Why leadership talent should be a priority for VC-backed fintech businesses
As many as four in five start-ups will fail in their first three years, according to Noam Wasserman in his book The Founder’s Dilemma.
If you’re a fintech founder, developing your own leadership talent needs to be a priority
Of those businesses that secure venture capital, only one or two in ten will produce substantial returns. Even if a business makes it through these hurdles, the founder may not. Only 25% of companies holding an initial public offering (IPO) retain their founder as CEO.
Market trends, competition and failures of marketing, product and pricing all play a part in this picture, but according to data from CB Insights, up to a quarter of VC-backed start-ups fail for reasons of leadership. Leaders burn out or lose focus, they don’t attract and retain the right team, or they don’t manage underperforming teams or disgruntled stakeholders. A founder may not be able to change the market or the competition, but they can change their leadership and performance.
The starting point for any founder-led business looking to scale is to recognise that what got them where they are won’t get them where they want to go. The things that made you successful at the start-up phase are not the same things that will make you successful at scale-up.
Leadership talent is a great case in point. At the pre-venture, start-up phase of a business, leadership talent is of minimal importance. What matters most at the start-up stage is the founder’s technical expertise, market insight, commercial savvy, pitching skills and risk appetite. Once investment is secured and the process of business building begins, leadership talent jumps to the head of the queue, arguably second only to product market fit as a determinant of success.
When you speak with founders and VCs about ‘leadership talent’, they often assume you’re talking about recruitment. Yes, hiring and retaining top talent is crucial, but it’s not the whole picture. You can hire the greatest talent in the world, but if the founders aren’t developing their own leadership skills and providing the management and leadership their team and wider business need, then the superstars they hire will jump ship or underperform.
If you’re a founder of a VC-backed fintech business and want to maximise your chances of success, developing your own leadership talent needs to be a priority. As the business scales, you need to shift from being doer-in-chief (at start-up) to business-builder-in-chief (at scale-up) to CEO (at maturity). That requires you to lean into three very different modes of leadership:
- Brave Warrior mode (entrepreneurial, start-up leadership).
- Considered Architect mode (operational, scale-up leadership).
- Wise Monarch mode (visionary/strategic leadership for mature organisations).
Few founders excel at all three, but you will need to develop some basic ability in all three modes to maximise your business’ chances for success.
Most founders are natural Brave Warrior leaders, who would really like to be able to skip the boring Considered Architect stage and leap straight to the Wise Monarch phase. The bad news is that that rarely works, even if you hire a great COO to do the boring operational ‘stuff’. Instead, you need to develop a ‘minimally viable’ set of operational leadership skills as the business grows. To lead a successful scale-up business, you’ll need to be able to:
- build and manage a high-performing leadership team
- set up direct reports for success and hold them accountable for results
- deliver constructive feedback and manage group dynamics
- encourage collaboration and cross-functional work
- set up and lead an annual cadence of effective operational management meetings
- co-create a clear operational roadmap and hold your team accountable for delivering against it.
These operational leadership skills don’t appeal to many founders, but you’ll need to dig deep into reserves of patience, tolerance and discipline to get this done if you want your business to thrive. The landscape is littered with examples of promising start-ups that failed to scale, often because their founders simply could not or would not lean into developing their leadership talent.
The good news is that you won’t have to do this forever. Once the business has a high-performing leadership team aligned around a strong operational plan, and with everyone holding each other accountable for success, then you can – in fact, you will need to – elevate out of the operational weeds and lean into Wise Monarch leadership. This style of leadership requires the leader to look up and out at the market landscape while focusing on the future and innovation, and is much more comfortable fayre for most founders.
Developing your Considered Architect mode is simple, but not easy. You can pick up any book on management and read up on the basic skills required. However, applying those skills if you’re an entrepreneurial founder can be a real challenge. Most founders become founders because they value, if not need, freedom and autonomy. The consistent routine of effective operational management, which seems to impinge on this freedom, can leave a founder feeling very hot under the collar.
Whatever stage of growth your fintech business is at, being the most effective leader you can be, in service of the business you founded, will push you outside of your comfort zone. It may be pitching or public speaking that challenges you, or managing your board or leadership team, or overcoming your own impatience and hyper-creativity so you can provide consistent operational leadership. Whatever it is, get well supported. Being a founder or leader can be hugely isolating, so build a great network of peers, get a great mentor, hire a coach and lean into your team of professional advisors.
As the founder of a fintech start-up, you have achieved something brilliant. You took an idea and you made it real. While others took the paycheque, you took the chance. As you face an uncertain future and an incredibly challenging market in 2023, remember that you are tenacious beyond belief, and with determination and willingness you can grow your leadership talent and give your business the very best chance of success. Go well on the adventure with my admiration.
About the author:
Rachel Turner is author of The Founder’s Survival Guide and coach and principal at VC Talent Lab.
