Serial entrepreneur and angel investor: Signs of startup failure and success
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Serial entrepreneur and angel investor: Signs of startup failure and success
The key to an early-stage company is building a product and ensuring financial stability.
Navigating Web3 tides with focused insightsCompiled by TechFlow
Note: This article is included in the TechFlow special series "YC Startup Class Chinese Notes" (updated daily), dedicated to collecting and organizing Chinese versions of YC courses. The twenty-fourth installment features Elad Gil, serial entrepreneur and angel investor, in an online course titled "A Conversation with Elad Gil."
Introduction to Elad Gil
Elad Gil is a well-known technology entrepreneur, investor, and author with extensive experience in the tech industry. Below are some notable companies Elad Gil has helped found or been closely associated with:
- Color Genomics: A genetic testing and personalized healthcare company founded in 2013. Elad Gil was a founding team member.
- Mixer Labs: A social geolocation services company focused on developing location-based applications. Elad Gil was a founding team member. Twitter acquired Mixer Labs in 2011.
- Twitter: Elad Gil served as an early team member at Twitter from 2004 to 2005. While not one of the original founders, he played a significant role during its formative stages.
Additionally, Elad Gil has served as an investor, advisor, and board member for several prominent tech companies including Airbnb, Pinterest, Square, and Instacart. He is also an active venture capitalist who supports and invests in numerous startups.
As an early investor, Elad Gil has supported and invested in many successful startups. He actively participates in the Y Combinator (YC) accelerator program and serves as a mentor and advisor. Through collaboration with various startups, he has accumulated rich experience within the startup ecosystem.
Elad Gil is also known for his book "The High Growth Handbook," which provides insights into achieving rapid growth and success in highly competitive markets.
The Entrepreneurial Journey
Many of my friends stayed on the East Coast, so when I first arrived here, I felt somewhat isolated. At that time, the internet bubble had just burst, and market conditions were poor. Most people had lost their jobs and were desperately searching for new opportunities. Even former vice presidents of product management struggled to find product manager roles anywhere.
The environment was strange and difficult to navigate. There were no incubators like Y Combinator back then, nor much content available about startup ecosystems. Information sources were extremely limited, so you had to rely on real-world networking and personal connections to learn anything.
I initially entered the industry by offering free labor to startups. In fact, I worked without pay for a company—this was one of my entry points into the tech world. I started in software launch roles, became a software professional, and gradually moved into other areas.
I moved here to join a telecom equipment startup as a product manager working on hardware. Later, I left that company and independently began working for free at a software startup.
Eventually, I became a full-time software professional, which led me to Google and other companies. At Google, I worked on iAndroid and built the early teams for Google Mobile Maps and Mobile Gmail—each serving hundreds of millions of users. Although I didn’t witness their massive growth firsthand, this experience was invaluable to me.
Later, I left Google to found Mixer Labs, a data infrastructure startup. Our main product was GeoAPI. Eventually, the company was acquired by Twitter, which at the time had only around 90 employees.
One of my responsibilities was helping scale the company from 90 to 1,500 employees in just two and a half years. Previously, I had experienced Google’s rapid expansion—I joined Google at 1,500 people and three and a half years later, it grew to 15,000.
When things really take off, growth happens incredibly fast. After leaving Twitter, I founded Color Genomics, a company focused on large-scale data and genomics. It raised approximately $150 million in venture capital and continues operating today in Burlingame.
I consider myself someone who excels at teamwork and hard work. I can adapt to teams of different sizes—from five people to hundreds. For me, this is how I realize personal value.
Frequent Career Transitions
Between large corporations and startups, many individuals frequently transition between these worlds. They might start a company, get acquired, manage a department, start another company, or even become investors. Silicon Valley thrives on this kind of movement.
Ben Horowitz joined Netscape in 1995 as VP of Product, later founded Opsware (acquired by HP), managed a major division at HP, and then co-founded the venture capital firm Andreessen Horowitz (a16z) with Marc Andreessen.
For those moving between these paths, this represents a relevant career trajectory. I believe it's a meaningful perspective.
