The Danger of Hubris: How Founders Lose Focus After Funding

Table of Contents

• Introduction
• The Intoxicating Effect of Success
• What Is Hubris in Entrepreneurship?
• Signs of Hubris in Founders
• Why Hubris Is Dangerous for Startups
• The Fine Line Between Determination and Denial
• The Paradox of Fundraising
• Recommended Reading
• Conclusion

Introduction

In Greek mythology, Icarus flew too close to the sun, his wax wings melted, and he plummeted into the sea. After a decade of observing and investing in startups, I've watched numerous founders follow a similarly tragic trajectory—not with wax wings, but with millions in venture capital.

The Intoxicating Effect of Success

Success in the startup world, particularly raising significant funding, can act like a powerful drug. It changes people, often so slowly you barely notice at first. I've witnessed this transformation firsthand with numerous founders. While I'll keep names and specific companies confidential out of respect for privacy, one story particularly stands out: a portfolio founder who raised approximately $150 million. I observed his gradual shift from the focused, resourceful entrepreneur I'd initially backed to someone with markedly different priorities and approaches.

While there are many reasons why startups fail, this isn't just another cautionary tale about startup failure. It's a deeper exploration of how success itself can become your biggest threat.

What Is Hubris in Entrepreneurship?

When examining why do startups fail, one factor often goes unnoticed: hubris. Hubris is the dangerous cocktail of excessive pride, overconfidence, and arrogance. For entrepreneurs, it often creeps in after milestones like raising venture capital or experiencing rapid growth. Early success can act like a double-edged sword—while validation boosts confidence, it can also obscure judgment.

The founder's role—akin to a visionary and a commander at the helm of the company—exposes them to immense praise and pressure. As the applause grows louder, some founders lose their grip on reality, beginning to trust their instincts so blindly that they neglect constructive criticism or sound strategy.

And why is this a problem? Hubris doesn’t just impact how a founder views themselves—it seeps into their decision-making, financial discipline, and ability to lead. The cost is often paid in both financial and reputational terms.

Signs of Hubris in Founders

If you’re wondering whether hubris might be quietly steering your ship, here are some red flags to consider:

1. Lavish Spending and Financial Indiscipline: Founders often lose sight of their financial responsibilities, splurging on extravagant events or unnecessary luxuries. Remember the founder I mentioned who raised $150 million? At one point, he proposed spending $1 million on a single company-wide event, planning to fly in all employees from various global offices for an elaborate gathering. Fortunately, the board of directors intervened before this wasteful expenditure could materialize.
2. Empire-Building Without Strategy: It’s tempting to expand quickly—new offices across multiple countries, higher headcount, and bigger budgets. However, without a clear strategy, it can resemble empire-building for its own sake.
3. Neglecting Stakeholders: A founder consumed by hubris often starts ignoring early investors and advisors who helped them get started. Monthly updates become quarterly, then stop altogether. When these investors reach out, they're met with radio silence or dismissive 'too busy' responses. I've seen founders who once sent detailed monthly metrics suddenly become unreachable after raising their Series A, only to resurface years later when they need more capital.
4. Denial of Reality: Many founders remain in denial about their startup’s trajectory. They mask poor unit economics and mediocre KPIs by raising more money instead of addressing the underlying issues.
5. Obsessing Over the Competition: As competition raises more capital, hubris can push founders to recklessly burn funds to keep up—often at the cost of long-term sustainability.

Fast-forward to the endgame: When the money runs dry and the cracks can no longer be ignored, some founders resort to the startup equivalent of ghosting—sending a blunt, two-line email announcing the shutdown, often leaving investors, employees, and customers with more questions than answers.

Why Hubris Is Dangerous for Startups

The consequences of hubris ripple across a startup’s ecosystem, leaving significant damage in its wake:

• Desperation Breeds Bad Deals: Founders running out of cash often raise funds on bad terms, agreeing to harsh liquidation preferences or other unfavorable conditions just to survive another day. This approach not only alienates and heavily dilutes early investors but also sets the company up for long-term struggles. In their desperation to keep the dream alive, they accept terms that can haunt the company for years to come.
• Internal Discontent: Arrogance at the top can alienate employees, advisors, and even co-founders. When decision-making becomes a one-person show, team morale suffers, leading to disengagement and talent attrition.
• Poor Course Correction: Founders blinded by hubris often mistake determination for denial. They fail to recognize when their strategy isn't working, clinging desperately to failing ideas. The thought of public failure becomes so unbearable that they continue pushing forward with blind hope that things will "somehow play out."

In short, hubris creates a dangerous domino effect: it not only endangers the founder but threatens the entire company's survival. The most fatal shift occurs when founders begin to believe their own hype, mistaking their ability to raise money for proof they deserve it.

The Fine Line Between Determination and Denial

Think of founding a startup like sailing: stubborn founders are like boats with stuck rudders, pushing blindly forward, while persistent ones adjust their sails to the wind. The key difference is simple: determination means pushing through challenges while maintaining awareness of reality; denial means pushing through while ignoring it entirely.

The Paradox of Fundraising

Closing a funding round creates an intoxicating high. The wire transfers hit your account, TechCrunch publishes your story, and LinkedIn connections shower you with congratulations. But here's the sobering reality: fundraising isn't validation of success—it's borrowed time and borrowed money. Too many founders mistake investor confidence for product-market fit, treating capital as confirmation rather than what it really is: fuel to prove their hypothesis.

Recommended Reading

For founders walking the tightrope between confidence and hubris, I highly recommend Ryan Holiday's "Ego is the Enemy." The book cuts through the BS and shows exactly how ego can destroy what you've built. You can find this and other foundational reads in my guide to essential books for entrepreneurs.

Conclusion

The startup I mentioned eventually imploded, ending with a brief email to investors saying, "Whoops, it didn't work out, I need more money". But it wasn't a simple case of bad luck or market conditions. It was a gradual descent that began the moment success bred overconfidence.

Raising money isn't success—it's fuel for achieving success. How you use that fuel determines whether you reach your destination or burn up along the way.

The best founders maintain a delicate balance between confidence and humility. They're confident enough to pursue ambitious goals but humble enough to acknowledge they don't have all the answers. They understand that while determination is crucial, hope is not a strategy.