Founder's Guide
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Debugging Your Startup: What to Do When Things Aren’t Working

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Every CEO goes through times when they say to themselves “things just aren’t working.” While this might very well be true, what is not true is the feeling that generally accompanies it: “I’m all alone and this is a unique problem.”

After seeing startups from the inside and outside, from seed rounds to billion-dollar companies, I can definitely say that all problems CEOs experience are repeated. Across board meetings, CEO dinners, coaching sessions, leadership retreats–I hear the same startup problems mirrored back to me time and time again. Here are the common ones:

  1. I don’t have product-market fit
  2. I need money to run my business but investors don’t want to give it to me
  3. I have product-market fit but I hate my job
  4. We aren’t making progress against our goal
  5. Critical people keep leaving my company

When you have one of these problems and you don’t know what to do, it is easy to feel stuck. But you are not alone, many others have solved very similar problems in their own companies. This guide describes the most common reasons behind these problems, and how you can solve for them inside your company.

 

CEO problem one: I don’t have product-market fit

If you don’t ever find product-market fit (PMF), your startup is fucked. You might not have product-market fit if:

  • You aren’t growing
  • You have high churn
  • Your product is hard to sell
  • Customers don’t seem to care that much

What this feels like is constantly being stuck in the early phases of a startup: messing around with new product ideas, getting no traction, going back to the drawing board.

 

“You might not have product-market fit if: (1) your startup isn’t growing; (2) you have high churn; (3) your product is hard to sell; or (4) customers don’t seem to care that much.” Click To Tweet

 

Another variant of this is that you’ve gotten to a middle-stage because you either did have PMF at one point–or you thought you did–and then you scaled up your team. This can be even harder to get out of because you may have a lot of momentum with a customer base or an idea that isn’t really working anymore. It can be hard to pivot what you are doing because of the very public commitments you’ve made to employees, customers, investors, and, most importantly, yourself.

 

Pre-conditions for finding product-market fit

I won’t explain how to find PMF; there are other great articles on how to find product-market fit, including this one from Rahul Vorha (CEO of Superhuman). However, I will explain the necessary pre-conditions for finding PMF and what the usual blockers are:

You need to decide who your customer is. At Justin.tv (a live video broadcasting site), we could never decide who our primary customer was. Was it the viewer? Was it the broadcaster? What kind of broadcaster, talk show streamers? Because we were scared to commit, and thus tried to serve everyone, we served everyone very poorly. Only when we decided to focus on gaming broadcasters and pivot to Twitch did we truly find product-market fit.

You need to focus on that customer. It is easy to get distracted by shiny new opportunities. For example, a big customer (10x bigger than any existing customer) might come around with a big revenue opportunity. But servicing that revenue opportunity may result in a bunch of custom work. Do you take it? Many CEOs are tempted, but it won’t help you serve the customer base you set out to serve. In fact, it will hurt your ability to execute as well as you could for your original customer base.

You need to talk to that customer. Many founders build what is in their head, never bothering to check their assumptions with the market. It is easy to pay lip service to the mantra “talk to your customers” without actually doing it. You need to get out there and talk to at least five potential, and five actual customers so that you can see what you are currently servicing and what you can service better. When talking to customers, you need to learn about who they are, what they care about, and what their needs are. This is the data that will let you focus on what they truly want. Also, this isn’t a one-time thing–it should be a continual practice to gauge how the needs of your customers change as your services improve.

You need to have a team who can execute a solution that is actually 10x better than alternatives (along at least one important dimension). Many times this step is ignored. If the new customer base and new product require a specific set of skills to actually make something very good, you will need to have those skills. Many teams just do not have the skills to execute on complex products but refuse to actually admit it to themselves (until they just run out of money and die).

 

CEO problem two: I need money to run my business but investors don’t want to give it to me

Finding and meeting investors can be a challenge of its own, before having to convince them to actually invest. Feeling like you deserve money, and that it is unjust that you aren’t getting it is a very common sentiment among founders struggling with this process.

Guess what: No business deserves to be funded. Investment is amoral. By default, no one gives a shit how much work you’ve put in, what your backstory is, or why you really care about solving this problem–they are only concerned with how strongly these items indicate a (massively) fruitful investment opportunity.

If you are having trouble convincing investors to give you money, something is wrong with one or more of the following:

  • Your market
  • Your metrics
  • Your narrative

 

If you’re having trouble convincing investors to give you money, something is wrong with one of the following: (1) your market; (2) your metrics; (3) your narrative. Click To Tweet

 

Validate your market

Investors want to invest in big markets. The entire venture model is predicated on finding home runs that deliver Uber-like returns to make every General Partner into a billionaire. You can think this is unfair, but that doesn’t change reality and it doesn’t change the economics of venture funds. You should pitch the biggest idea into the biggest market that you actually believe in.

