VC's Mind

Mediocre CEOs/Owners

posted Dec 29, 2011, 8:42 AM by Deren Tan   [ updated Apr 23, 2012, 4:08 AM ]

We have had close up view of several business failures in which we have invested in.  There are a variety of obvious reasons why business fails but one that most notably sticks out with a disastrous impact is one that emanates from the behavior of entrepreneurs and owners of the companies.

Often business that fails are those that are spearheaded by entrepreneurs that adopts a kind of hubristic behavior which led them to behave in an extreme arrogance and pride which consequently results in overestimating their own competence and capability. Deluded as well as blinded by excessive desire to possess wealth, they often adopt a strategy which they believe allows them to  monetize ‘half baked business’ in the quickest possible time a psychological process that prevents them from seeing their own failings and prejudices.

Premised on this false notion of the way business and market works they set out to devise business strategies that often are short term in nature and do not interact in manner that would be effective and optimal with the business and competitive environment. These entrepreneurs usually engage in short term thinking and usually engage in deal driven business formation which often leads to the eventual collapse of the business.

The strangest observation is that they seem to have someone to blame for their failure. The usual suspect would be government, financiers/banks, business partners, advisers. The irony of these group is that they just out rightly reject the notion that they might have made a big mistake and refuse to figure whether they know less than what they think they know even in the face of a complete business failure.

In short, there are no short cut to success, entrepreneurs and business owners in addition to hard work have to think hard to produce a business model that clearly  defines how its organization can creates, delivers and captures value. We end our thoughts on this subject with a quote from the founder of Facebook, a company that has evolved from a valuation of USD$100 million in 2007 into today's astronomical valuation of USD$80 billion.


"There are no shortcuts to success– ”A lot of building a company or a product like Facebook is just about determination and believing that you can,”  “Everything that’s worth doing is actually pretty hard.” 

                                                                                                                                        Mark Zuckerberg


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