Ep. #1021 - What Happens After Your Startup Fails?
In today’s episode of Startup Hustle, Matt DeCoursey and Matt Watson get real on what happens when a startup fails. They talk about how it affects your employees, clients, and yourself—the entrepreneur in you. But don’t worry! They also dive into how you can lessen the bitter taste of failure.
Covered In This Episode
Meddling is a common occurrence for startups. But what is it? And how can you avoid startup traps that make your startup fail?
There are many tips that you take note of from the Matts. Don’t miss their insights on what happened to failed startups in 2022.
Tune in to this Startup Hustle episode now.
- On being part of the Deloitte Tech 500 and Inc. 5000 (01:53)
- FTX in the crypto space (03:32)
- What happens after your startup fails? (05:11)
- Implications of failure for local, small-scale entrepreneurs (08:59)
- What is meddling, and why is it common for startups? (11:05)
- Start the business properly and protect yourself (14:33)
- Properly shutting down businesses (16:05)
- Learning when to pivot (22:34)
- What’s going to happen to the failing startups in 2022? (24:41)
- Accepting failure vs. doing something about it (25:48)
- Leaders take responsibility (28:55)
- Replacing people aren’t a good fit with the team (29:54)
- What happens to your investors or supporters when you fail? (33:20)
- Tips on how to avoid failure (36:50)
That’s why people pivot. They’re like, you know what, I’m wasting so much time; I just need to invest in something else.– Matt Watson
If you need to shut down a business, you need to do it properly. Just because you cease operating does not mean you have “ceased operating.” You have to file papers. You have to shut down businesses on the state and federal levels.– Matt DeCoursey
I’ve talked to a lot of people over the last decade that had businesses that failed. Most of the time, they’ll come back around to admit that they saw that the ship was heading toward the rocks and didn’t do anything to try to fix it.– Matt DeCoursey
The pressure of being a founder or an entrepreneur, sometimes, is you get these really complicated, difficult situations. And you have to figure your way out of them. And sometimes, it’s just not accepting defeat. You just gotta keep fighting until you figure out a way.– Matt Watson
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 00:00
And we’re back! Back for another episode of Startup Hustle, Matt DeCoursey is here with Matt Watson.
Matt Watson 00:06
What’s going on, man?
Matt DeCoursey 00:08
Failing, bro. Most startups are gonna fail. And I don’t know what’s next. What’s gonna happen? Do I just implode and disappear into the ether? I don’t know.
Matt Watson 00:21
My mom always said I was a failure. So I’m used to it.
Matt DeCoursey 00:25
I’ve met your mom. And I’m pretty sure I know. I know her actually fairly well. She hugs me when I see her at the Apple Store randomly. Or when she comes to visit and see an event in the suite. And I’m positive I didn’t call you. Actually, did you definitely deserve that? So what happens now is what we’re going to talk about today. Now, if you want to, perhaps, prevent your startup from failing, I suggest that you recognize that today’s episode of Startup Hustle is brought to you by FullScale.io. Hiring software developers is difficult. Full Scale can help you build a software team quickly and affordably. And has the platform to help you manage that team. Visit FullScale.io to learn more. That’s our startup right now. And it is certainly not failing.
Matt Watson 01:13
Definitely not. You didn’t say we’re on the Inc. 5000 and in Deloitte Technology Fast 500, and in Forbes Next 1000.
Matt DeCoursey 01:20
Yeah, I do. We wanted to know about that other award. I went back, drove up to the bank, and I tried to shove that thing in the tube. But it didn’t fit. It said to come into the office, come into the lobby, Mr. DeCoursey. And I came, couldn’t get it in the little slide thing that went to the teller, and they’re like, what are you doing? So I’m trying to put this award in the bank, and they’re like, you can’t deposit the award. Just because you want to say something doesn’t mean you’re really winning. It doesn’t mean you’re failing. But, Matt, for real though, like, you see, okay, I don’t know when this episode’s coming out. But we joked that we maybe could have titled it What the FTX. Like, like, what the past happened with that. That’s the point of recording this. To establish a startup that imploded in like days.
Matt Watson 02:16
So talking about FTX, the crypto exchange that is only like four years old. And, I mean, the guy who owned it, Sam, whatever the hell his name is.
Matt DeCoursey 02:26
Are you coming fried or something? Yeah, yes.
Matt Watson 02:29
He was worth, like, $10 to $15,000,000,000. Yeah, a couple of weeks ago. And then people I don’t know who fell fast or him or Kanye West. It’s been a hell of a week for those two dudes.
