Forget the glamour, mystique and tales of stratospheric success, the hard truths for leaders building or scaling start-ups are many. Whichever type of business leader you are: Chief Executive Officer, Chief Technology Officer, Chief Marketing Officer, Chief Financial Officer, or Founder, pitfalls are ever present as you navigate the valley of death and beyond. From the high chance of failure to the downsides of scaling too fast, we unpack these and other harsh realities of life as a leader in a start-up or scale-up.
1. The start-up grind is real
The sacrifice of founders is well documented.[1] But the truth is all leaders in any kind in a start-up experience sacrifice. Say you’re the Chief Marketing Officer (CMO). Although you manage marketing, chances are you’re doing the work that would be typically completed by an entire team in an established business. Getting up to speed on LinkedIn ads, honing your graphic design skills and pitching for media coverage is all in a day’s work for the start-up’s marketing leader. Equally, if you’re the Chief Financial Officer (CFO) or the Chief Executive Officer (CEO), your to-do list is probably as diverse as it is long. Tack on having to stay lean, flexible and hyper-responsive to unforeseen circumstances, and you have a perfect storm for long hours with little downtime.
2. You’re unlikely to make it
One of the hard truths for leaders of start-ups and even scale-ups is that the odds of succeeding are slim. Recent research by Startup Genome reveals around 90% of start-ups fail entirely. But beyond that headline, only 1.5% of the start-ups that survive achieve the multimillion-dollar exit their leaders dream of.[2] While many start-up leaders may be old hands at the start-up and scale-up game, for example, the serial founder or high-growth CEO, previous achievements don’t guarantee future success. The closure announcement of Artifact, an AI-powered app delivering personalised news feeds, is a case in point.[3] Despite being founded by Instagram co-founders, Kevin Systrom and Mike Krieger, Artifact shuttered operations in January 2024 with a lack of sufficient market opportunity cited as the reason.
Quitting while you’re ahead
The moral of the Artifact story is that sometimes the smart decision is to call time on a venture that isn’t working out as you expected. Check out our articles that address this scenario, Start-up runways: when to call time or call an investor and Seven successful start-up exit strategies for founders.
3. Burnout is a reality
If you think burnout is only experienced by sensitive types or people with boring jobs, think again.[4] Relentless hard work and the prospect of failure lurking around every corner can create excessive stress for start-up and scale-up teams. Ultimately, if you’re a leader in an innovation business, this constant worry and pressure can impact your health and wellbeing if you’re not careful. It’s crucial to guard against burnout and physical ailments that can be triggered by no exercise, poor diet and insufficient sleep. The leadership team is the engine room of a start-up and scale-up. If one leader runs out of steam, so could the business. It can literally be a case of no health, no wealth.
Top tip
Read our blogs, How to avoid burnout so you and your business thrive and How mental fitness for founders drives start-up success to learn how to guard against burnout and protect your health and wellbeing.
4. You could be drinking the Kool-Aid without realising
Finding a market need and validating demand for your product or service is mission-critical to getting off the ground and commercialising your idea successfully. So don’t make the mistake of skipping over the product/market fit stage of your start-up journey or getting caught in your start-up’s echo chamber when it comes to customer demand. Founders and their leadership teams must believe in themselves and their innovation, but this shouldn’t morph into blind faith in your venture’s success. There are many reasons why a seemingly great idea or winning product can fizzle. What’s important is to keep an open mind, and take what your customers, investors and external advisers say seriously. Although it could be hard to take at times, feedback is a gift. For more information on how to sidestep this pitfall, see our article, Nine reasons why innovation fails and how to avoid them.
5. Overnight success is a myth
The start-up journey is a marathon, not a sprint. When we think of businesses that achieved meteoric success seemingly overnight, the reality is their achievements were years, even decades in the making.[5] Elon Musk founded Tesla in 2003 and Starbucks started out with one shop in Seattle in 1971. Before its stellar success, Instagram languished as Burbn, a web app for whiskeys and bourbons.[6] Closer to home, Australian synthetic anti-infectives pioneer Recce Pharmaceuticals was founded nearly two decades ago in 2007. The key takeaway for leaders of start-ups and scale-ups is that patience and staying power are crucial. You need to be in a start-up for the long haul, not for a quick buck.