Founders Continuing to Lead Their Companies
A turning point occurred when Mark Zuckerberg hired Sheryl Sandberg as COO—people began believing that founders could continue leading their companies effectively.
In the 1990s, once entrepreneurs raised venture capital, they were quickly replaced by professional CEOs. VCs typically took control of the board soon after Series A funding.
This meant founders were often demoted, making way for seasoned executives to run the company.
But starting with the Zuckerberg era, things changed. People suddenly realized, “Wow, large companies can actually be built while still being led by the founder.”
If you look back at the history of tech giants, this becomes evident.
Intel was always driven by its founders. Microsoft was led by its founder for the first 10–20 years. So was Dell.
Being a founder-CEO isn't easy. Once they lose control of the company or negotiate poor funding terms, they often exit the stage—examples include Steve Jobs, and the founders of Yahoo and eBay.
Looking at major companies from the 1990s, nearly all followed this pattern.
Product-Market Fit
I believe what truly matters is product-market fit—delivering a product that users genuinely need. That is the only thing that really counts. To achieve this, you must hire people unless you can independently develop and sell the product yourself.
That said, if you can't get money from customers or directly bootstrap your project, you'll need to raise funds. But ultimately, building and selling the product is key. In the early stages, this is the true core. It seems obvious, but it’s actually very difficult.
There are three signs indicating whether your product fits the market:
- First, people use it actively despite flaws, or show strong loyalty even when the product is imperfect. For example, when Twitter went down or faced issues, users stuck with it—indicating initial market acceptance.
- Second, if you're a SaaS company and have recognizable brands adopting your product organically and paying for it, that signals strong market fit. For instance, PagerDuty attracted Apple early on; Zeplin was adopted early by Facebook; AirTable won over multiple well-known brands.
- Third, receiving strong feedback from users—even a small group. For example, at Color Genomics, which provides hereditary cancer risk information, we received thank-you emails from early customers saying the service helped them potentially save lives. Such positive customer feedback indicates product-market fit.
Beyond these clear signs, there are other indicators. For example, people tend to undervalue compound growth when starting from a small base. Even if user count grows from 100 to 120—a mere 20 users—if it consistently increases by 20, then 30, then 40 each month, this usually means product-market fit. Many overlook this sustained organic growth, which is actually a sign of success.
However, if there's no product-market fit, the company may go off track. But if fit exists, minor missteps matter less—though they should still be corrected. For example, Mixer Labs initially built the wrong product—an attempt at a content aggregation site or wiki. Later, we pivoted to create infrastructure for location-based apps. This illustrates how startups can successfully shift direction.
Hire Well or Fire Well
On hiring, I’ve noticed many people keep unsuitable employees too long. Reflecting on my first startup, we decided within the first month to let someone go—even though they succeeded later in their career. But they didn’t match our immediate needs. I strongly believe in an old saying: Either hire exceptionally well, or fire exceptionally well. Ideally, do both.
I think many tolerate poor performance for too long—waiting six, seven, or even eight months before saying, “Hey, maybe give them another chance.” But you need to have an initial feedback conversation to see if improvement occurs. Maybe offer a second chance, but then you must act.
For startups, think of hiring like a life raft. Your ship is sinking, and you’re on a small raft that holds only five people. Who should those five be? If the current people aren’t the right five, find better ones. You can only carry so much burden, productivity, and coordination.
I think this mindset is crucial—you must carefully select team members.
Effective Business Strategy
To me, focusing on customers and meeting their needs early is a critical signal. Equally important is immediately beginning to build your product or service.
Of course, this doesn’t mean skipping market analysis. Market research and strategy development are necessary. Understanding your target customer and defining your market segment are essential steps. But you also need to build something, try it out, and observe feedback quickly.
I’ve seen many fail because they wait too long and never actually start building. Sometimes they exist invisibly for three or four years—a dangerous sign, since they never gather real customer feedback. Successful companies almost always iterate rapidly, continuously releasing newer, better versions.
Also, I’ve noticed successful people prioritize team efficiency from day one. They may focus on setting up the early development environment so everyone can run a full product instance with one line of code. You can take simple steps to dramatically improve team efficiency—but many overlook this.