Matt DeCoursey 02:44
No doubt, yeah, bro. I don’t have too many. I’ve never liked Kanye, but I love a good Yeezy dude.
Matt Watson 02:52
But so those who don’t know, FTX in the crypto space is an exchange competed with by Nance and Coinbase and stuff like that. And yeah, evidently, they’re illiquid. And when you deposit your money there, they take your money and like trading it and borrowing against it and lending it doing all this shit. And so now it’s like a bank run. Basically, everybody is trying to get their money out of it, and they can’t, and now it’s illiquid. And what’s even crazier. You talk about startup failures. You’re talking about crypto again. For a little bit, there was block phi, which was a big one, and Voyager and this other fund er and Celsius. All of them have also failed over the last several months in the crypto boom, and FTX tried to bail all of them out.
Matt DeCoursey 03:39
Now I have no idea how the hell FTX bailed them out when they paid themselves to do with why they also failed as a house of cards.
Matt Watson 03:41
So the crypto side is full of startup failures at the moment that were pretty high-flying startups. I’m talking about, like, weird, crypto scammy shit. We’re talking about block Phil and Celsius, and FTX. Like, these were big names that were like billion-dollar unicorns. All fail.
Matt DeCoursey 04:02
But anyways, I mean, on a much smaller, like more like, you know, okay, I don’t know what it’s like to have 16 billion, no. House, okay. I told my wife I said, I said I was talking to her about that. And she’s kind of like listening with, like, one ear partially open. And I’m like, I can’t imagine what it feels like to go from 16 billion net worth too, like, grow. And you know, so here’s the thing. So let’s talk. So when your startup fails, what happens? Man, All kinds of stuff can happen. You know, I think a lot of that depends on how it was set up. I know a lot of people that have had a failed venture, and you know, the people that I know that are the most successful aren’t going to let that destroy them. They learned from it in many ways, like Well, let’s talk about our friend Luke Iron soul from smart beverage, who got a lot of headlines because he had a competitor. Luke’s been on the show before, a good friend of mine. And you know, Luke, don’t you? Thirsty coconut, right? Yeah, well, they changed the smart beverage. But what happened was one of their competitors did a bunch of really foul play kind of stuff and basically squeezed him out. It was so that they ruined his business. But he did. His competitor did such dirty stuff that they actually have filed a suit that has a RICO predicate on it because they, I mean, like, really, like, they defamed them, they did all kinds of really bad shit. And you know, in that particular case, why his business failed, he’s probably looking at a big fat payday for the way that it occurred. Now, Luke also, so what happened is the Kansas City Star big paper here in town, wrote an article and went viral, and Luke ended up getting 1000s of messages about them, including a lot of people that said, Hey, man, you really fought hard here. I’ll invest in what you’re doing next. Because I like fighting. Yeah. So it’s not always a bad thing. Now, in the case of like, the, okay, you’ve got these, like, failed crypto things. I don’t know, man. I mean, fuck, how about we work? Apparently, you can run and work and leave with that and a platinum parachute, and then get 400 million in funding from Andreessen Horowitz later. Who knows?
Matt Watson 06:25
It’s insane. Some of these personalities are bigger than life. And our work is a good example of that. And then you’ve got, like, Theranos, like that whole thing that failed.
Matt DeCoursey 06:37
Like, there’s no later. Yeah, it’s a scam.
Matt Watson 06:39
Yeah, but so if you’re defrauding people and doing fucked up shit like that, you might go to jail.
Matt DeCoursey 06:41
That can help bring this back a little bit.
Matt Watson 06:46
So we talked about how your startup fails like there’s, there’s a lot of different scenarios there. And, the first part of it is like, Hey, I’m trying to do this thing. It’s my side hustle. I’m trying to create a company. That idea is not working. I haven’t been able to raise money, I haven’t found a co-founder, I can’t find a developer, or whatever. And deciding it fails, right? That’s totally different than we were crashing and burning later. So or it’s like, hey, we, we, we raised a Series A, we’ve tried to grow the company, but all of a sudden, we’ve run into a bunch of problems, we can’t find product market fit, we can’t grow, you know, whatever, or a competitor kills us. Like, there are a lot of different shades of gray here and scenarios of where startups kind of fail.