If you are having trouble convincing investors your market is big enough, they might not give you that feedback directly. Backchanneling through mutual connections can be a better way to get you the real data.

If your market is really small, maybe raising money isn’t a realistic solution for you. Often times I see founders who refuse to accept the reality about their market size fundability. In this case, you might be better off admitting that to yourself and figuring out a way to fund the business through revenue.

 

Identify your key metrics

Investors want to invest in good metrics. What metrics are important depend on what kind of business you are in. For hardware businesses, bill of materials cost (BOM), margin, customer acquisition cost (CAC), and revenue growth rate are often key indicators of overall performance. For SaaS, the important metrics are typically CAC, average customer value (ACV), churn, sales efficiency, and revenue growth; while consumer businesses tend to focus on daily active users (DAU) and retention.

Like it or not, every business is basically a spreadsheet equation that spits out a $ of profit number at the bottom. Investors are trying to pick the spreadsheets with the most profit, and the lowest risk of having the variables changed up on them suddenly. Lots of founders want to deny reality by claiming their business is special. It’s not.

 

If your metrics aren’t working for you, they're working against you. Good metrics make it easy for people to invest. Bad metrics make it tough. Click To Tweet

 

Develop a compelling narrative

You need to tell a compelling story about why anyone should give a shit about your business. Most founders tell a story that is either too complex, assuming too much effort for investors to decode complexities or industry jargon. Good stories are simple, powerful, and lead you to a natural conclusion (in the case of a fundraising pitch, that conclusion is that the company will be worth billions).

If your narrative sucks, you are relying on investors working hard to figure out whether your company is good or not. Unfortunately, most won’t do the work.

If you want to read more about how to design a narrative in your fundraise, I also wrote a post on raising a Series A from VCs.

 

CEO problem three: I have product-market fit, but I hate my job

This one is more common than you think. It also comes in many forms and variants. Some common ones we will address:

  • “I’m bad at my job, and I hate it”
  • “I’m good at my job, and I hate it”
  • “I’m burned out” / “I’m not excited anymore” / “I’m distracted by new things”

 

I’m bad at my job, and I hate it

Of course, you hate it. You feel like you are failing every day. This is a common feeling for founders who are actually being successful because if you are being successful, you are continuously forced to face new challenges and do things you’ve never done before. Every rung you climb up the ladder is different. First, you figure out how to build a product. Once you’ve mastered that, you have to do sales. Just when you’re getting good at sales, now you need HR because there are too many people! Oops, all of a sudden the product is slowing down, competitors are getting to feature parity and you need to figure out how to hire a head of product. And so on and so forth.

Your first instinct might be to think “I shouldn’t be CEO.” But the problem with that conclusion is that it is predicated on the idea that you can find a superman to take over the CEO role who can do everything. No one can do everything. The person you find will go out and do what you should be doing right now: hiring people on to his or her team with more experience, and empowering them to make more decisions.

For more on when to hire for specific roles, see Co-founder and CEO of BloomReach, Raj De Datta’s post on hiring salespeople.

 

I’m good at my job, and I hate it

You’ve let yourself be trapped in your Zone of Excellence: the things you are good at doing but don’t really give you energy. The insidious problem of the Zone of Excellence is that you can easily think you should be doing those things because you are good at them and the company presumably needs them done. The problem with living in your Zone of Excellence is that you have created a job you excel at but hate doing.

The key to escaping your Zone of Excellence is to live in your Zone of Genius: the things you love doing that give you energy. You need to ruthlessly delegate the things in your Zone of Excellence. How do you do that? By hiring people on your team with experience, and empowering them to take on those things.

 

I’m burned out / not excited / distracted by shiny new things

Being burned out is a consequence of spending too much time hating your job. The same is true of escapist fantasies (building a different company) and still not being excited.

One of your top priorities in a startup, once you have product-market fit, is to figure out how to retain yourself. Startups are a marathon, not a sprint. If you can’t figure out how to make a job that you actually want to show up for and do every day, then you are going to get sick of it, and quit. Failing to create a role that utilizes your talents, but also energizes you, will hurt your company and is not in the interests of you, your investors, your employees or your customers. So do the right thing, and figure out how to make your job great for you.

