Visionary founder, who has experienced failure in the past, has finally come up with an idea that seems to be catching on. Because the main reason behind their previous failed effort was lack of organization, they are determined to make the most of early traction and pour more gasoline on the fire. The founder is there to help the company scale, which means that resources flock to this company in form of cash and employees.
Competition is tough. Determined not to cede an inch to others, the founder steps on the gas even more, prioritizing aggressive growth above everything else. The founder is praised for their crazy ideas. An incipient finance team is added, but they don’t function as a true partner in the decision making process. Instead, it’s all done by the founder. The company’s infrastructure starts to buckle under the added scale; the product feels like it’s being held together with popsicle sticks and bubble gum. Furthermore, customer service issues are piling up — but there’s a solution for that. Bodies are quickly hired until the product is fixed and the customer experience is optimized. There is no formal onboarding process for all the new hires, but they learn the founder’s catchphrases and ideology quickly, so there seems to be a sense of acculturation occurring. The growth team is crushing it, so there is very little oversight, except to get rid of obvious non-performers. Growth continues, as does funding unabated.
But now, stress fractures are starting to appear. Preliminary reports from the finance team show that burn is growing uncontrollably, and the gross margin picture is unclear. The lawyers are concerned that the company is behind on various compliance obligations. The HR department warns that employee complaints are stacking up. Churn is suddenly rising amidst all the customer support issues, so the CS leadership is forced to make a change. The founder knows something is wrong, but figures it’s just the result of pushing hard. After all, you have to break a few eggs to make an omelet. The only issue that is truly concerning to the founder is that the growth team seems to be struggling to hit the new set of targets that have been established. Apparently, there aren’t enough high-quality leads to go around. So, the company increases spending on new, unproven channels.
The company begins a fundraising process, but investors are drilling much deeper into the data and asking tougher questions about burn, margins, and customer acquisition costs. Meanwhile, a press report about the main problems that the company’s product is experiencing comes out at the worst possible time. The company ignores the reports, but is quickly contradicted by more leaks from customers and employees. The press reports attract the attention of regulators who suddenly begin to conduct investigations into the company. Feeling mistreated, a key platform partner ends cooperation with the company. In fact, the company never had a solid deal with them to begin with.
All of a sudden, board meetings take on a different tone. The company’s current practices are unsustainable. Its relationships with customers, partners, employees, and regulators have deteriorated. How could the founder have missed all these problems? The founder is on the defensive, but acknowledges the charges. This makes the founder wonder, “is new leadership necessary?” Suddenly, the founder is calling for the CEO’s head. The financing process falls apart and the company has precious time left to fix all the issues. One of the hottest startups in e-commerce has hit the wall at 100 miles per hour.
And now, we are in the phase of addressing all the existing debt and arranging for repayment. From there, we’ll do the best we can to fix what we know is wrong and restart our hyper growth with better systems.