Matt DeCoursey 07:31
Yeah, and you know, I mean, define failure. I mean, if it were running out of money, and like, you know, the day we’re recording this, the FTX exchange, according to the Wall Street Journal, has officially declared bankruptcy and the, and Sam, their CEO has resigned, now, well, resigning from a bankrupt failed place. I don’t mean you were getting fired anyway.
Matt Watson 07:53
But yeah, well, and some of it is accepting failure, and should you accept it or not? Right? Because from there, there’s an opportunity cost here, right? At some point, like, look, I keep trying the startup idea, and maybe I should just give up on it because I’m wasting my time because I could be doing something different. Right? So that’s another big part of this. And that’s why people pivot or they’re like, You know what, I’m wasting so much time, I just need to go invest in something else, like I should be doing something else.
Matt DeCoursey 08:19
Yeah. So let’s take this down to a much smaller relatable scale, for like the local entrepreneur and business owner, what happens after your startup fails? I think that everything to do with that has to do with the way you set up the company and funded it. Because you know, and I wrote about this in my book, Million Dollar Bedroom, if you decide you want to own a business, it should be its own entity immediately. Like immediately, because the purpose, the meaning, like form an LLC, a corporation, something that separates you from the business. So in that particular case, the reason that people do that is because it does create that barrier between you, your you personally, meaning you don’t necessarily have to lose your house, or spend the rest of your life paying that stuff off. And that’s why being set up well in the beginning now, if you brought investors in, and they and they earned equity, hey, they took that risk with you. So you know that startups fail all the time, and investors don’t get repaid, you’re likely gonna have employees who don’t have jobs because there’s no paychecks like it’s shot. It shutters that shutters and then in some cases in the A, what you’ll see a lot is as competitors may come in and basically buy it for next to nothing. And then they want your clients and then I don’t know there’s a zillion different ways that that will win.
Matt Watson 09:46
At one point in time when I was raising money for sci-fi, I ran across a couple of those firms that all specialized in buying things that were on fire, like oh, we’ll buy it for two times. annual revenue where most SaaS companies will be like 567, or whatever they would buy.
Matt DeCoursey 10:05
It might even be like point one. Yeah. Well, they weren’t that walk away from this.
Matt Watson 10:10
Yeah, they weren’t that low. But I mean, they were pretty low. And yeah, they were basically like a fire sale and they’re like, we’ll figure out the shit and turn it around. And then we’ll try and repackage it up and sell it for five times multiple later, like, that’s their plan.
Matt DeCoursey 10:25
Well, since we’re in the middle of the episode, let’s actually talk about meddling, which is I don’t know if that’s a term. That’s, I feel like in my world, I kind of invented that term, but I didn’t meddle is a very common thing to occur for startups. And that’s where you have enough revenue, traction or funding to just kind of exist in the middle, you’re not necessarily going bankrupt. And you’re certainly not killing it. And I think this is like a super common scenario. So here you are, you know, you have 100,000, you have 50,000 a month in revenue, you have 49,000 A month in expenses, your your six years and you’re still on this, like shitty founder pay, you’re not earning dividends you’re not earning, you can’t give yourself a raise. And you’re kind of stuck in the middle, because you and that’s that those are. So there’s that firm that exists, that it’s like not the fire sale people. But the people that want to come in and buy stuff like that, because it let so in those cases, like a lot of a lot of founders are going to look at that as failure, and a lot of them are going to be happy to maybe end up owning a small percentage of something that maybe has a chance to earn money later, or pay them along the way while they can go and get a job. Because for a lot of people, if your startup fails, you’re gonna have to go get a job.
Matt Watson 11:47
Well, I think you’re right, there’s a lot of startups or small businesses that I wouldn’t say that they failed, but they’re, they’re sort of middling around. They’re sort of zombies, right? They’re just kind of slowly plodding along. And the problem is they, the management team, the founder, you know, just don’t have what it takes to take it to the next level. And, you know, their brother is in charge of sales and has no idea what he’s doing should be working in sales.
Matt DeCoursey 12:14
And you know, his sister does, whatever, if you’re right in the middle, you’re not a sexy target for people to come put more money in and help it gray.
Matt Watson 12:19
Where they were, they don’t have the appetite for that kind of risk. Right? They’re very happy, just kind of plodding along. And, and those aren’t failures, but that’s kind of its own class of thing, that they’re not really a startup anymore. At that point. You’re not in a high growth mode. Yeah. But you might be on the cusp of failure, too, because it’s like, either you’re growing or dying, you know, when you have a business?