 

CEO problem four: We aren’t making progress against our goal

One of the most common things I hear from founders is “Everything takes longer than it should!” This concern is super common. In my experience, it comes from two possible root causes:

  • You need to focus more and do fewer things
  • You need to hire different people

 

You need to focus more

Often, startups get bogged down in spreading themselves too thin and trying to take on too many things. It is tempting for founders to quote The Mythical Man-Month – which illustrates how the completion of a software project will become more and more delayed as more manpower gets added to it–and use it as an excuse to give every engineer (or even person) in the company a different project. If you feel like you aren’t making enough headway on the top goal in your company, you might need to focus on that goal and sacrifice the things that are less important. Two common scenarios where it’s easy to lose sight of this include: f

  • The previously mentioned example of how a company’s biggest client or revenue opportunity can persuade teams to go for the low-hanging fruit, even if it harms their ability to serve their primary customer base. This will feel great at first, but end up slowing the company’s progression in the long run. Clearly defining what you want to execute on and staying firmly focused on that will help to avoid this.
  • When customers request new features or services, it’s easy to fall into the trap of building them right away. Instead, first validate that these ideas are even aligned with your top goal. Then, validate these ideas further by confirming their value with other customers to ensure there is a significant use case amongst your primary customer base.

 

You need to hire different people

Often startups initially hire people who index low on execution and low on experience. This is for a couple of reasons:

  • Founders hire who they know, and if they are young, they know a lot of young people without any experience
  • Founders without functional experience sometimes can’t tell if someone is a high performer in that functional area or not, and so hire low performers
  • The people who are interested in joining early startups are often very creative people who feel stifled in bigger companies (though sometimes these very creative people are not the most execution-oriented people)

Why would anyone with actual, valuable experience and significant opportunity costs join a startup (that is probably destined to fail!)? Often at the beginning of a company–the first couple years–the founders might not have a choice of who to hire, because the pool of people willing to join their startup is probably very small. After a company gets to a certain stage it is normal that the pool of candidates has expanded greatly. However, the founders are often unwilling to re-evaluate whether some of the members of the current team are perhaps too low on execution and/or experience for the startup’s current needs.

Having the wrong people can manifest itself in executing slowly against goals. Mistakes get made, wrong paths get taken, and progress can grind to a halt.

The remedy to this is for founders to have ongoing, assertive, and candid conversations with team members about the needs of the startup, and whether the team members are able to meet those needs, as well as what support is needed by the team members to meet them. If they aren’t able to do the job, the team members should be layered under someone who has more experience. Newsflash: you aren’t doing anyone any favors leaving them in a job they aren’t able to do. If you leave them there they will eventually burn out and quit (but first probably become toxic within your organization).

As Co-founder and CEO of Lattice, Jack Altman puts it in his post on building startup teams, “Hire and fire like it’s your most important job.”

 

CEO problem five: Critical people keep leaving my company

If you have a problem with good people continuously deciding to go to business school, “realizing that they don’t want to work at a startup”, or going back to their old job at Facebook, it may be because of one of the following:

  • You haven’t created clear career paths for people
  • You haven’t defined the purpose of the company (aka Mission)
  • You aren’t working together as a team
  • Your culture sucks

 

Promote career development inside your company

Founders often don’t realize this: people give a shit about their careers. It is easy to forget about that when it feels like there are existential things on the line every day.

After your startup gets to a certain size, people will really start to care about their opportunities and where working at your company gets them career-wise. In order to address this, you should implement a leveling system (similar to what Facebook or Google have), sooner rather than later. You should also create a performance review system and a skills grid that explains what skills need to be achieved or demonstrated by every person at every level to get to the next level. This will make it much easier for your team to know what they need to do to advance their career at your company.

 

What is the company’s mission?

People need a reason to get out of bed and show up at work every day. Paying rent is an okay reason but, if that’s the only reason, then as soon as someone shows up with a bigger bag of money they will leave you to secure the bigger bag.

Some companies start off with a mission-oriented founder with a purpose, and some companies start off as an accident. If you are in the latter (or even in the former), you should think carefully about what your company’s purpose is and whether it is attractive to the right pool of talent. Culture-minded professionals will take your company’s mission into consideration when deciding whether or not to join your team, so it’s important to think carefully about this.

After you have a mission, make sure to communicate it. However much you think you are communicating it, it is probably not enough. It is also very critical for you to help tie back what rank and file employees are contributing to the mission so that they can know their work has a purpose.

 

Not working together as a team

Often times, founders over-index on individuals executing on tasks and forget to build a cohesive team that executes together. This may manifest itself in these ways:

  • Politics: people fighting with each other for more power
  • Trust: lack of compromise between team members
  • Withholding: people not telling each other their real opinions

There are many resources on team building, but the thing I’ve found most valuable is to start by building trust. High trust is the first step to getting a team to operate as a team. Without trust, there is no foundation.

