It did not work… now what?

As startup leaders we have to be rational, but a lot of times we get emotional about our vision, product and go-to-market. We pitch it with passion and we manage it with our guts. Successes feel us with joy and failures cause us pain. So taking the emotion out the equation is actually irrational.

We raise money from investors based on our plans to the future including product launch, go-to-market model, and obviously business projections. Our investors buy into the vision, but as every experienced investor knows, they really buy into our ability to execute on our vision and coup with all the challenges of building a startup and delivering results.

We use the investment money to put our plans into actions. This is the time the rubber meets the road. We have to execute aggressively on all fronts, but listen at the same time to the market feedback by quantifying and measuring.

Most of times reality doesn’t meet our initial investors’ presentation and our “modest/not aggressive” excel spreadsheets. Most of times, we launch our products or service and we realize that things don’t work as we expected. Examples: (1) we planned for a certain users’ traction and we are getting substantially less, (2) we planned signing-up a certain amount of publishers, but realized that the process is long, and their requested feature list is not fully aligned with ours (3) competition released a strong product that you did not anticipate and it can become a major problem in building your business (4) our partner bought our competitor and now. (5) So many things can go wrong.

Now what?

You have to act quickly.

(1)    Realize it quickly.  First and foremost, you have to realize that it did not work. For most of us “soul players” it’s a major hurdle. Don’t try forcing “optimistic analytics” on bad results. See the situation as is. Quantify and measure. This will help you not to argue with the results.

(2)    Analyze Root Cause – Don’t get emotional, now it’s time to understand, what did not work, and why. Your analysis can result get deeper into the core of the offering, packaging, features, or go-to-market models.

(3)    Fix it ­– don’t freeze. Come up with a plan and execute. Change the product, change the offering, change the go-to-market, change whatever is the core reason for the situation and move forward. Don’t hesitate. All your stakeholders will appreciate it.

(4)    Communicate it – You have to communicate that something did not work and your solution to it – quickly, clearly and effectively with the relevant stakeholders – management, team members and most importantly your investors.

As for communicating with Investors, early stage investors are experienced in the dynamics of startups. They know that things change. They will hate receiving “all is good” presentation when the data does not support it, and won’t appreciate management that does not realize reality. Obviously, they won’t like a “we have a problem” presentation either, but will highly appreciate a CEO that realizes it quickly, has a plan, and already fixing it. This develops trust.

Personally, in my early days as CEO I made the same mistake of not realizing reality several times as well, and sometimes I needed a wake-up call from my peers. The trick is to know yourself and work with a team that does not afraid to fail, since they trust themselves that they will recover.

Why is Edison’s light bulb out there? That’s a trivia question.