Matt DeCoursey 12:43
Well, that’s what Matt’s referring to is, you know, when it comes to market share, or like in global political situations power, there’s a finite amount of it. And if you’re not growing, if you’re just static, like someone else is gaining it, you’re getting weaker in your industry. Yeah.
Matt Watson 13:01
So you know, it was that girl and somebody slowly ate your lunch, even if you don’t see it.
Matt DeCoursey 13:05
So you know who Jack Welsh is, right? The former CEO of ge, ge does a million things. So Jack Welsh, who lot of people is like an iconic leader, entrepreneur, CEO type, he went into GE like, this is like, you know, 2030 years ago, and really pissed a lot of people off because he sold off all of the divisions that weren’t number one or number two in their industry, right, like and that created a whole school of business school like education and belief that if you’re not number one or number two in your industry, you’re probably on your way out in a lot of ways. Because that’s usually the way it goes like, Hey, Matt, what’s the third most popular rideshare service?
Matt Watson 13:50
Z trip and Kansas City, I guess?
Matt DeCoursey 13:53
Right? Is that even a thing? Like, right? And my point is, like you got Uber you got left? Whoever’s number three, there was a number three, four or five, six and seven out there somewhere. But yeah, yeah, that’s what’s Yeah, well, yeah. So but that’s not the US like there are international things and stuff like that. But you’re absolutely right. Really, if you look at most industries, it’s the same thing as razor blades. We’ve talked about that before you have Gillette and Shaq. Yeah, and everything else that goes with it. But there isn’t a number three there. That’s actually you ready for me to blow your mind with vocabulary? When there’s when two companies or when only two companies own 97% of the market share or more that is called an ogre sloppily moving big words today. Yeah, I learned shit on my way to dropping out of five schools, bro. I did a job interview with someone the other day and they were like I’m four credits away from graduating and it’s out of the problem. I was like, not for me. No, I can’t throw stones in that regard. But anyway, yeah, so like what happened? hands afterwards. I mean, first off, start, you know, start the business properly, and protect yourself. You know, that’s, I mean, Matt and I each own 50% of Full Scale, LLC. And here’s the thing is if, if, if tomorrow it failed, that’s where it ends, right?
Matt Watson 15:21
Yeah, yep, you gotta have it all set up. I mean, that now, but along the way, a lot of times what a lot of founders do is they do goofy shit like sign, personal guarantees, and other stuff.
Matt DeCoursey 15:25
If you’re doing that along the way, then that’s going to pierce the veil of if you’re personally guaranteeing things at a different business, you may have some creditors coming back and looking for that. Okay, all right. So on a most basic level, if you do you need to shut down a business, you need to do it properly. Just because you cease operating does not mean you have to quote, cease operating, you have to file papers, you have to shut down businesses on the state and federal level. Otherwise, what ends up happening is you’re going to end up getting some nasty letters in the mail from the IRS that are telling you you’re not filing taxes, I actually had that happen. When I loaded the ticket brokerage that we moved from Indiana to Kansas, there was one form that didn’t get filled out properly. And a couple years after we had moved, I got a call from a lawyer that was like, Do you need representation on your tax warrant? I was like, What are you talking about? The dude was like you have a $100,000 tax warrant in Indiana. So because of formatting nowadays, I feel that I filled out the form and put it and that was a very common thing. But states if you don’t, if you just suddenly ghost the file, and that’s what it looked like to them, they still take the average rate of tax contribution you had been making for you and your employees and carry it forward. Now look, because I was a common thing. I filled out a form I sent it down and talked to someone on the phone like same day kind of shit. And they’re like, you’re good, right? But those are the little lingering things. So where I live now, I am still 10. Eight years later, I still get a frickin letter from the IRS for the dude that lived here, before me trying to reach out about a business that has, you know, some weirdly named business and I have tried to return those letters, send them back, and they just send them back again. You can’t actually return to the sender. So I’m like, What do I do? Like, I just got one recently. I’m like, here it is again. And it’s like, I know, it’s funny, because you’re technically not supposed to destroy that nail either. So I’m like, What do I do here? I don’t know what to do. So yeah, but this is real stuff. And yeah, I think that. Yeah, and I think the one thing too is, you know, the one thing that I don’t like is when businesses are on their way out or failing is they often leave employees and their clients in the lurch. Yeah. Yep. Not cool people. Not cool. Like, I get it, you’re trying to save it. But if you know it’s going to flop, don’t put everybody else in a shitty situation. And we’re talking about FTX I mean, dude, there’s dollars of real people’s money.
