Part One of a Four Part Series: The Four Syndromes of Startup Failure.

In his keynote to several budding entrepreneurs, Eric Benhamou, Chairman of 3Com, former Chairman and CEO of Palm, made some observations about how startups fail.

Numero Un: The Dysfunctional Board

Eric noted that Boards are dysfunctional because they lack collegiality. Often when Boards are built, they are underpinned by the Company’s investors.  Investors who have personality clashes, no common value system, and those who represent firms who have vastly different return objectives.  One who is risk averse, seeking an early exit at a modest return, while another is aiming for the fences.  Are Boards really this way?

Are investors not mature enough to play nicely in the sandbox?  Do egos get in the way of rational thinking?  I’m not certain that I completely buy into this argument.  Simply because the basic sense of fiduciary duty does not fly out the board room window.  Doing what’s BEST for the Company as a going concern is the first and foremost governing principle that all Board members must adhere to.  While individual motivations do influence behavior, as in any situation inside or outside the Board room, I am not willing to make the leap that a sophisticated venture investor would completely shirk this responsibility over a personality conflict. When it comes to investor misalignment, I argue that fault lies with the startup for not selecting investors who were not on the same return horizon in the first place. While Eric does not argue that there is a cause and effect relationship between “unfriendly” Boards and startup failure, I feel that there other far more critical issues with which startups must contend to put them on them path toward success.

Keep reading!  This is only the First Startup Failure Syndrome in a Four Part Series.