Startup problems: Why founders keep getting fired

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Monthly Archives: February 2018

Startup problems: Why founders keep getting fired

Every founder dreams of making it big.

Stories about struggling entrepreneurs who turned their startup into million-dollar businesses have captivated the industry for years. But what founders rarely talk about is what happens when they’re asked to leave the very company they helped create.

“The interesting paradox is that when founder-CEOs do really well that also increases the chances that they’re going to be replaced.”

It may sound counterintuitive, but starting a company doesn’t guarantee a job for life. Founders are forced out all the time. Entrepreneurs behind some of today’s most-talked-about tech enterprises — like Steve Jobs (Apple), Jerry Yang (Yahoo) and Andrew Mason (Groupon) — all found themselves pushed out at one point in their career.

Getting the red slip

 
Interestingly a founder’s early success can play a crucial part in their firing. As startups grow, they often bring on more investors. These investors end up on the board of directors and can make management decisions about hiring and firing.

In fact, a study by Noam Wasserman, a professor at the University of Southern California, found founders rarely last. On average, four out of five entrepreneurs are forced to step down or removed from management. By the time startups reach the three-year mark 50 per cent of founders are no longer CEO. By the IPO fewer than 25 per cent still lead their company.

“The percentage of founder-CEOs who ‘go the distance’ is extremely low,” Wasserman explains.

“People like Bill Gates and Larry Ellison, who are able to lead their companies for quite a while, get all the attention because they are rare.”

Plan for the future

 
There aren’t any steadfast rules for founders who want to stick around, but here are three things that can help.

Ryan Howard, ex-CEO of Practice Fusion, was fired twice from his own company. He suggests entrepreneurs plan ahead in case one day they’re forced out too.

It helps, he says, to tackle the uncomfortable ‘what ifs’ by hiring a lawyer who can help, he explains in Fast Company. “That attorney can help draw up an employment agreement for the founders. [It] might include things like accelerated vesting and a severance package.”

Don’t give up too much control

 
Another way to prevent being pushed out is to properly vet board members. Ensure new members offer value, share the same vision and future plans for the company. By doing this, founders can spend less time worrying about being ousted and concentrate on work.

“Founders get fired when they’ve turned over majority control of their company to others in exchange for working capital, and the investors lose faith in the founders’ ability to create value” shared Ian McCullough, engineering manager for Uber.

Grow with the company

 
Changing with a company is crucial. Like everything in life, it can take time for entrepreneurs to get accustomed to a new environment. Founders that can grow with their team and adapt have a better chance of lasting.

“If you are a founder that constantly questions yourself as well as your business then the founder concerned is better positioned to carry on making the right decisions for the business,” explains U.S. VC Guy Lewis.

Best of both worlds: The non-profits that act like a startup

Technology influences everything we do. It affects how our economy runs, the way we vote and even the medical care we access. In fact, tech (and the startups that create it) are behind some of today’s most successful social breakthroughs and nonprofits are taking notice.

The new nonprofit model

 
In an effort to emulate their success, more not-for-profit companies are choosing to run their organizations like a lean startup. For Rumie founder Tariq Fancy the startup model has proven incredibly successful. 

Since launching in 2003, Rumie has provided its low-cost tablets — that hold up to 10,000 textbooks — to youth around the world. Through its technology students can learn about a variety of topics, which include science, math and history.

By adopting a scrappy can-do attitude and implementing new technological resources, they’re making a difference in the lives of those who need it most. Just recently the company was awarded the Google Impact Challenge award for their ongoing efforts while Fancy, himself, was named one of BNN’s Top 40 under 40.

According to Fast Forward, a U.S.-based nonprofit accelerator, the number of nonprofit startups has more than tripled since 2000. A figure that proves just how popular the concept has become over the years. More investors and wealthy benefactors are opting to invest in hybrid companies (like Rumie) with a social mandate. 

To learn more about how nonprofit startups are changing the world listen to  Robert Gold, host of BusinessCast, interview Fancy . Make sure to also visit our official iTunes page.

Why VCs keep falling in love with dating apps

Finding love online isn’t new.

Dating sites, à la eHarmony, OKCupid and Match.com, have used top-secret algorithms to match singles for almost two decades. However, a unique breed of smartphone apps — think Tinder and Grindr — focused on instant matching have revolutionized the dating market.