Matt Watson 18:31
Yeah, and even their employees, but all their employees and all their employees that must have had money in it. Yeah, as well.
Matt DeCoursey 18:37
Well, Enron was like that Enron was, you know, if you’re not old enough to remember just Google it, there’s a lot of documentaries about it that Enron which which was cooking their books, and lying about their profitability, and at the same time, knowing that they were pretty gonna possibly be fucked at some point. And then there at company news, like having to answer questions like, do you would you still recommend that we buy Enron shares as employees are absolutely like, come on, asshole. You know, like, for real? Yeah. I would sell you on that one. You know what I can’t tell you. I can’t tell you anything. Sometimes I know for a fact. Finding expert software developers does not have to be difficult, especially when you visit FullScale.io where you can build a software team quickly and affordably. Use the Full Scale platform to define your technical needs and see what available developers, testers, and leaders are ready to join your team. Visit FullScale.io to learn more. Okay, so now have you ever worked somewhere that just like suddenly had a lock on the door?
Matt Watson 19:43
Matt DeCoursey 19:44
I had my ex wife dead.
Matt Watson 19:47
I’ve never been to that work for a place that sold things like water filter installation or something.
Matt DeCoursey 19:48
Showed up one day and the thing was bolted up. Saw it literally and like the owner can’t find anything. it can be found that the dude had been writing bad checks doing all kinds of shit on the net. I mean, literally, it was just like gone. Like Gone, gone. And then about a month later we saw an article in the local paper about him being arrested for fraud. No clue on the employee level that anything was a problem until it was. Yeah. Now look, if you do stuff like that, yeah, you might go to jail.
Matt Watson 20:29
But well, it’s but especially if you’re, I mean, not paying employees, you know, you owe a bunch of employees money, and you owe a bunch of vendors money and owe the bank money and all this kind of stuff to like, does it get really ugly? Fast?
Matt DeCoursey 20:42
Yeah. Well, so you know, all right. I want to go back to the like, I mean, I’ve been a ton of successful people, I think failure is a good thing. You know, when it can be I don’t, I don’t say I want to encourage it. But it definitely doesn’t destroy you. I’m one of the people that’s so sometimes I talk to young entrepreneurs, and they haven’t been in it that long. And they’ve seen nothing but success, and it makes you feel bulletproof. I’ve been in that boat. I’ve been in that boat, I wrote about that million dollar bedroom, when I got literally crushed by a Google penalty and went from like, 50 grand a month in passive income to nothing over like less than 10 days. You know, like, I mean, it’s, but I learned from that, and that feeling of being bulletproof. Like I don’t want to write an investment check to someone that hasn’t failed on some level. Because when you’re feeling bulletproof, like you can walk in between the raindrops and see around the corners. You don’t always make your best decisions.
Matt Watson 21:54
You’re absolutely right. And just because you’ve been successful once, there’s no guarantee you’re gonna be successful again, at 100%. Like it, they are different every time. But I think the key to this, and we have I don’t think we’ve talked much about this today, but we’ve talked about in other episodes is what they always refer to as the pivot is like, okay, my, my original startup idea failed. But is there some way to pivot this to something else that I’ve learned along the way. And one of the biggest problems is people are really stubborn about that. They keep chasing whatever the original idea was, even though it’s totally not working. And sometimes it can be as simple as, Hey, I created digital marketing software for plumbers or whatever it is. But I’ve realized that selling the plumbers is way too hard. But people keep telling me that lawn service, people need this. And I should just make a slight little pivot and do that instead, like, you know, sometimes it’s a really slight pivot, but people get so hung up sometimes about their big Master Plan vision, that sometimes they just need to simplify it down to a smaller niche.
Matt DeCoursey 22:54
It’s ego and pride and being stubborn in a lot of cases. And, you know, I’ve talked to a lot of people over the last decade that have had businesses that failed. And you know, most of the time, they’ll come back around to admitting that they saw that the ship was heading towards the rocks and didn’t do anything to try to fix it. Right. You know, and that’s, I mean, that’s, I think, as entrepreneurs, we’ve all kind of been in that spot. And, I mean, if you’re expecting something to change, you need to ask yourself, why is it going to change? You can’t like optimism. It is a great approach. But it does, it doesn’t turn into winning just because you’re positive about it. Right. So it’s like I said, it’s okay, so the ships are heading towards the rocks. Oh, but we’ll be good. We’ll be good. Okay, why are we going to turn the wheel? Are we going to slow down? Are we going to drop an anchor? And I think people do that a lot with expenses, and you know, some of the things that I Okay, we’re going to be in the trailing vapors of a lot of startups failing in 2022 Because venture sled venture investments.