When a new member joins, they might spend two weeks getting the project running on their laptop instead of thinking about how to immediately contribute or scale the team. I believe you can implement simple measures to fix this.
Team Effectiveness and Customer Alignment
For early-stage startups, the most important thing is maximizing team effectiveness. Efficiency has two dimensions.
First, team members must move in the same direction, share clear goals, and understand exactly what they’re building and why.
Second, it means rapid iteration—engaging customers early and constantly reevaluating market fit.
Because I believe the common mistake is this: Even if you have the smartest, most passionate team, if you never find product-market fit, your company will fail—due to lack of revenue, cash flow, or ability to raise more funds.
So no matter how brilliant your idea, the focus must be on building something people truly want.
During entrepreneurship, distractions arise—especially after raising money. You get invited to events, pulled in different directions.
Many founders get distracted, but the real core is whether people are buying your product and how fast you're growing. If you aim to build a high-margin, breakout company, this is especially critical.
Of course, there are many types of startups you can build—lifestyle businesses are perfectly valid too.
People start companies for various reasons.
Part of it involves asking yourself as a founder: What do you truly care about? What are your goals? And are your actions aligned with them? Too many people follow default paths without considering whether it suits them.
What Should a CEO Spend Most Time On?
For early-stage companies, the key is building a product and ensuring financial stability. You may not be the one coding, but you’re helping build it. Also important is avoiding conflict with co-founders.
Early startup failures usually stem from three causes: lack of product-market fit, insufficient capital to survive, and co-founder conflicts that stall progress. These are the issues you must address.
For later-stage companies, challenges multiply. Beyond sales, you face process scaling, team expansion, executive hiring, internationalization, launching new products, and acquisitions. These cannot be handled alone—they require a strong team.
Therefore, you need to think about how to build and manage an efficient team to tackle these complexities.
Team vs. Market
Most startups make some progress within months to a year, then hit setbacks. But it's hard to tell whether it's a real roadblock or just temporary.
Some companies persist for three or four years with no growth or momentum. If this drags on too long, change is clearly needed.
Of course, exceptions exist. TomTom, a European GPS company, spent six years with four people brainstorming ideas before landing on GPS and succeeding. But it took them a very long time.
Most companies trend toward early action—at least in adoption or core metrics. In today’s loose capital environment, people can wait longer because they keep raising funds. But this isn’t always wise—it may prevent great talent from pursuing other creative ventures during their peak years.
Thus, I believe regular honest evaluations are necessary. If change is required, I recommend starting fresh. Often, when people pivot, they stay within the same market rather than cross into a new one. If you're in a bad market, repeating the same effort leads to failure.
In such cases, you have three options: shut down, sell, or strategically pivot. If selling, aim for an obviously successful buyer. Because I believe market matters more than team strength.
Many talk about great teams finding answers, but I've seen many brilliant teams fail in bad markets. Conversely, in a great market, cash flows in regardless of execution quality—you don’t even get time to reflect or replicate.
Some teams are exceptional, but if the market is bad, it doesn’t matter. Meanwhile, weak teams can succeed in great markets.
You might not be good at what you're doing, but because you're in a great market, your product still gains wide adoption.
Ultimately, great teams and great markets reinforce each other. Occasionally, magic happens—like Google or Facebook—where teams launch new product lines and achieve extraordinary scale.
In short, market importance far outweighs team strength. I've seen many great teams fail in bad markets, and many weak teams succeed in great ones. It may seem unfair, but it’s grounded in reality and values.
Reasons Startups Fail
First, sometimes people jump in blindly, building without deep thought. While this can work if your product恰好 matches market needs, it often repeats past failures. We should study history—ask why previous attempts failed—and explore different approaches to avoid repeating mistakes.
Second, many startups depend on miracles to succeed. Obvious opportunities are already crowded. Startups succeed in non-obvious, challenging markets by overcoming obstacles—in distribution, pricing, product, etc. Some succeed by creating *two* miracles through strategic shifts. But doomed startups often rely on too many miracles, which have low probability.
