Tech Founders Struggles with Marketing and Story
While this research was able to identify that tech founders' struggles with marketing and story may impact initial funding, data on how much importance should be placed on a founder's story was exceptionally limited. The research indicates that while a founder's story may help a tech company succeed, there is little evidence that the lack of a story is a main cause of struggle. I discuss the research, available data, and some helpful resources below.
Even after extensive research into media reports, industry reports, and academic studies, there wasn’t a lot of information or case studies on failed founding stories or PR techniques that failed regarding founders’ stories. This is most likely due to failures and failed attempts not being as marketable/publishable as more success-based stories. Also, companies (especially failed companies) are less likely to provide intimate details on failure because they may be concerned about their future successes or simply embarrassed and “done.” So, I released the date limits of the research in order to “go back in history” a bit and find failed tech startups, that had received at least series A funding and had been operating for at least two years in order to cull their stories and media reports, and analyze key factors leading to their failures. Even then, I wasn’t able to find anything in the media on startup failure or marketing failures within startups that focused on flawed founder stories.
I was able to unearth some really great research about tech startup postmortems that provided excerpts of 242 analyses of failed tech startups that offer a brief look at what went wrong.
—Fashion Project failed because it didn’t have money to spend on marketing to bring in shoppers.
—Quirky noted handling too much too soon, including marketing.
—GroupSpaces noted their failure was due to premature scaling.
—Everpix noted they began marketing too late and that their first pitch deck to investors was “mediocre.”
Still, even after reviewing each of the available goodbye letters, there was nothing posted about failures directly due to the founding story.
There seemed to be a number of letters reporting some fumble or misstep with marketing, in general. However, nothing directly tied to the founder’s story was mentioned in terms of failures. In fact, founders’ stories seem so bound by heroic ideologies that even if a company does fail, these stories are not blamed for the failure.
For instance, Zenefits' co-founder, Parker Conrad, had a great founding story that focused on an “aha” moment, experience in the field, and innovation. However, when the company failed, staffing problems were to blame. Neither the story nor marketing were mentioned as contributing factors to its demise. Likewise, Zirtual's eventual failure was not attributed to CEO Maren Kate Donovan's eBay Power Seller story. Rather, it was blamed on not having the proper funds the company needed to convert independent contractors to full-time employees with benefits.
I also found a research blog that delved deep into “Lost Founders” and why their startups failed (please note that these startups are India-based but marketed globally). However, none of the available case studies noted the founder’s story as a potential marketing problem. That being said, the story about Finomena had an interesting note from an ex-employee: "One of the co-founders won’t stop boasting about the college she went to and the companies she worked at…when you hear her speak you’ll realize it’s hard to even believe her history…" While this type of response hints that a founder's story could be a problem internally, it still does not provide evidence that it can cause a company's demise.
Finally, I looked for what funders and venture capitalists (VC) look for when funding relatively new tech startups. I mostly found lists that show that VCs tend to focus more towards metrics and experience, rather than on the founder’s story. However, I was able to find a few helpful quotes from VCs on what they look for in the founder’s personality and/or story prior to making an investment. I’ve listed those and a few other resources you might find helpful in the following section.
Being underfunded is one of the primary reasons why startups fail. In 2014 Fortune analyzed more than 100 startup postmortems and found that almost 1/3 (29%) failed because of lack of funding or they “ran out of cash” (please note that while the article is older than Wonder’s standard two-year research threshold it is cited here because the data have not been reliably reproduced by any later source). It should also be noted that many VCs see the founder’s story as a major “selling point” to provide funding. Poor marketing (14%) and no financing/investor interest (8%) were also notable reasons for startup failure that may be influenced by the founder’s story, but once again, there is no hard evidence to support this theory.
According to CNBC, “most VCs said they placed a greater emphasis on the founder's personality, and on his team” when making funding decisions, which could tie into why a founder's story is important for funding, if not a major factor in why a company fails. A few VC quotes that go along with this idea are presented below.
—Taizo Son, founder of the VC firm Mistletoe, reported that the criteria he uses to invest in a startup are based on the founder’s passion and mindset: “My criteria to invest are the founders. So I won't check any business plans, any economic projections, spreadsheets; but (instead) I focus on the founder's mindset (and) passion.”
—Yossi Vardi, a prominent VC investor of 86 startups, noted “when I started, I thought ideas were overrated and now I think ideas are irrelevant. It's about execution and the personality of the people, rather than about the idea.”
—Parul Singh, principal at a VC firm called the Founder Collective, stated that in terms of personal contact with a founder one of her red flags is arrogance: “I am always watching for customer and market orientation. If someone is enamored with their product but have an 'if I build it, they will come' attitude, I don’t think that works. The only red flag for me is arrogance. It’s a fine line. You have to believe you can build something that never existed before, so there is a certain arrogance or confidence needed for that. But you also have to deal with a lot of (sometimes negative) feedback coming from the market and be able to reorient yourself, so if you’re too inflexible to take input, that’s a bad sign.”
—Om Malik, partner at True Ventures, a VC firm, noted that "since we do seed and early-stage investments, the answer is very simple: People first and foremost. Ideas come next, and the potential market comes third. I think seed investors who are in for the long haul need to love the entrepreneur [enough to] have a fair and honest and constant communication while building the company."
—Magdalena Yeşil, founder of Broadway Angels, a prominent VC firm, reports that she looks for the greatness in a founder’s story, not necessarily that the founder is great personally: "Own your story and believe in it yourself, and see if [funders] are smart enough to come along on the ride."
—Stephanie Palmer, partner at Uncork Capital, said of first pitch meetings with funders, "[The founder’s] personal story is paramount when raising money for the first time. It’s going to be a long and likely bumpy journey as you build your company. I want to understand why you are uniquely positioned to defy the odds and build a large and lasting company in the absence of very limited proof points today. Your personal story can be a powerful tool to communicate your experience, your motivation, your perseverance, and your passion."
Even when a founder's story is discovered to be a lie, it doesn't always lead to a company's failure, particularly if other factors overshadow the lie. For example, Netflix's founding story of Blockbuster late fees spurring the company's start was discovered to be a lie in 2002. However, in 2012, when marketing for a book about Netflix's historic rise began, the falsehood was discussed openly with very few negative consequences other than some critics noting that the CEO and co-founder, Reed Hastings, had a "social IQ of zero." To this day, the flawed founder story is little more than a blip on Netflix’s success radar than any kind of serious issue regarding company trust. This story, though, may simply prove that a founder's story takes a backseat to a genius product when determining a company's success or failure.
You may also be interested in this fascinating academic study on a non-tech, non-US startup and their origin story perception as it highlights their perception vs. stakeholder/interest group perceptions and the resulting effect.
Another research path that could prove fruitful for you is this list of success stories. It dates back to 2014, but includes some really key founder success stories that allow for deep analysis of why they worked for marketing.
While there was no preexisting research that provided niche case studies on tech startups and their marketing failures regarding the founders’ stories, I was able to identify several quotes from investors that focused on founders' personality, pitches, and stories that indicate a story's importance for initial funding. However, the lack of evidence that a founder's story or lack thereof leads to a struggle to succeed indicates that while a founding story may be important for funding, it is less critical for a startup's sustained success.