Matt Watson 24:08
Yeah, absolutely. Yeah, like Carvana stock is down like 95% There’s a lot there’s gonna be a lot of a lot of stuff that’s going to crash and burn over the next. Yeah, Carvana. Automotive, retail 95% publicly traded, that’s a publicly traded company like to call out you’re not a startup anymore when you’re traded.
Matt DeCoursey 24:29
If I can buy shares on the Robin Hood app of your company, you’re not a startup. No, right. But, you know, but a lot of companies that operated with I think 2022 will end up we will end up looking back at it as as like the colon cleanse of startups because it’s going to force a lot of a lot of you You know, a lot of good habits to occur in companies that burn cash. Burn.
Matt Watson 25:08
Well, the other thing is accepting failure versus doing something about it. And you got me to watch the super pumped about Uber s. And I think their example is right? Did you watch all of them? Oh, yeah, I think it’s a classic series of not accepting failure. I mean, they could have accepted failure right away like, oh, we created a competing cab company. And San Francisco went after us and levied millions of dollars of fines against us, threatening to throw me in jail. And he basically just said, Fuck, you know, I’m not going to accept this and said, hey, you know what, we’re not a cab company more shut that company down. We’re starting a new tech business. Now, what are you gonna do about it? Let’s go. Yeah, and just took the fight to him. Right. And, Uber did a lot of crazy things and bad things along the way.
Matt DeCoursey 25:59
But they’re out there a lot of innovative things out there, too.
Matt Watson 26:02
They did a lot not to accept failure, right? Like the legal battles that they had to fight and fight with Apple and China and all these different things, just not accepting the failure, like the willingness to fight or struggle a lot too, like the impending doom that he was going to because at many stages, he’s like, I can’t go back and ask for more money.
Matt DeCoursey 26:15
Okay, well, then you’re not going to pay your bills, dude, right? We’re literally like CFO going well, then we’re, I don’t even know how we’re gonna pay our bills next month.
Matt Watson 26:33
And that’s the thing, sometimes it’s what you have to do, you’re like, Look, I can’t go back to the investors, I’m gonna act like an idiot. If I go back to them, I have to figure out a way to do this. And, and that’s the pressure of being a founder or an entrepreneur, sometimes you get these really calm, complicated, difficult situations, and you have to figure your way out of them. And sometimes it’s just not accepting defeat, you just gotta keep fighting until you figure out a way.
Matt DeCoursey 26:57
So let’s talk about this post mortem death rattle for a minute, I’m going to tell you one thing that’s not going to help blaming. Yeah, you know, like so. So counselors, not that I know from seeing one hand over blaming is a wasted emotion. And so it’s jealousy. Right? Like, like, like engaging thought and energy, and either of those doesn’t actually do anything productive. Right? You’re absolutely right. It doesn’t, it doesn’t. So being jealous that your competitors beat you doesn’t help. blaming other people doesn’t help. Now, look, there may be some blame realization. But you’re as if you’re the founder and the owner and you’re blaming everybody downstream. I’m going to point that right back at you and say, Okay, this point, that’s you, buddy. That’s you that fucked it up eventually, at all that shit travels downstream. It flows downhill. In most cases, in this case, you have to begin to take some responsibility as a leader, because if you were the one making the decisions, and pushing the buttons and pulling the levers, like is everyone else’s fault that your decision didn’t work out, or your leadership failed? Because that’s kind of where it ends up.
Matt Watson 28:15
I loved it. I can’t remember what you. You describe it one day, but it was like taking responsibility for everything.
Matt DeCoursey 28:22
What would you read in a book about ownership? Yeah.
Matt Watson 28:25
It all rolls up, though.
Matt DeCoursey 28:26
That’s not my concept. It’s actually a big book. Jocko is a former Special Forces guy. So there are no bad teams, there are only bad leaders. Right? And that’s a military thing. Now with that, he’ll also say, if you have someone on your team that isn’t going to do the push ups or row the boat, that you can’t sometimes can’t do anything about that. Right? Like having a guy with no arms on your rowing team isn’t a very good decision as a leader either as the point. Yes. So with that, but that’s why a lot of businesses fail. Because, you know, like, for me when I talked to a lot of founders that I’ve talked to you and say, What’s your biggest problem? They’re like, Oh, I, I don’t have the right people. Okay, if you realize that, why are they still there?
