The #1 Reason Good Startups Fail—And How We Make Sure It Won't Happen To Us
Doing something major like starting a company is a lot easier with other people than it is on your own.
Until it isn’t.
The biggest reason startups fail isn’t bad ideas, lack of funding, or inadequate experience. 65% of startups fail because of disputes between co-founders.
The co-founder relationship is uniquely messy. It involves money, ownership, commitment, morals, pride, and personalities, all of which need to mesh together harmoniously so you can create something that your future, and maybe even your livelihood, depends on.
Still, even with a high probability of co-founder conflict, most people think the benefits of having one outweigh the risks. A counterpart can provide more money, a network of resources, specific expertise, a person to bounce ideas off. They’re someone to split the work with and mull over big decisions with. And most importantly, they’re there with you in the trenches when things inevitably get tough.
Luckily the co-founders here at AE Studio actually kind of love each other. We’re getting along swimmingly, and we’ve been working together successfully and happily for years. Our relationships have been highly rewarding and a lot of fun, so naturally, we want to inspire our employees to establish similar relationships with each other.
We set people up to work well together in a few ways:
Using Thinking Tools
When new team members start at AE, we introduce two major thinking tools to inform their mindset and prime their behavior.
1. Core Values
The core values at a lot of companies tend to be bullshit. They’re written as a formality and presented to new hires as written proof that the company is legit. No one really follows them, let alone reads them, and most of the employees probably have no idea they exist.
That’s not the case for the core values at AE. We live them, we breathe them, we bathe in them.
We make a point to sit down with team members to explain each of our core values because they’re the tenets by which we’ve successfully worked together, communicated, and built strong relationships. We refer to them all the time in one-on-ones and company-wide meetings so that all team members learn to internalize them.
The core values document is something that everyone in the company can have a say in. It’s a living, breathing document to which many team members contributed early on, and it’s still being improved—in line with the core values themselves. The doc, like many other things at AE, is an external structure that’s recursively self-improving.
Eventually, these core values, like cultivating a growth mindset and over-communicating rather than under-communicating, prime team interactions both consciously and unconsciously. They help establish:
- Aligned expectations
- Things everyone has in common
- An owner’s manual for avoiding and resolving conflict
- Best practices for communicating and working
If someone doesn’t agree with or make an effort to put these principles into practice, then maybe they’re not a great fit for the team and they’re not someone you could establish a strong cofounder relationship with. That’s been a good litmus test for figuring out who we want to work with on specific projects.
If your company doesn't have a core values document, or the doc is outdated or underutilized, we seriously recommend creating one and operating off it. You’ll avoid a lot of potential misunderstandings.
2. We use a PDP Personality Test as an excuse to talk about how to work well with each other.
Core values align expectations and get team members on the same page, while the PDP test helps them acknowledge and navigate their differences.
This personality test isn’t totally perfect because each person is a complex, dynamic individual. But it’s a surprisingly useful tool for thinking about how to work at your best and communicate effectively with other team members and clients. Here are just some of the things it helps you understand:
- Your energy style, which might be:
-A follow-through, supportive style
-A persistent style
-A rocket-launch style - How you’re pushing yourself to be different as a result of stressors in your environment
- How you appear to others
- Your communication style and how to communicate effectively to others with different communication styles
- Your backup style (how you might act/react when your energy is low) and how to have agency when you find yourself in it
- Motivators
- Demotivators
The PDP tool has been vital for us in establishing great team relationships and working well with clients. We use it as a tool to increase our own agency by creating awareness of specific feelings, behaviors, and patterns in ourselves. Then, we figure out how we can maximize each other’s agency in the same way, using side-by-side analyses of other team members’ personality charts versus our own.
For instance, if your PDP profile shows that criticism is usually a demotivator for you, you can prime yourself before feedback sessions so you feel less demotivated when you receive criticism.
We conduct individual, in-depth PDP reviews with every new team member to set them up for success when they start, and we continuously incorporate the thinking tool throughout their time here.
At the beginning of any new project, we also usually have everyone on the team do a PDP review meeting to help each person understand their own personality and energy style. Then we have side-by-side PDP reviews, in which we compare team members' charts to better understand each other and learn how to work together as best as possible.
Finding a Co-founder
Using these thinking tools on ourselves and each other has made everyone at AE better at their jobs, better at working with different people, and generally happier. At the same time, our team members are becoming better potential founders themselves.
They’re fostering relationships with like-minded, growth-minded colleagues who could end up being the people they want to start a company with. The odds of them having a fallout are much lower because they’re primed with these thinking tools, and they've already worked together.
All of this is happening right now at AE. We have our core consulting business keeping us profitable so that we can also incubate startups that spawn from team members’ brilliant, agency-increasing ideas. The people who work on these projects become co-founders of startups within AE, using our capital and resources to bring ideas to life and help them grow.
Our setup is pretty unique. Most people only have a built-in set of like-minded peers that they can bounce ideas off in college. We think it’s even better to have that opportunity outside of college, where people have a lot more experience, and we can back them up.
We’re fairly sure that the startups we’re incubating within AE won’t fail because of co-founder disputes. They might fail for a handful of other reasons, but we’re determined to make sure that’s not one of them.
If you have a good idea and are looking for other people to help bring it to life, have a chat with us.