For example, someone once thought competing with Yelp meant launching an event product, using open spaces to win users, then building local listings. Multi-step plans like this usually fail.
Better to focus entirely on winning the events market—or the local listings space—with full commitment. This also applies to avoiding unproductive investor meetings.
Currently, the widely cited “miracle” is the data moat. Some believe generating vast data and differentiating from competitors ensures success. While applicable in fields like genomics, broadly speaking, I rarely see companies truly achieve this. Relying solely on data as an asset—or assuming AI superiority from data alone—is usually insufficient.
In summary, startup success or failure often hinges on avoiding blind starts, creating miracles in tough markets, and not over-relying on single strategies or resources.
How to Choose a CEO?
Choosing a leader can involve various debates. But sometimes, the choice is obvious—that person is simply the right pick. This can spark controversy. I believe the key is solving the problem, even if you make a mistake. Mistakes can be corrected, but having someone accountable is essential. Without a clear leader, challenges severely slow company progress. For technical products, a technical expert should ideally lead. If both founders are technical, consider who excels more in sales, fundraising, or hiring.
If both are technical, perhaps one makes a better CEO. If one is business-oriented and one technical, the business person may excel in certain areas, but that doesn’t mean they should be CEO. Technical leaders drive product iteration and understanding, shaping sales, development, and decision-making.
Honestly, I think any configuration can succeed. Sometimes founding teams honestly assess: “This person is better than our current CEO at what we need—whether in hiring, fundraising, sales, or setting vision.” Then the decision becomes clear.
Fundraising Strategy
We used different fundraising strategies.
For our first startup, we secured seed funding from a well-known VC fund and a group of angel investors. Then we raised a second round from a super angel or small fund group. Our biggest issue was a bad investor. When we exited, he tried to claim extra value from the deal.
For our second company, I was tempted but held back. We realized brand-name investors aren’t always wise partners. So choose collaborators carefully. Research them thoroughly. Ask founders questions: Did things go smoothly? Were there problems? This reveals the investor’s true nature beyond surface appearances.
I think there’s a difference.
We want investors who challenge us, question our decisions—because it drives improvement. Sometimes founders feel uncomfortable being questioned, but it’s actually a growth opportunity.
Investors might ask naive questions, but that could prompt you to rethink your approach or reaffirm you’re on the right path. I distinguish between those who fight for their own value or behave poorly versus those who push and challenge you.
Among our investors, only one performed poorly—not everyone is like that. We spent two to three months finding them.
Overall, fundraising isn’t something you finish in weeks—it takes months, otherwise you won’t truly know your potential investors.
Usually, you’ll notice that most investors hesitate until someone actually commits—that’s really strange.
Generally, most investors are driven by fear and ambition. They fear missing out, rather than being genuinely excited or convinced. Therefore, highly confident investors are extremely valuable. Many adopt the opposite strategy—chasing brand-name investors. But this can lead to poor investment decisions, since everyone makes mistakes.
In finding investors, we relied on networks and referrals. We worked with people we already knew and trusted, asking them to introduce us to potential investors. The process varies, but building strong relationships is key to finding the right backers.
If you encounter bad investors or have doubts about certain ones, you can take steps:
- First, maintain open communication and clearly express expectations and concerns. An honest, transparent relationship helps both sides understand each other better.
- Second, seek advice from other entrepreneurs or industry professionals. They may have similar experiences and offer valuable guidance.
- Most importantly, don’t hesitate to reevaluate your partnership with an investor. If collaboration isn’t working, consider alternatives. A bad investor can negatively impact your company and even threaten its survival.
Decision-Making Criteria
I have three simple criteria—though they sound basic, I encourage deeper reflection.
- First is market—or product-market fit. Is the team building something people actually need? You can verify this in various ways: visible traction or interest from released products, or direct conversations with potential customers. Personally, I use methods inside companies too. When investing, I conduct extensive market research—even as an angel investor.
- Second is the team—are they outstanding individuals capable of quickly learning new skills? As a founder, I consider this vital. Though again, market dominates.