Since then a slew of new startups hoping to mimic their meteoric success have managed to not only attract investors from across the globe but spawn a hodgepodge of imitators all looking to hit it big.

In recent years niche apps (everything from @coffeeMbagel to @Bumble and even Sizzle (a free platform for bacon lovers) have diversified the market.

Looking for a lover who must love dogs? There’s an app for it. Seeking out singles who have thick, luscious beards? There’s an app for it. Want a partner who’s a dedicated foodie? Yep, you guessed it. There’s an app for it.

But, in an oversaturated market that’s facing steep competition from new upstarts, can dating apps continue to thrive? For entrepreneurs who can outlast the competition the rewards are huge but so are the risks.

A match made in heaven

It should come as no surprise that both entrepreneurs and VCs are diving head first into online dating. Love is now a multi-billion dollar business. In fact, a report by Fast Company, found the online dating market worth more than $4 billion. China represents approximately $1.6 billion of that total, likely buoyed by its growing economy and a gender imbalance that sees men outnumber women almost two to one.

It also doesn’t hurt that in North America more men and women are signing up for online dating sites. A study by Pew Research Center found the number of people aged 18 to 24 dating online tripled between 2003 and 2016.

When done right, dating apps have also managed to rack up a large number of users and money. Last summer Match.com offered to acquire Bumble for $450 million (valuing the company at $1 billion). Tinder is 50 million-members strong and valued at $3 billion while Coffee Meets Bagel has raised a total of $16.7 million and famously turned down a $30 million takeover offer on Shark Tank.

“The singles market is growing, which means category size is growing. In 2011 there were about 300 million single adults online worldwide,” explains Coffee Meets Bagel co-founder Dawoon Kang about the ever-increasing market. That number will be close to about 700 million by 2019. Growing category size means growing revenue for dating apps that serve singles,”

How to make it work

So, what separates successful dating apps from the rest? How can entrepreneurs create a lasting relationship with consumers? It all boils down to finding an underserved market and creating unique services that provide meaningful experiences.

Happn, a GPS-focused app that’s raised $22 million, found its niche by matching people who have physically crossed paths. Through location tracking, it connects singles who happen to share the same commute, visit the same coffee shop or even pass each other on the street.

We’re a generation used to technology that does everything. Apps that connect people together in a way that’s easy, genuine and touch on with real life work and that’s why Happn works, explain Emma Mrejen, a dating expert at @Happn_app

Some of the biggest and most successful companies in recent years were apps focused on Asia’s growing, yet underserved, market that up until a few years ago had few competitors. Last year Beijing-based Tantan raised $70 million while Singapore’s Paktor brought in $32.5 million in 2016 and gay dating app Blued secured $100 million earlier this year.

In North America, more companies are diversifying beyond romance-based offerings to create new value for their users. For Bumble, that means asking users to swipe right on potential business contacts, new friends, and even prospective mentors. Tinder and Plenty of Fish also offer up friendship as one of its core services.

While it may seem like an odd prospect to look for friends on dating apps it makes sense to customers accustomed to swiping right on everything from food to love.  Of course, the future for digital dating is uncertain, but startups that hope to survive should look to new trends before it’s too late stand if they hope to create a lasting relationship.

Two startup community champions you should know

Helping those in need is no easy feat for Canada’s gamechangers. Across the country, a network of organizations and partners work hard to make a difference in underserved communities.

In recent years, a better understanding about how crucial social services are and the unique role they play has made their job even more important. And, while some believe new technology is helping exacerbate inequality, a new generation of entrepreneurs are using it to make a difference in their own backyard. Meet two Canadian entrepreneurs working hard to help Canadians from coast to coast in innovative ways.

Janelle Hinds

Founder of HelpingHands, an application that matches students with volunteer opportunities in their community.

Janelle Hinds is on a mission to boost community engagement in Canada, especially in diverse communities. The app, recently awarded $210,000 by Ontario Trillium Foundation, comes a crucial time in the country since volunteering rates across the country are on the decline. Through it, students are matched with unique volunteer experiences based on their skills. Meanwhile, it also acts as a platform for students to showcase work to future employees and find organizations in their area.

Nadia Hamilton

Founder of Magnusmode, a digital platform that supports Canadians with cognitive special needs.

The company’s digital cards help break down everyday tasks into manageable steps and come complete with instructions. Each card features unique pictures and instructions to help individuals in their day-to-day life. As a result, users learn everything from how to go shopping to personal hygiene.