Some ways to build trust:

  • Invest in getting to know your team: The better you know your team and the more you are invested in knowing them personally, the more they will trust you. Some questions I have started asking to get to know my team members better:
    • “What do you want from your relationship with me?” Assuming they value being in a relationship with me, what do each of them need from me in that relationship? I want to know, so I can try to give it to each of them.
    • “How can your job at Atrium be your dream job?” I want to know what they want from their job (opportunities, access, etc) and then I want to work towards giving each of them what they want (within the constraints of reality and our business).
  • Trust document: Have everyone outline their own personal story and why they build trust the way they do and have everyone share as a group
  • Vulnerability: Disclosure of personal information we feel vulnerable about is a way to build trust. The group leader will have to model this behavior first, to create a safe environment. “If you really knew me…” is a great exercise to do this with.
  • Offsites: Plan time with your team where you spend time explicitly on getting to know each other and not just on work.
  • Naming emotions: Calling out your own (or others) emotions is a way to drive deeper into what our fear, anger, and sadness may reveal about the dynamics at work. Underlying these emotions there is often some dissent or open questions. As a skillful facilitator and leader, you can build trust by getting people to stop withholding from each other using this technique.

 

Your culture sucks

Many founders are not very intentional about their culture when they start their company. It is very easy to become 100% preoccupied with doing the things you need to do in the short term to survive another day. The unfortunate consequence of this is that your culture becomes the set of random good and bad qualities that the founders and early leaders happened to model in the early days.

Some signs your culture sucks:

  • Team members talk about bad things happening to them all the time
  • Team members are not invested in the company’s success
  • Team members are actively toxic and that behavior is considered normal

In order to remedy this, you might try the following:

  • Create company values. Values are like a decision-making framework that can be there when you aren’t. In order for them to work, there must be buy-in and repetition. At Atrium, we go over our six core values at the start of every bi-weekly all-hands and recognize exemplary individuals, nominated by employees, as our Values Champions.
  • Make hard decisions to replace toxic individuals. Sometimes early team members are so scarred from the past dynamics inside the company that they can no longer be positive, even if the environment improves. Those team members may need to be helped to find other opportunities outside your company. But don’t forget what they’ve contributed to your company’s growth and pay it back by contributing to their career growth, whether that means tapping into your network for opportunities or simply providing candid (and helpful) feedback that will aid them in their next role. An employee that is toxic at one company can be a valuable contributor at another.
  • Model the behavior you want to see. As a leader in the company, you need to model the behavior you want to see from your team members. Solicit feedback from teammates on your performance as CEO–they will then be more receptive to receiving their own feedback, and may even get in the habit of seeking it themselves. At Atrium, I provide copies of my favorite books to employees–most recently on leadership, teamwork, and mindfulness–and hold book club discussions to see how we as a company can benefit from implementing some of the practices. The more you do for your company, the more your company will begin doing on its own.

 

Seek help from your peers, not pity

Everyone has problems. Founders are no exception. Somewhere out there, someone has solved a situation exactly like the one you are in. Find resources where founders like yourself are putting their heads together to solve the same types of problems you’re going through.

There are a lot of great communities to join and contribute to in order to find those like-minded peers. Follow topics like Startup Founders and Entrepreneurs on Quora, or The Startup on Medium. Go to meetups and events like Atrium’s monthly Founders Happy Hour. Subscribe to thought leaders like Andrew Chen and our blog to keep up with learnings from a variety of different founders and investors.

Rejoice in knowing your problems are not unique! If you take a step back and really analyze your situation with a healthy degree of self-awareness, you can certainly figure it out too.

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  • “Somewhere out there, someone has solved a situation exactly like the one you are in.” This struck a chord with me. I am moving from freelancer to startup and feel a bit directionless at times. I have realized lately that I need to reach out more and surround myself with inspiring people who’ve been there.

  • Amazing well-written and organized article Justin. Love that you mentioned Quora first in things to follow/read (which is like a niche secret!), it has been an amazing resource lately for me along with The Startup on Medium (and of course Atrium and Andrew Chen!). Something about Quora’s algorithms is working very well and all the startup topics to follow (like the one you linked) has been amazing.

    Keep it up! I’ve have taken notes and highlighted parts of this article to keep in mind for my startup–the Twitch piece about focusing on a target customer is something I’m actually going through right now from our beta testing, once we figured that out from users feedback it helps everything from product focus and simplification (it’s just amazing what hyper focus and targeting does to our team and MVP!) and building something target users are genuinely excited about (non-target users we have to ignore). I’m an Atrium customer and have been recommending Atrium to every startup founder I’m meeting.

  • mm

    Justin Kan is an internet entrepreneur and investor known for founding various companies, including Twitch--a video game streaming platform (acquired by Amazon for $970mm). He served as Partner at Y Combinator, where he impacted over 900 companies and funded more than 130. Currently, Justin serves as CEO of Atrium, where he's building technology to revolutionize the $450bn legal industry.

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