- Finally, if they call me at 10 p.m. on Friday or Saturday, will I answer? Will I be happy to talk? Are they good people? Do they have integrity? Are they pleasant to work with? Life is short—we spend most of it working—so avoiding prolonged interactions with unpleasant people is one of the worst experiences imaginable.
Introducing the Team
I’d like to emphasize several points.
First, make the story clear and concise. Avoid excessive personal details—like where they lived in Canada or their age. Focus on the core: they had an idea in college and haven’t researched it in seven years.
Second, structure the pitch around three highlights: co-founders, market, and product being developed.
Plan to demonstrate results. Early demos are crucial—they prove you’ve built something real, not just talking.
Quick market analysis, fit assessment, and use case considerations are also vital. Show thoughtful understanding of market dynamics.
Explaining the team’s motivation and why they started the project is important. This builds interest and trust quickly.
Finally, efficiently using time is key when meeting busy people. If you respect their time, they’re more likely to spend more time with you.
Balancing Transparency and Frequency
I recommend writing a monthly blog post on this topic. In it, first highlight how others—investors, advisors, stakeholders—can help, so they know exactly how to support you. That way, even if they just skim the email, they’ll notice your request and respond.
Second, include metrics like sales. Even if numbers are modest, that’s fine. Crucially, state how much runway remains. Paul Graham often stresses cash flow—similarly, mention how long your cash lasts, how much you’ve burned, then update on team, market, and product.
Launching a new product? Journalists or investors may care—ask if there’s news worth sharing. I suggest monthly updates to maintain rhythm—keeping investors informed without overwhelming anyone. Monthly strikes a good balance.
At Color, we sent investor updates early. I’d call investors with background materials, but they’d often say: “No, no—I’ve read your latest update. I know what happened. Let’s skip ahead.” This high transparency saved 20 minutes upfront and made every investor call more effective. Investors appreciate openness—they want to feel part of the company and team, and expect honesty from you.
How Did You Evaluate Markets Like Airbnb in 2010?
I invested in Airbnb’s seed round, expecting big things. I believed in their market appeal because their product worked well. I also participated in a travel service called Servas. After WWII, it promoted world peace by enabling people to freely host each other. As a Servas traveler, you received a booklet listing Italian hosts willing to welcome you. You could call or email strangers to ask if you could stay with them—for free. I enjoyed a similar experience traveling in Europe, so commercializing this felt natural. I realized housing—one of people’s most valuable assets—could be monetized. Helping people profit from their homes seemed highly promising. The idea sounds simple, but required experience and hard work to execute.
Investor Due Diligence
Most investors list their portfolio companies on their website, AngelList, or CrunchBase. As an observer, I browse these lists and note companies I’ve never heard of—likely because they shut down, had small acquisitions, or other outcomes.
I believe if a founder leaves a successful company to start another but doesn’t bring along previous investors, it’s a significant signal. Sometimes, calling successful companies, they’ll tell me they no longer work with certain investors. This info is valuable to me.
For example, I know someone who exited a company for $1 billion. They started a new venture, but none of their prior investors joined any funding rounds.
Based on such observations, I’d reach out to that person to learn their story and plans.
Pricing Strategy
Marc Andreessen once said something interesting—if he could tell entrepreneurs one thing, it would be: Raise your prices.
Tech-driven companies often underprice their products. They believe lowering prices accelerates market share and competitive advantage.
But this strategy is often untested and hard to reverse. People sometimes overthink pricing and its market impact.
When your customer base is small, raising prices and losing some customers is acceptable—you have a chance to excel, not just be average.
Of course, various strategies exist to determine optimal pricing. But generally, unless you’re explicitly chasing market share, starting premium may be wiser.
In some markets or niches, low pricing is crucial—especially if you aim to rapidly accumulate data assets.
Often, people simply check competitor pricing and mimic it, without deeper consideration—unless they’re an older, more mature company.
Pricing involves complex, long-term decisions—value-based vs. cost-based models. Michael Dearing offers excellent online tutorials on this topic.
You can also use a “good, better, best” framework—offering basic, mid-tier, and premium products. The premium tier often exists mainly to push buyers toward the mid-tier option.
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