“What started with my brother as a spark has become something that literally I could not have imagined,” Hamilton said. “We have users from all over the world who are signing on.” Hamilton told The Record

Three black founders you should know

It’s no secret that Canada’s growing tech ecosystem suffers from a lack of diversity. For the country’s minority entrepreneurs, it can be challenging to find the right talent and even the resources needed to grow a business.

A 2017 report by Pitchbook, a U.S.-based investment firm, found that access to startup capital was one of the biggest impediments to black entrepreneurial success. What’s more, not-for-profit group Project Diane found black women, in particular, had a hard time raising upfront money. Between 2014 and 2017 black women founders made up less than 0.2 per cent of all venture deals during that time.

Despite these sobering facts,  Toronto’s black entrepreneurs are having a big impact on the local tech scene. Here are three local entrepreneurs who are transforming their respective industries.

Aisha Addo

Founder of DriveHer, a ride-share service that provides safe rides for women

Aisha Addo, a serial entrepreneur on a mission, is no stranger to hard work. Before launching DriveHer she created Power to Girls Foundation. The Canadian organization helps marginalized young women of colour find valuable mentorship and leadership opportunities.

Over the years her hard work has earned her a slew of impressive awards. However, it’s her most recent venture that has landed her on our list of top tech entrepreneurs. Last year she launched DriveHer, a new car service that offers women safe transportation around the city. The Uber-like company only hires female drivers and picks up female passengers.

DriveHer comes at a crucial time in the industry; several ridesharing companies are grappling with how to deal with sexual assault and domestic violence that primarily impacts female passengers.

Andray Domise

Founder of Techsdale, a community tech program for youth in Etobicoke

Andray Domise may not be known to Torontonians outside of tech, but his impact can be felt across the city.

“It’s really important to get young people exposed to this early. This the direction the economy is going. a lot of the jobs that are now going to be phased out.” @AndrayDomise

The communication director for The Black Business Association founded Techsdale, a community program that teaches at-risk youth how to code. The initiative started as a way to diversify Toronto’s tech scene but has slowly grown into a much-needed resource for at-risk teens in the area. The goal is to provide black youth new career paths and make a difference in an industry sorely lacking in diveristy. “We do this because we see how much potential exists in these areas,” he says.

Manu Kabahizi

Co-founder and CTO of Ulula, an analytics platform that provides companies with tools to monitor human rights risks

Manu Kabaizi, co-founder of Toronto-based Ulula, is helping make the world a better place through tech. His company’s platform is tackling a pervasive problem that impacts both big and small businesses: forced labour.

A recent report estimates that over 40 million people are victims of forced labour or modern slavery. In fact, forced labour has quickly become a global challenge, which the UN contributes to $150 billion in illicit profits and primarily impacts women, children, persons with disabilities and minorities around the world.

Ulula’s mobile platform helps combat forced labour overseas by letting businesses monitor human rights risks, and measure social and governance risks. It also helps employees share their insights instantly to help companies improve working conditions.

 

Why legal startups are destined to change the world

The technology boom that disrupted key industries — like transportationteaching and the media — has found a new target. Tech-savvy entrepreneurs are creating A.I.-influenced tools that make it easier for both lawyers and the clients they serve to navigate the legal system.

Everything from drafting new contracts to discovery and due diligence is evolving at a record pace. More and more companies are choosing to offload so-called grunt work once performed by interns and junior associates onto sophisticated machines.

Of course, this has huge ramifications for entry-level professionals. New lawyers and paralegals learn the ins and outs of the profession by working on smaller tasks that computers can now do in half the time.

The future is now

It’s not hard to see how influential A.I.-tech has become. In China, officials are using new tech to run the world’s first ‘cyber courts’. These online systems preside over internet-related legal cases, which free up traditional courts to deal with other, arguably more important, issues. 

Meanwhile, last year, CaseCruncher Alpha (a U.K. robot) made headlines when it beat 100 of London’s top lawyers in a timed legal challenge. The now-famous bot was created by law students Jozef Maruscak, Rebecca Agliolo and Ludwig Bull. 

As technology continues its inevitable march forward new digital tools will rise to change how lawyers and those in the field work.

Interested in learning about how Canadian startups are changing the legal world? Listen to  Robert Gold, host of BusinessCast, interview Hersh Perlis, director of Ryerson’s Legal Innovation Zone. Make sure to also visit our official iTunes page.

