Closing the Loop



Currently, I am an advisor/mentor/investor in ten early stage startup companies, three accelerators and one venture fund. I pride myself on spending a lot of time with each company, getting as involved as possible, and, in many cases, having projects assigned to me. But, one simple fact continues to shock me:

Only one of these companies sends me a regular update.

I understand that the early days of building a company are hectic, and that updating advisors and investors is not a high priority. I also know that there is a natural fear of bad news, so it is easier to not admit that things are hard.

Unfortunately, there are consequences to not updating your advisors and investors: I am not involved or engaged with a company that does not update me. I am, however, very involved with companies that do update me. As a Founder myself, I know that you live through a hundred battles every day. But, if I am not informed, I cannot be an effective advisor. Not knowing about the struggles, the victories and the defeats means that my help and advice is given with a limited perspective. What’s even worse is that I have no idea if the advice that I provided was helpful, since I’m rarely informed of the end results of any given decision.

But it’s not the fault of these companies specifically because I have found that most entrepreneurs forget to close the loop.

Closing the Loop

One of the fundamental components of continuous improvement is feedback. If you don’t know how you are doing today, you can’t get better tomorrow. Modern engineering processes such as Scrum or Kanban encompass feedback as a core part of the process through the use of retrospectives. This is why the engineering teams at many startups are the best run teams. So what about the rest of the company?

The best way to make sure your company stays focused on continuous improvement is to always close the loop. For every decision you make and every goal you set, check back on it in the future to see if it worked. Did that strategic partnership pay off? Did you meet your goal of 10% weekly growth? Make it part of your company culture to always review decisions and goals in the future. You will learn from them.

It can be scary to review past decisions since many of them will not work out well. However, the fear of bad news will slowly paralyze your decision making because it will evolve into a fear of failure. If you develop a habit of sharing news, both good and bad, you will feel a weight lifted from your shoulders – the weight of that fear.

Communication as a Core Competency

Making sure your team closes the loop is easy if you’ve set communication as a core competency of your team. If you have done that, then you already have the tools and structures for communicating. Then, all you have to do is to make sure that you communicate retrospectively.

The following are a few examples of how you can close the loop:

  • Regular Updates. Send regular updates to your team, investors and advisors on your progress that review the results of key decisions (Leo has a great template for these kinds of updates that is short and easy). These serve not only to update the team around you but force you to put in writing what has worked and not worked on a regular basis.
  • OKR Reviews. Many companies use OKRs, but not many have regular public OKR reviews. Such a public review of individual OKRs should not serve as a punishment or a reward, but it should be a chance for everyone to learn from what worked and what did not.
  • Waterfall Financials. When projecting your company’s financials, the only guarantee is that those projections will change (a lot). Keeping track of changes in your projections will help you understand the flaws in your forecasting models, and waterfall financial reporting is a great way to do that.

The best way to make sure you are closing the loop is to make it part of your corporate culture. Every decision that is made must be followed with a report on how it faired later. Remember, the goal of closing the loop is not to punish failure but to learn from your mistakes.

We all make plenty of mistakes: why not turn them into assets?


Reprinted by permission.

Image credit: CC by Siri Spjelkavik

About the author: Sean Byrnes

Sean is the founder of Flurry, the leader in advertising and analytics services for mobile applications. He is currently an advisor, mentor and angel investor in the San Francisco bay area. You can read more of his advice and thoughts on building businesses on Sean On Startups and his personal website.

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