Founders are expected to have all the answers. Some consider this a reasonable expectation. They are the people who see entrepreneurship through the lens of founders delivering well-rehearsed pitches on stage. Founders and founders-turned-investors know this is a long way from the truth.
The reality is that on most days we are faced with more questions than we have answers. These questions come in different forms depending on the person asking. Prospective partners and customer have specific questions. Team members have different ones. Every investor has their favourite questions to fire at entrepreneurs. And accelerators and their Entrepreneurs-In-Residence have different ones again.
And while the rate at which founders learn is a superpower, there is a dark side to the expectation that founders should have answers on demand.
The punchline is that it’s easy to develop a habit of providing answers on the fly.
The answers I’m talking about are the ones that help smooth over conversations.
They are a sugar hit for the founder and to those in the conversation who take the answer on face value. And why wouldn’t it be? In the universe of unknowns, it’s nice to have (or at least think you have) some of the answers.
These answers could downplay the seriousness of a business model issue, over exaggerate the capability of your team or technology, or present overly optimistic timelines.
Left unchecked these seemingly harmless answers have a sneaky way of finding their way back into companies. And what comes next can be a slippery slope to cultural mayhem.
The slippery slope
Startups are about momentum. This, in turn, relies on a large set of problems being solved in a short amount of time. And every day is different.
Founders are forever selling, hiring, fundraising and developing their business. Much of this hustling requires the ‘puffer fish’ effect. In other words, making whatever you’re building look more significant, more exciting and more impactful than it probably is.
It’s the combination of ‘puffer fish’ effect and delivering answers on demand that founders need to be most wary of. And one encourages the other. The more people who respond positively to the claims within the puffer fish component of the narrative, the more likely a founder is to hardcode this into the proposition. This hardcoding is accelerated when a founder is asked a question for which they don’t have an answer but provide one anyway, and it is well received.
This experience, which is akin to receiving dopamine hits, can come to grinding halt in one of three ways. First, when founders excitedly debrief their teams about what they have ‘sold’ and the team responds with disbelief. The look on their faces says, ‘You said we could do what? Why would you say that?’ This often then requires the founder to course-correct the team’s priorities or the expectations of the person to which commitments were made. In any case, the founder risks losing credibility.
Second, the team finds about what’s been sold through another party (not the founder). This scenario is the most awkward for the founder, and it can happen when a partner, customer or investor inadvertently mentions that they are excited about the new thing that the founder has committed to. Regardless of the magnitude of the change, the team can start questioning the founders logic and more importantly, if they are on the same side. After all, it is a reasonable expectation for the team to believe they are in this together.
Third, an investor, partner or journalist declares in an open forum that they don’t believe your thesis.
These three scenarios beg the question: What should founders know, so they don’t have to fabricate answers?
Answers that founders should have
Fred Wilson does a great job of addressing this.
I look for founders to know that nuts and bolts of their business or at least their hypothesis on what they will be. Broadly this means they should have answers to 11 questions:
- What problem are you solving (why does it matter)?
- What is the solution (are there existing alternatives)?
- What is your unfair advantage?
- Who are your target customers (is it a big opportunity)?
- How will you distribute product to your customers?*
- What is the business model (what is the history of the business model)?*
- What is the riskiest assumption in your business model?
- What tech stack is the engineering team using to build the product?
- What is your key growth metric?*
- What are the top three insights you have learned to date?
- What talent are you missing in your team?*
While these questions are important (and presented in no particular order), I place additional weight on the answers given to those four with an asterisk. They provide me with proxies for the venture’s self-awareness and the founder’s rate of learning.
Prior planning and preparation prevents…
Look up how this phrase ends if you’re unsure. The critical and often understated value of preparation when it comes to pitching or presenting a business is that it helps to surface questions that might arise during meetings. Identifying these questions, formulating answers and then rehearsing responses is essential for two reasons. First, a well-considered answer is as obvious as one that has been made up on the fly. The difference is the former generates credibility while the latter erodes credibility.
Second, formulating and rehearsing answers (and pitches more generally) with team members not only leverages their subject matter expertise but it also brings them closer to hustle coalface. This ultimately means that teams have a clearer understanding of what is going to be said and how tricky answers will be managed. This also means that they will be less surprised if a course correction needs to be made as a result.
I make this point because I often see co-founders blindly trust what their colleagues will do and say when pitching their ventures only to be disappointed that there is a mismatch in expectations. Obviously, trust is vital in co-founder relationships. Preparation and planning close that expectation gap and unsurprisingly, deepens trust.
We don’t know
It’s OK to declare you don’t know. Many founders don’t believe this because they fear it could abruptly end or add awkwardness to a conversation. I empathise with this reluctance and would like to offer a tactic that makes saying ‘we don’t know’ as productive as providing a well-considered answer.
‘We don’t have an answer for that at the moment, but our hypothesis is…’
I make this statement because it demonstrates point blank that I don’t know the answer but that I am preparing to learn more about the issue. I also often find that framing a response in this format inspires others in the room to offer their suggestions, the by-product of which also demonstrates that as a founder I am open to collaboration and partnership.
One last thing
Don’t be a handwaving founder. These are the people who, despite their best efforts, have very little subject matter expertise, use non -specific language which pitching (and answering questions), and make bold yet unsubstantiated claims. And while it’s true that natural selection will play a role in removing these founders from the consideration set of investors, partners and hires, most early-stage founders start with little more than hustle and vision.
The antidote to being seen as a hand waving founder is to know the fundamentals of your business and knowing how to say ‘we don’t know’. Fundamentals mean understanding the nuts and bolts of how your product works and how you capture value as well as the insights you’ve gleaned from the journey to date. Along with a bold vision, these are the ingredients that make for productive, momentum-generating conversations.