The ugly truth about how a lack of diversity is hurting tech

Toronto’s growing tech industry can be an isolating place for people of colour. The city, like other  tech hubs across the country, suffers from a lack of diversity.

In fact, a 2018 report by Innovate Inclusion found that some of Toronto’s top tech incubators — institutions tasked with helping new startups thrive — lacked diversity at several levels. A growing problem, the study says, that’s contributing to a “digital divide” in the province.

“We fundamentally believe the solutions we are creating through technologies must reflect the populations they serve.” @jodilynnkovitz, founder of @Move_the_Dial.

For the industry’s Black workers and other underrepresented groups gaining a meaningful foothold in tech might be especially difficult. While Canadian statistics aren’t available — a telling problem in itself — the U.S. offers a glimpse into some of the problems workers likely face.

Black in tech

 
South of our border, Black tech workers make up only 9.3 per cent of the industry. Alongside Hispanics, they remain underrepresented compared to other private sectors and hold fewer leadership positions. Meanwhile, a survey by the Kapoor Center for Social Impact found two of the most common reasons minorities chose to quit the tech industry was down to discrimination and cultural bias.

Here at home, advocates say Canadian workers face similar problems on the job and more is needed to combat it. Nirvana Champion has seen first-hand how challenging the city’s tech scene can be. Especially, she says, for women of colour who experience discrimination on multiple fronts. Through Move the Dial for Everyone — a subset of the well-known Move The Dial initiative that amplifies women in tech — she’s working to help the industry’s underrepresented groups. 

 “We don’t have the data, because we’re not collecting it yet,” she explains. “Anecdotally we uncover more stories all the time about the experiences of people of colour. When we’re talking about diversity we have to  move beyond just gender and look at intersectionality.”

“Through Move the Dial for Everyone we’re sharing stories and hoping to drive awareness,” adds Dayana Cadet, another volunteer and the group’s co-lead. “We want to show people who may not be familiar with what women of colour [and other underrepresented groups] face to know that there is an issue. [We want to] foster a community of inclusion for those who have previously always felt excluded or unheard.

Why inclusion matters

 
Aside from the fact that diversity has proven over and over again that it’s good for everyone, it also makes economic sense. Diverse companies are more profitable, period.

U.S. companies with higher racial diversity are more successful. A McKinsey report showed firms that place in the “top quartile for racial or ethnic diversity” are 35 per cent more likely to have higher financial returns.

What’s more, a study by Intel and Dalberg found that the tech industry “could generate an additional $300 to $370 billion each year if the racial/ethnic diversity of tech companies’ workforces reflected that of the talent pool.”

“The data made it abundantly clear that there is a significant gap in gender diversity in Canada [but] we found through our work that for visible minorities and other underrepresented groups those numbers are far worse.” @jodilynnkovitz, founder of @Move_the_Dial.

The same study also found the racial makeup of a company directly correlates to higher performance over time and improved efficiency. “For every 10 per cent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes rise 0.8 per cent.” 

What’s next?

 
For years, companies spent millions on education campaigns – blaming a talent pipeline for a lack of representation. But that’s just not true anymore. New surveys are finding talent isn’t the only issue preventing diverse workers from joining some of the world’s biggest tech companies. Bias, it seems, plays a big part in preventing both women and minorities from advancing in the industry.

Even when people of colour do graduate with the necessary skills they find it difficult to thrive. Applicants with Black- or Hispanic-sounding names are less likely to receive a callback or be hired. On the other hand, people of colour, regardless of gender, are 3.5 times more likely to leave the tech industry due to harassment. That’s almost double the rate for white women.

Entrepreneurs looking for ways to improve their diversity could look to industry leaders like Pinterest. The photo-sharing platform has increased the number of women and people of colour at its offices. The company went beyond diversity pledges to improve its numbers, which included publicly listing its own poor track record. Microsoft also saw gains when the company enacted a diversity bonus program, which tied compensation to diversity gains.  

Of course, improving diversity takes work and there’s not a clear-cut way to do it. Jodi Kovitz, founder of Move the Dial, and her team aren’t waiting for the problem to fix itself.

Her advice? Take action now to ensure Canada’s growing tech community is more inclusive. Also, work with other groups to start making changes within by seeking out diverse voices. “We won’t make a change unless all voices are represented and really treat advancement of all people as a fundamental strategic component. “