The biggest risk all of you face as you try to make it in the business world is that you buy into the massive hype of the entrepreneurial craze and think running a successful company is like falling off a log. It’s not. It’s really, really challenging.
While the best way to learn the ropes is through experience, another way is to understand what works and doesn’t work in the real business world. In 2015, this is what didn’t work and the ten entrepreneurs responsible. Pay attention. There are powerful lessons to be learned.
10. Ryan Grepper, founder and CEO, Coolest.
The Coolest Cooler inventor raised over $13 million to become the second-biggest Kickstarter campaign ever. That was the end of 2014. Today, Coolest is selling coolers on Amazon ahead of fulfilling commitments to its backers in order to “keep the lights on.” The good news is the product exists. The bad news is the reviews are dismal, with 28 percent giving it just “1 star,” mostly due to poor product quality and support. So not cool.
9. Sean Rad, founder and CEO, Tinder.
He’s in, he’s out, he’s in again, and he should be out again. Following in the footsteps of American Apparel’s Dov Charney, Abercrombie’s Michael Jeffries, and Lululemon’s Chip Wilson, Rad has some realissues, not to mention a serious case of foot-in-mouth disease that will continue to plague parent IAC’s Match Group, especially now that it’s a public company.
8. 50 Cent, rapper and entrepreneur.
Curtis James Jackson III, aka 50 Cent, made a fortune on a record label, on a clothing line, and as an actor. Then he reportedly made $100 million from an investment in a vitamin water company that was acquired by Coca-Cola. Last year, he filed for Chapter 11 bankruptcy protection. What went wrong? Lack of fiscal responsibility, i.e., he overspent. He’s not really broke, mind you, but using the courts to stiff creditors for $28 million is pretty low-class, if you ask me.
7. Ivan Reedman, co-founder and CEO, Torquing Group.
Less than a year after raising more than $3.4 million – a record for a European Kickstarter project – the Zano drone maker filed for “voluntary liquidation,” aka bankruptcy, stranding all but a few hundred of its 15,000 funders without the Zanos they’d purchased. Personally, I think anyone who backs high-risk projects like this is asking for trouble, but that’s just me.
6. Dan Price, founding CEO, Gravity Payments.
Price suddenly decided to raise the minimum annual salary at his 120-person credit-card-processing company to $70,000 over a three-year period. The story went viral, but that doesn’t mean it’ll work. Leveling the playing field removes incentives for managers and the enormous payroll increase may very well bankrupt the company. To make matters worse, Bloomberg recently revealed that Price’s motivation may not have been as altruistic as he made it out to be.
5. Ellen Pao, former interim CEO, Reddit.
Pao’s reign as interim chief of the popular social site was mercifully brief. In eight months, she was successful at just one thing: demonstrating a complete lack of understanding of the site and alienating just about the entire Reddit community. As with hercontroversial tenure at Silicon Valley venture firm Kleiner, Pao needs to learn that business is not about her, but about serving her stakeholders.
4. Tony Hsieh, founder and CEO, Zappos.
After growing the online retailer to $1 billion and selling it to Amazon, Hsieh has been experimenting with wacky management structures. Last year he transitioned to a controversial new organizational system with no managers or titles known as Holacracy. About 14 percent of the company quit and the rest are still trying to figure out what their pay and jobs are. It’s sort of nuts.
3. Gurbaksh Chahal, founder and CEO, Gravity4.
After pleading guilty to two domestic-violence charges, self-destructing in spectacular fashion, and getting fired by the board of ad-tech company RadiumOne on the eve of a planned IPO, the narcissistic serial entrepreneur is back in the news with a new assault arrest, a gender discrimination and harassment suit, and allegations of epic pill-popping. Need I say more?
2. Maren Kate Donovan, former CEO, Zirtual.
This high-flying virtual assistant startup was doing great until it tried to convert hundreds of contract workers to full-time employees. Then it crashed and burned. Sadly, that fate was preventable. If I’ve said it once I’ve said it a thousand times: the number one reason businesses fail is that they run out of cash. Every CEO must viscerally understand business and finance. Period.
1. Elizabeth Holmes, founder and CEO, Theranos.
The iconic Holmes dropped out of Stanford at 19 to disrupt the $76 billion laboratory diagnostic industry. She raised $400 million at a whopping $9 billion valuation and made an enormous PR splash after a decade in stealth mode. Then The Wall Street Journal broke a story questioning the efficacy and accuracy of the technology and Holmes has since been under fire. Looks like a major case of overhype and under-deliver to me.
These 10 stories represent some of the most common pitfalls that entrepreneurs face. And if you follow the links, you’ll learn more. I think the most important takeaway is this: with rare exception, these are all very smart and very capable people. That’s just how hard it is to build a successful growing business over the long haul. Never underestimate the challenge.