency than regular employees, regardless of the merits of the individuals involved.

Poor decision making, ignoring evidence/advice

The C-level directors consist of two founders and two friends of the founders. One thing they all have in common is that once they have decided to do something, they will not be deterred or persuaded by anybody, and this includes the company's investors and advisory board. This has led to some questionable business decisions in the past that have cost the business money and opportunities. We have had to change core aspects of the business' strategy several times in the past due to missteps by directors that have closed off opportunities to us.

Limited capacity to learn from mistakes

When the company makes questionable decisions, it's usually the same mistake repeated over and over, rather than new and exciting mistakes being made. For example, making decisions explicitly against the advice of investors / employees, which later cost the company money and credibility, is a thing that has occurred at least twice in the time that I have worked here.

---

Despite all of the above, we seem to be financially growing, we are constantly expanding, and our staff retention seems good to me (there have been two leavers in the past 6 months, and ~10 new hires). My own observations so far lead me to believe that we might be succeeding despite the directors rather than because of their leadership.

I am not an expert in the minutiae of how startups succeed or fail, so perhaps the concerns I've observed really aren't all that important. What am I missing? I'd be interested to know if there are key factors in startup success/failure that I've failed to take into account.

Definition of Success / Failure

Several contributors have correctly pointed out that my definition of success/failure is not very clear. For the purposes of this question, my definition of Success is, the startup passes Series C funding and goes on to exist as an established, profitable, non-startup company. The definition of Failure would be not making it past Series C funding. These definitions are purely for the context of this question and I appreciate that there are many ways to define success and failure. Thank you for the feedback!

Answer 1

I've worked for a bunch of startups.

Some were led by very charismatic leaders who practiced nepotism, had poor decision making skills, and never seemed to learn from their mistakes.

Some of these companies were able to get to IPO and prove exceedingly lucrative for the founders. Others were purchased by larger companies, again making the founders wealthy.

Some failed miserably.

My own observations so far lead me to believe that we might be succeeding despite the directors rather than because of their leadership.

Often there is no one pattern that can determine success or failure.

Many of the leaders I've encountered were terrific at raising money and/or terrific at getting to IPO. As for running a company post-IPO most were either miserable at it, or uninterested. Very few were really good.

I am not an expert in the minutiae of how startups succeed or fail, so perhaps the concerns I've observed really aren't all that important. What am I missing?

First you need a strong definition of what "success" and "failure" mean to you.

Is it a success if the founders get rich and everyone else gets unemployed? Is it a failure if the company doesn't exist after 5 years? Etc, etc.

And then you may wish to look at what is motivating your leadership.

Only then can you have some insight.

Can a startup still succeed despite inexpert management?

Very few companies (startups or not) have expert management.

Some succeed. Some don't.

Answer 2

What you describe is pretty much the norm for startups. I'm in a company just out of that phase (500+ employee). It's eerily familiar.

I believe you are making the assumption that what you describe makes an important difference in the company's future. Sadly, the one thing that is most important is luck (and maybe timing) for a startup. So, given most other startups are facing the same exact challenges, this won't make a difference.

My suggestion: nudge the company in the right direction when you can, even when you feel you're against everybody. Stay professional, state your opinions, act on what you can/are allowed. Maybe it won't make a difference, maybe it will.

But in the end people will know how competent/stable/directed you are. Whether it succeeds or fails is out of your hands. It's probably already out of anybody's hands.

Answer 3

There might be many different measures of success for a company, but one useful metric for a startup is: can it reach positive cash-flow before it runs out of cash?

If it can, it can hire more people and grow and reach out to more customers and grow further and become an established company. If it cannot, the company goes out of business and everyone loses their jobs. (This is of course a highly simplified summary, but is ultimately what it comes down to).

So, how do the things you mention impact the likelihood of that success? Well, none of them are positive things and I understand why you are frustrated; but if the boss's friend brings investment with him, that could be a positive for cash flow even if they aren't as good at their job as someone else might have been. Bad decisions (depending how "bad" is defined) might cost money, or cost an opportunity for more money, but if the business still brings in enough cash, it doesn't matter. And so on.

So, yes, it is very possible for a company to succeed even with inexpert management - as long as it makes money, and as long as you define success in terms of the company surviving and growing. (You could instead define success as being "a good place to work"... but it's possible for somewhere to be a great place to work and still go out of business).

The sad truth is that good or bad management, and whether or not a company makes money, are only indirectly related. It would be nice to think that all companies, and only such companies, that do good things, succeed and make money; in the real world, that's not necessarily true.

Answer 4

This is just my experience, having worked in a couple small companies of varying focus.

The first thing you might note is that the company can become quite "top-heavy" quickly as director, executive and highly experienced positions become available and filled. This is a part of bringing critical domain experience to places that count such as product development, venture capital relations, intellectual property protection and regulatory oversight.

Also commonplace is all those positions seem to know each other either from previous experiences together or directly. It's not uncommon that an entire swath of people will move from company to company in a group based on recommendations from insiders. This is because these people work well together, and have demonstrated their ability to produce results. You absolutely have to keep in mind that many startups have their eggs in a single basket. They don't have a product out there, or their revenue stream is very tight/non-existent. So the focus needs to be on getting to a point that they can either release a product or get bought out by a bigger company.

On that note you should definitely take a step back and consider when the management are making decisions that you don't agree with, it doesn't mean they're bad decisions necessarily. Most regular employees don't have the insight to the inner working of things to make that call. And that's also not to say that founders of small companies haven't failed due to poor decisions. It's more along the lines of try not to worry yourself to death about things you can't really change.

As for repeated mistakes or poor decision making, some companies have to go through 2 or 3 CEOs before they land a successful one. Sometimes this means the entire inner circle leaves and a new one gets hired. Sometimes the founder sits at the top forever. There are tons of problems in small companies like poor documentation, poorly defined project scopes and lack of good management (among other things).

Ideally, you can make observations, but try to stick to your role and use the flexibility of startup culture to make changes where you can actually make them.

Answer 5

Taking it from the top:

Nepotism
Hiring friends to fill key roles is just how the real world works. Ignore this. When you found your own company then you can pick who to hire. I'd be willing to bet you'd pick people that you know pretty well and trust.

Poor decision making/ignoring evidence/advice
Investors don't know everything and quite frankly can easily derail a startup. Just because they provided some cash doesn't mean they understand the market. A good CEO picks and chooses what advice to act on and what to ignore.

If the CEO if the company has a positive cash flow and your company is expanding then management is doing the right things. Trust them.

Also, startups generally have to shift direction, sometimes radically, and sometimes incredibly fast, in order to win. The fact that core aspects of the business strategy have changed several times is actually a good thing. A startup's job is to jump in, try a bunch of things, throw out the things that don't work, try a bunch of new things, and repeat until you have a stable business. At which point you sell it and move on.

Limited Capacity to Learn from Mistakes
This one is tougher without explicit information; however your previous statement about changing the core strategy several times seems to imply that they are learning from their mistakes and pivoting as necessary.

Honestly, I believe you are over thinking this and need to step away from the water cooler where all the back seat drivers hang out second guessing what the CEO is doing. Do you like your coworkers and the job you are doing? If so, then just carry on and let management do management things.

---

Now to the titular question: Can inexpert management succeed?
Yes, yes they can. In my experience, the best CEOs are the ones that constantly make mistakes while still growing. That type of sheer determination is often hard to find and the amount of things they learn by failing is far more valuable than if they were always right.