What Is The Worst Thing You Can Hear As A Startup CEO?

Quite honestly, you can say anything you want to me. It’s not going to affect me, and it’s not going to hurt me. Well, it may hurt me if you’re an investor that just pulled your term sheet (I’ve had that happen, and it sucks).

So say what you want. But here are the six things that no startup founder ever wants to hear:

A. I’m sorry, but we’re pulling our term-sheet.

 

Oh man, there is nothing more painful than having a term sheet pulled. I had this happen and it was devastating.

Imagine you’ve just climbed Mount Everest, and you’re just about to plant your flag. Then someone has the nerve to throw you off the mountain.

But you have to climb the mountain, so you get up again and start climbing. Now you have some idea what it’s like to lose a term sheet.

Losing a term-sheet sucks, and so does…

 

B. Having your co-founder walk out the door.

 

I lived through this one too. Right before we were about to close funding, my two co-founders walked out the door, stole the companies IP, and started a competing company.

Ouch. Who wants to have that happen?

Losing a key executive or co-founder is really bad, but a pretty close second is…

 

C. Losing your 50% customer.

 

We landed, or thought we landed I should say, a big deal with a major OEM here in the Silicon Valley. We had gone through the steps of actually doing the development for the customer because we had more knowledge than our customer did.

The engineer we were helping was forever grateful, and he used our product in his design. “We’re in,” we thought.

We got the pilot order.

We got the alpha order.

We got the beta order.

We got the pre-production order.

We didn’t get the production order.

The OEM designed our product out and designed in a competing product. We were incensed.

Fortunately, one of our board members knew the CEO, so he called the CEO, and we were back in the design.

Then we were designed out again.

Back and forth it went until finally, painfully, we were designed out for good.

No one wants to hear that. And you certainly don’t want to hear:

 

D. Your manufacturing partner made a mistake building your product.

 

We made a conscientious effort to not scrimp on quality, so we used the best fabrication facilities in the world. We thought there would be no issues at all building our products.

I’ll never forget when we got our first product back to evaluation. Jeroen, our VP Engineering who designed the product, and I went to the lab immediately to evaluate the product.

Jeroen wired up the product, and turned on the oscilloscope.

“This is strange,” he said. The product, a type of amplifier he had designed variations of many times before with success, looked like a dead short.

Jeroen spent the rest of the day evaluating the product to trace down the failure. It turned out our fab, one of the most well-known fabs in the world, had inverted one mask layer, so our product appeared like a dead short.

We hurriedly fixed the problem at the fabs expense, but we had to delay our product introduction by three months. This wouldn’t be the last time a fab screwed us during our existence.

Having manufacturing problems is bad, but here’s what you really, really don’t want to hear:

 

E. No one wants to buy your product or service.

 

You’ve been working diligently towards launch day. You’ve planned everything out. You’re open for business.

Now what do you hear? Crickets.

No one’s buying. Or at least, not enough people are buying.

What do you do? Do you give up? Do you pivot? Or do you plow ahead?

I remember when we launched our first set of products. We had been in stealth mode for close to a year, and when he planned the simultaneous launch of the company and our first products.

We scheduled a bunch of interviews for me to do with various industry publications along with a major advertising blitz. When launch day came, our web traffic went through the roof.

We got a bunch of orders, but the buzz didn’t stay at a fever pitch forever. Our steady state went up, but not as high as we wanted.

Limbo.

Somewhere between where you want to be and where you don’t want to be. This is a classic entrepreneurial dilemma.

Things are moving in the right direction, but not at the pace you planned on.

That’s better than no one wanting your products, but not good enough for a restful night’s sleep.

Since we’re on the topic of products, here’s one that no founder ever wants to hear:

 

F. A competitor has come out with a superior product to yours.

 

Like us, you could be in stealth mode for a while working away on your product. Then, out of the blue, another competitor comes along and announces a competing product. You look at what they’re doing and you realize that not only are they better than you, they’re a lot better than you.

You’re crushed because you realize in an instant that your competitor is likely to clean your clock. You’ll need to take swift action to survive.

I never had this happen running our company, but I did have something similar happen running a division of a company. Our chief competitor, Linear Technology, came out with a product that was clearly better than what we had.

And, if they did the right things, they could wipe the business I was running of the face of the earth. We scrambled to catch up.

In three months time, we developed a competing product and a new process technology for the product to overtake the Linear product. Our product was significantly better than theirs.

We had adverted disaster. But every night during that three month period, I worried they would figure out what to do and kill us. Fortunately, they never did.

For more, read: How Do You Know Your Company Is On The Right Track When You're Just Starting?

 

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