6. The learning curve is constant and steep
For start-up leaders, the hats are many. In the early days, whatever your leadership role is, you’ll need to be across strategic planning and know about growth hacking, management, pitching, data analytics, hiring, financial budgeting and marketing. And you’ll need to be good at most if not all of them. So, whether you’re the CFO or the Chief Technical Officer, you’ll need to become proficient at multiple skills within your discipline and outside of it too. That means having a fundamental love of learning is crucial for any start-up leader. As your start-up transitions into a scale-up, the steep learning curve continues. But at this point, it changes. Your challenge now is not so much about learning new things. It’s about learning to let go, taking off some of your many hats and adapting to the changes a growing business with a larger workforce and customer base brings.
7. Failing to plan is planning to fail
Benjamin Franklin, one of the founding fathers of the United States famously said, “If you fail to plan you are planning to fail!” This hard truth is particularly pertinent for start-ups when they approach commercialisation, and for scale-ups. It’s crucial to have a solid strategy and a clear mission, vision and values for your business to keep your start-up team on track. Underestimate the importance of having a robust, properly resourced go-to-market strategy at your peril. Take a step back and make sure you have set realistic goals, have the right team and adequate funding to execute your commercialisation phase and product launch successfully. Having a diverse capital stack and comprehensive financial strategy is a must, but it’s doubly important as your start-up begins to scale. Our articles, Commercialising innovation and launching your product and Moving from start-up to scale-up: five tips for success, offer some useful pointers.
8. Cash flow is crucial
Funding is the fuel that drives your start-up and scale-up. Many early-stage start-ups are able to secure some seed funding or a government grant to kick-start their venture, while other start-ups are 100% bootstrapped in the early days. But sooner or later, every start-up heading towards commercialisation must navigate the valley of death. At this point funding options are increasingly thin on the ground, and this is when most start-ups fail. Excellent financial management is the key to survival. If you’re doing R&D, make sure you register for the R&D Tax Incentive (R&DTI) refund. Accessing it early with R&D financing in the form of Radium Advances to accelerate your innovation and grow your tax refund is a smart move.
The valley of death and beyond
The valley of death is the period of negative cash flow start-ups must navigate successfully to begin reeling in customers and generating revenue. And it’s not the only time Radium Advances can come in handy for your business. Scale-ups can be at risk of growing too fast and becoming a victim of their own success by running out of cash. Providing you have eligible R&D; Radium Advances can help your business avoid this fate. To find out more, read our articles, Nine essential calculations for start-ups to succeed and The cash KPIs for scale-ups every founder should know.
9. You’re a leader, not the boss
Possibly the hardest of the hard truths for leaders is that you may be a leader but you’re not the boss. Indeed being ‘the boss’ in the traditional sense could set you up for failure. Ignore your customers (actual and potential), your staff, contractors, investors and ecosystem stakeholders at your peril. Even if you disagree with your customers, remember they’ll be right to some extent. Their feedback contains valuable learnings. When it comes to your employees, the more you can help them do their jobs well, the better it will be for your start-up or scale-up. Take Goldilocks Suit. The start-up began life as a baby wearables pioneer before partnering with stakeholders and leaning into an additional opportunity to create wearables for seniors.
The buck stops with you
While you may not be the boss in an old-school sense, start-up leaders still need to be accountable for their decisions. If you take on board the hard truths of start-up and scale-up leadership, success – not failure – will likely be around the next corner.
[1] Cheng, H. (2020). Brutal Truths About Startup Founders That Nobody Told You. [online] Jupitrr. Available at: https://medium.com/jupitrr/brutal-truths-about-startup-founders-that-nobody-told-you-6256196bcf40
[2] Genome, S. (2023). Startup Genome. [online] Startup Genome. Available at: https://startupgenome.com/article/the-state-of-the-global-startup-economy.
[3] Team, A. (2024). Shutting down Artifact. [online] Artifact News. Available at: https://medium.com/artifact-news/shutting-down-artifact-1e70de46d419
[4] Sifted. (2022). Burnout and bullying: Why startup workers’ mental health is so bad | Sifted. [online] Available at: https://sifted.eu/articles/mental-health-workplace.
[5] www.linkedin.com. (2023.). Startup Reality Check: Busting the Overnight Success Myth. [online] Available at: https://www.linkedin.com/pulse/startup-reality-check-busting-overnight-success-myth-matt-bailey
[6] Blystone, D. (2022). Instagram: What It Is, Its History, and How the Popular App Works. [online] Investopedia. Available at: https://www.investopedia.com/articles/investing/102615/story-instagram-rise-1-photo0sharing-app.asp.