Matt Watson 29:14
Yeah. And that’s, that’s a huge, honestly, that is probably one of the biggest reasons why a lot of companies fail, right? They’re totally the reason for having the wrong people and not having what it takes to make those decisions to make the changes. I see this in the company I work at today, where there’s like, hey, there’s two or three people around here that nobody understands why they still work here. Why a job? And it’s like, somebody’s got to make the call of like, replacing these people and strike can’t do it. They struggle with it.
Matt DeCoursey 29:46
Yeah. What have you struggled with?
Matt Watson 29:49
I have? I have and honestly, it feels like my gut reaction. My gut reaction is always right. But it’s like yo, I’m gonna try. I’m going to See if I can get them to do this, I’m gonna give them a second chance. And next thing, you know, like my business has failed. Because six months ago, I should have made the change, I should have hired a new salesperson, I should have done whatever it was, and we would be so much better off. But instead, we’re meddling around with the wrong people.
Matt DeCoursey 30:17
So that a lot of you know, management leaders and consultants and experts will say that if the right time to fire someone is really the moment that you think, wow, I should probably fire this person. Yeah. Because you get it’s like, it’s like this, get that you talked about the gut. And I’ve actually talked about that recently. Because I’m a few years out of being 50 years old. I’ve got a lot of laps around the track. And I look back at my history, and the gut is a real thing. Like I look back at personally and professionally, things where I like, my gut was like me, you probably shouldn’t do this. I’m like, Yeah, but everything works out for me anyway. You know, and like, and it doesn’t. So you know, so that’s, there’s a lot to be said about that. And there’s a reason you feel that way. You’ve heard me say this a lot. Your best employees are usually great right away. Now, here’s the thing, if you have hundreds and hundreds of employees, it’s exponentially harder to have 300 out of 300 be like, like, you know, a triple plus. You know, there are places for different people in organizations. But if you are a five person company and two of your employees are bad 40% of your company sucks.
Matt Watson 31:36
That tells me you have about a 60% chance of making it probably more like a 30% chance of making it what one of my favorite things from this or where it came from is like all of your employees should either be a racehorse, a workhorse or sent to the glue factory.
Matt DeCoursey 31:46
Who said that someone said on the podcast, it was one of our guests.
Matt Watson 31:50
I don’t remember where it came from, but I loved it, was that Lirael? I don’t know. Your point is that there’s a lot of employees; they’re just workhorses. You know that they’re not flashy, they do their job.
Matt DeCoursey 32:00
It was Cameron Harold, the former CEO of the one 800 got junk guy. Okay, yeah, yeah, that was how am I? Because we, you and I, that was when we still did, like two or three people on the show. And I think we got off of that. We’re like, wow, that was a real that was really good. I forgot about that.
Matt Watson 32:25
Yeah, so but that’s the point is there’s a lot of people that can be workhorses. There are other authors, something slow and steady wins the race.
Matt DeCoursey 32:29
Yeah, like and some roles aren’t as exciting as others. So they don’t necessarily attract the racehorse kind of candidate.
Matt Watson 32:39
Right? Yeah. Yeah, they can’t, they just can’t be done.
Matt DeCoursey 32:42
Yes. That is so true. And no, jackasses. Yeah, glue factory glue factory. Okay, so we mentioned this earlier, what happens to your investors or supporters depends on the way you’re set up. If they bought equity in the company or convertible notes, they accepted the rest, they’re not going to get a return for sophisticated or reasonable or repeat type investors, they get it.
Matt Watson 33:07
They get it, they should get it, they get their big boy pants on and they do these kinds of investments, they understand that they’re going to do 10 of them, and two or three are going to be huge. Home runs and whatever.
Matt DeCoursey 33:20
Like there’s gonna be some losses and the founder like, tell him you’ll pay him back later yourself or whatever, they accepted the risk.
Matt Watson 33:25
It’s but it is hard to go back to them and be like, I can’t go back to the country club after using all their money and what you know, losing it all like I mean, that’s most of the people at that Country Club probably have a similar story somewhere.
Matt DeCoursey 33:33
Yeah. Show me the person that tells you they always win and you’re gonna show me someone that’s bullshit. Yeah. But it puts out on Twitter quote me on that one person.
Matt Watson 33:47
Yeah, it’s hard to go back to those people though. And it’s tough.
