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1 posts from April 2007

April 02, 2007

Soap Operas and Start-Ups

When we were growing up, my two older sisters would come home after school and immediately turn on the television and watch soap operas all afternoon.  I would sit on the floor playing with marbles, blocks and baseball cards for hours while General Hospital, All in the Family and As The World Turns droned on.  In retrospect, I wish I had paid better attention to these old-fashioned dramas.  It would have prepared me much better for being a VC.

Why would soaps and VCs be a good mix?  Because, at least in my experience, every start-up company is like a soap opera – full of intense drama and intrigue, conflicts and clashes, heroes, villains and beautiful (well, more often brilliant than beautiful) but flawed characters.

Why is there so much drama in start-ups?  If you look at the ingredients in a start-up, it shouldn’t be too much of a surprise.  Start-ups involve hard-charging, ambitious entrepreneurs and VCs who are aggressively trying to create value from nothing.  Strong (often eccentric) personalities and high stakes prevail, with literally millions of dollars at stake and the opportunity to meaningfully change the lives of the principals, for better or worse.  The participants in the drama ride the ups and downs together – sometimes working as a team, sometimes working against each other – under intense time conditions with competitors (and other villains) nipping at their heels.

Thus, with all the money, pride and ego involved, it’s no wonder there is so much drama in start-ups.  I’m always amused when an entrepreneur tells me they want to write a book about all the trials and travails they experienced in their recent start-up; amusing because what to them feels like such a unique, surreal life experience (one might event say, made for TV), is actually such a common one.

Over my 10 years as an entrepreneur and 4 as a VC, I’ve seen the following (I now realize not uncommon) scenes:

  • Trust erodes so deeply between a CEO and some of the board members that they each believe everything the other says is an outright lie with a hidden agenda, resulting in completely dysfunctional relationships and requiring a premature sale of the company.
  • The board of directors calls in three members of the senior management team and interview them individually to determine whether to fire the founder or the CEO, because both cannot operate in the same company any more.
  • Some of the VCs in an under-performing company decide they don’t want to continue investing in the company and state their intention to walk away, causing the remaining VCs and management to scramble. That is, until business begins to show signs of picking up, and then these same VCs defend their position vigorously, resulting in management whiplash and dysfunctional relationships at the board.

Acquisitions.  Follow-on financings.  IPOs.  Missed expectations and quarters.  Hiring and firing.  Ego, pride and lots of money.  All mix together to create a tremendous amount of drama and tension.  Seasoned board members and entrepreneurs know to expect this and stay cool no matter what scene they find themselves acting in.  If only I had paid more attention to the beautiful people blathering on the tube rather than my baseball cards…