And 5 ways to avoid being a part of it

I’ve been lucky enough to work in a few startups over the years, but I’ve also been unlucky enough to see some of them fail. The benefits of working in a startup have become almost cliche at this point. We’ve all seen job ads promising table tennis, free breakfasts, dogs and the ability work from home, but I feel like nobody is talking about something that has impacted me and almost everyone I know who has worked at a startup. Failure, and the resulting mental health issues that go with it.

First, let’s take a look at why startups fail. I want to make it very clear that I have immense respect for anyone who starts their own business. Running a startup is extremely difficult and founders are spread thin in so many different directions.

In addition to developing the product that will define the company and making enough money to keep it alive, they also have to secure funding, hire staff, pay rent, keep their workers happy and hit deadlines which are often out of their control. When you consider that it's one person doing several extremely difficult jobs, it’s no surprise that so many startups fail.

Think about it this way; Who do you know that can articulate a product’s unique advantages enough to get millions of dollars, while at the same time being likeable enough to keep their staff motivated and also have enough technical knowledge to be able to communicate to investors why the product that was pitched to them will be 6 months late, and 20% of what was promised?

Unless the founder hires the right people then the odds are against them. According to a study from the Harvard Business School by Shikhar Ghosh, 50% of startups fail within 5 years and 70% fail within 10 years. While this is devastating for the founder, it’s also a nightmare for the staff involved.

After spending years creatively solving problems, crunching and finding ways to work with a team of people, it’s extremely bizarre and draining to see everything you’ve worked on disappear in a matter of days. At the risk of sounding overly dramatic, it draws parallels to a torture method called learned helplessness. When a person realises that what they are working towards is, in fact, unattainable it removes human’s abilities to set goals and cognitively reward themselves when that goal is achieved. The resulting affects of this treatment can be depression and other mental illnesses.

So how can we avoid either working for a failing startup? Unfortunately there is no failsafe way of mitigating this situation. However I can offer some advice based entirely off of anecdotal evidence from myself and my friends who have had strangely similar stories of working in failing startups. We’ve worked in small and medium (20-50 person), well funded (30+ million) companies and they’ve have gone down in very similar ways. Here’s what to look out for:

1. Vanity Metrics

In the lean startup, Eric Reis explains that vanity metrics are statistics that on the surface make it look like your startup is performing well, but on closer inspection reveal the opposite. For example: One of the startups I worked was in the scaling phase. After 3 months we had about 160,000 users. This number was then put on every pitch deck and slide to boost morale. However, the number of returning users we had was around 20. That was less than the number of people that worked at the company. These statistics were used to make the company appear successful when the reality told a different story.

If your company is using hard metrics to show how successful they are, look closely at what they are actually saying, Bring it to the attention either of your direct boss, or failing that in front of everyone at your company. Use discretion when you do this so you don’t get fired. People in charge of you generally won’t like it when you make them look bad in front of everyone.

2. Arbitrary changes will save the company

One particular startup that I worked at was getting nothing done. We were constantly pivoting, changing the visual design and not releasing anything. However, we were going to move into an office. Management constantly assured us that all our complaints would be heard once we moved into the new office. I’m still not sure how changing a physical space can change the feature set of a digital product. Unsurprisingly, once we moved offices we still had the same issues and a year later the company didn’t exist. To combat this, simply ask “How is moving to a new office going to get us the users we need to not go out of business?”

3. Redesigning the product will change everything

There’s a saying in the startup world - If it looks good when you launched it then you waited too long. I’ve lived the extreme version of this. Constant redesigns, no direction, no definition of done. And then when you think you’re done, a new feature is added and for some reason you have to design everything again. Perfect is the enemy of done. Ship it and get feedback and you’ll get much better results than another unnecessary redesign.

4. Everything is dependant on one client

We’ve all been there. Every Friday you know you’re going to hear the same client or company name thats is going to help shoot your company to superstardom. If your entire business is dependant on the referral of one person or company it means they are in a dangerous position. That one entity can remove their support then you’re dead in the water. Also, it’s a sign that your marketing or accounts team can’t close any new business. To get around this, talk to marketing or sales and ask them about other potential leads. If there aren’t any it might be time to update your resumé.

5. The “we only need to convert 1% of the people” slide.

I’ve seen this in too many startup’s pitch decks and it goes something like this: Here is our go to market plan, we have a reach of 500 million people and if we only get 1% of them to sign up, thats still 50 million people! Exponential growth! Hockey stick graphs! Unfortunately the reality is that if 99% of people don’t want to sign up to something, the other 1% that might sign up, probably won’t have a reason to stick around. Ask management what makes them sure that 1% of people will actually stick around. If they have no answer, get on Linkedin and start talking to recruiters.

Hopefully these five warning signs help. Learn from my mistakes and avoid the crushing disappointment of seeing your hard work vanish before your eyes and start getting in contact with recruiters. Unfortunately as a designer your voice won’t really get heard on a management level so there is only so much you can do to try and help. However in the long run people will notice you are trying to help for the good of the company. Good luck!