Matt DeCoursey 33:52
Well, it’s not always hard to go back. It depends on what it is. Why did you fail? Like sometimes things fail? Like, there were definitely businesses that started around March of 2020. That didn’t, that was probably any other time would have been great because pandemic hits were immediately done.
Matt Watson 34:11
Yeah, I had one I was in event based stuff right. And so like, all the events are gone.
Matt DeCoursey 34:18
You’re dead tongues? Yeah. glue factory. glue factory start startups are almost like that. You have racehorses.
Matt Watson 34:28
And that just belongs to the glue factory pretty much applies to everything.
Matt DeCoursey 34:32
If you run a horse organization, please don’t try to cancel us for that reference. Sir, it’s not gonna work.
Matt Watson 34:41
No horses were hurt during the recording of this.
Matt DeCoursey 34:49
Oh, on a side note, when Matt and I joke we always have talked about our success or lack of success in crypto investing and we’re like we made enough money to maybe buy one of those many horses.
Matt Watson 35:03
And then we named Thank God, I didn’t need that. That’s all I can say are many horses named Satoshi.
Matt DeCoursey 35:08
I don’t even know where to fucking start out one. That’s it’s starting a service that tells people want to buy crypto so they can immediately sell theirs. Yes, you want to at least tell me, dude, maybe my new username is going to be crypto mush, because that’s Yeah, yeah. Or Yeah. So anyway, we’ll do so here we are, you know, it’s about time for wrapping up this episode, I want to remind everyone, if you need to hire software engineers, testers, your leaders Full Scale can help. We have the people on the platform to help you build and manage a team of experts. Going to FullScale.io only takes a minute and scope questions. But let our platform match you up with fully vetted, highly experienced team members. You know, they’re good software engineers, testers, and leaders, and they all specialized in long-term teams that work only for you solving problems, man. So man on the way out, like, I mean, what, how do you wrap up here, Matt, you know what, we’re all going to have some failures.
Matt Watson 36:10
At the end of the day, you have to chalk it up to education, like it was tuition, you know, I spent X years X amount of money, and at the end of the day, it was tuition for me. And, and, you know, I always tell people, it’s like, Look before you learn to walk, you have to learn to fall, and drugs, the reality, I got a lot of little kids, and I watch them fall, a lot of times where they learn to walk, right, and you just gotta keep going, you got to accept defeat, you gotta learn from it, you got to learn to pivot, you know, hey, along the way, our idea failed, I met a lot of smart people, I know a bit more about this industry, I’m gonna get the band back together, and we’re gonna do something else, you know, you just keep going.
Matt DeCoursey 36:47
And I think without taking your time and getting the right opportunity, you know, but I think what I want to, I want to start with pre-failure, and like, set the business up, right? You know, because the world thought this out on your behalf. That’s just why there’s a separation between you as a person and your business and try to make smart decisions along the way that don’t put you in the line of fire if things fail, like, you know, especially if you have investors, partners, co-founders, like you don’t have to nest if you own 20% of the company you don’t need, you shouldn’t be taking 100% of the risk on a lot of stuff. And, you know, so failure is often going to look like Whatever it looks like along the way to failure, meaning if you didn’t set the business up properly, then you might get screwed. You know, like and just try to try to be tasteful and classy about it. Like, like, you know, there’s a lot of if anyone’s throwing stones at you failing as an entrepreneur, and they’ve never been an entrepreneur, don’t listen to him, I wouldn’t give a shit. Like, hey, at least I tried. I think the thing is like, like that, I always want to know that at the end of my last lap around the track, man, I just want to know that I tried, man, and then I did right by people. So if you think the business is gonna fail, or it doesn’t leave, like don’t leave your employees screwed. Don’t put them in bad situations. And also, if it’s failing, you understand that it’s a perfectly normal thing for people to want to exit a sinking ship. Yep. So that’s what people need. In the end, your employees have to think about themselves and their families. I think that, realistically, you’ll end up getting judged more on that than the success or failure of the business. People doing fraudulent shitty stuff don’t get funded later. People that took a legitimate try and did it in the right way. And we’re trustable and learn from it, man, they get funded again, they get a chance to get back out there, or they get other great jobs or opportunities at startups. And you learn a lot from the failure, like I think NAT said, if you write that line item off as tuition.
Matt Watson 38:58
Yeah. All right.
Matt DeCoursey 39:00
Well, I’m gonna go back to work because I don’t want to fail. I don’t want to have to do all this stuff.