Emily Marsh June 25 2019

Sink or swim: what does great leadership look like in a startup?

Working in startups can be both exciting and exhilarating as well as unpredictable and stressful. What kind of leader does it take to help navigate people through the highs and lows?

We know that leadership plays a big part in company performance. Nowhere is this more apparent than for a startup business, simultaneously attempting to build a customer base and scale their business.

Leadership is the one thing that seasoned investors look for above all. Be it for Pre-Seed funding or Series B, investors really want:

Founders who are interested in building a great team around them. That’s not only cofounders but that’s ultimately the total management team that’s in the company. Founders who know what they don’t know are really valuable.”

Success doesn’t just rely on having a great idea, a solid business model, and a skilled team. Leadership style is paramount to whether or not a startup company sinks or swims. Research suggests that up to 90% of startups fail in the first few years. So, what kind of leader is required to make sure a startup business successfully bucks this trend, becoming one of the 10% and aiming for ‘unicorn-status’?

What do leaders need to ensure that they swim and don’t sink?

The unpredictability of startups

In the unpredictable world of startups, there is absolutely no guarantee that your hard work will result in success. A lot of the time, there will be factors beyond your control that impact how far your business can go.

When a startup is doing well, there's a buzz and excitement that radiates from the team. When it’s not doing well - whether it’s cash flow issues or technical problems - your team ends up with the weight of the world on their shoulders and an ever-shortening runway. The uncertain future, the newness of your team, and the fast pace of change can leave employees in a constant state of flux, which can be stressful to say the least.

In this fragile environment, leaders play an important role. Whether it’s a tough decision they need to make, pitching for yet another round of investment, or keeping morale high as the team are asked to pivot again, startup founders and leaders can’t afford to take their eye off the ball.

Within startups, you’re often bringing together very different types of people with very different backgrounds, all wanting to change the world. In a world where disruption is king and traditions are thrown out of the window, how can our startup leaders achieve change effectively whilst making their business work in our current world. One clear example of needing to disrupt the status quo whilst meeting existing standards and regulatory bodies is the FinTech industry.

Where finance meets technology, we have seen the rise of new banks, different ways of saving money, and an opening up of the previously mysterious world of small-scale investments. The finance industry is all about ethics, and doing things by the book, and keeping everything “safe” - whereas the technology industry these days is more about collaboration, innovation, and solving problems smartly. The FinTech universe essentially brings a world used to official oversight and audit – a very hands-on leadership approach – with that of autonomy and creative freedom. This creates a recurring challenger for the leaders of these startups: how can they adopt a style that suits both cultures and how do they get everyone working together cohesively?

How to be a great leader in a startup

In a recent blog post, we talked about the leadership revolution and how there are three key areas that will make a real difference to how we lead. Leading a startup can in many ways feel like leading a revolution, and so these areas are hugely applicable in this context.

What's your purpose?

Leaders of startups need to inspire people to believe in the purpose - the reason your company exists. To succeed in the unpredictable world of a startup, everyone must believe in what they are doing and what they are working towards.

A belief in the 'why' is what will spur people on when the going gets tough; when you lose out on the next round of funding you were counting on or when you fail to secure a new customer. It’s also what will unite people with different personalities, backgrounds, and experience.

Who do you trust?

If you want people to work with you to drive the business forward, you need to show them you trust them to get on with it. Being a leader is no longer about telling people what to do - it’s about encouraging people to be innovative and creative. This is what gets a startup growing and thriving. All the while, platforms like Slack and Skype provide continuous streams of communication so that everyone can be kept in the loop.

Sweta Patel, Growth Advisor to many startups in Silicon Valley, reasons that leaders in startups need to nurture people by encouraging an entrepreneurial spirit. Writing for Forbes, she says, “We all want to be a part of something greater than ourselves; that’s why we are all entrepreneurs at heart. Companies that nurture this spirit will have a better chance at succeeding because they are developing a fully invested team that is committed to propelling the business forward.”

Is this what it’s all about, trusting people to think like entrepreneurs?

As well as trusting others, leaders need the courage to trust their own decisions. Although it’s a group effort, sometimes the buck does stop with the person at the top. They need to be courageous enough to make decisions, bold enough to be open, and honest with their employees about how they are making those decisions.

How do you get people to make a difference?

To empower people to make a difference, you need to make them feel that the business is as much their baby as it is yours. This requires listening (really listening) to people’s ideas and encouraging a continual feedback loop.

Adam Bird is CEO and co-founder of Cronofy, a calendar syncing software company. In an article by The Startup, he is quoted as saying that listening is the most important quality of being an effective leader in a startup business: “Part of being a leader is assimilating inputs from all sorts of sources and distilling the patterns and insight from it. Your team are inevitably closer to customers, delivery, billing, in fact pretty much any aspect of the businesses. Unless you’re properly open to listening to what they are reporting to you, both directly and indirectly, you will struggle to help them effectively navigate the business.”

Is collaborative leadership the answer?

Everything we've discussed points towards a collaborative leadership style. With a large, well-established organisational culture, change can feel like turning a tanker, with a hierarchical structure and multiple layers of leaderships slowing decisions and behaviour change down. But, a small startup is the perfect testing ground for building a collaborative culture and honing your leadership skills.

What do you think? Is a collaborative and humble leadership style the magic bullet for startup success?

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