“Why do most startups fail?” I asked.
“The standard answer is that they are undercapitalized,” Pablo replied. “But, I believe that is only a symptom of a larger problem.”
“The larger problem?” I pressed.
“Most startups begin with an idea, that the founder believes may have viability as an enterprise. It is this beginning of an idea, only vaguely formulated, where the trouble begins,” Pablo replied. “You have to start with the founder and the development of the business model, and ask how big?
“How big?” I asked, in a wandering sort of way.
“Think of big in terms of timespan. If the founder only thinks about the first handful of customers and the fulfillment of the first handful of orders, that is as far as the business will go (grow). More mature organizations answer longer timespan questions related to the mission and vision of the organization. The most often missed characteristic in both of those documents is the concept of by when?
“For the founder, meaning initial stakeholders, entrepreneur, investor, private equity, board of directors, the initial question to task the CEO is what is the timespan of the mission? Timespan will determine the girth of the organization going forward.
“And, this is where the standard reason of undercapitalized emerges. Most startups don’t have the resources to deploy more than the first handful of customers and orders, so that is where the thinking stops.
“Those organizations that more clearly determine their mission, the timespan of the 3-4 critical goals will have greater clarity on what kind of organization must be built. And, the biggest accountability for the CEO is to build that organization.”