A 30-Year Perspective on Startup Culture
Part One: Starting from Scratch
It’s hard to ignore the allure of working for startups – especially if you’ve spent some time in the corporate world as I have. There’s an energy and spirit in startups that inspires employees, investors, and customers to contribute their talent, money and support.
They’re exciting places to work that create deep connections and a sense of shared purpose. You may be part of a team that is creating something so innovative it has the potential to create new markets.
I worked at five tech startups in a wide range of industries, including telecommunications (Aspect Communications), 3-D printing (DTM Corporation), semiconductors (Chicory Systems), XML processors (Conformative Systems), and web analytics (7 Billion People). My roles included product marketing, marketing communications, and public relations.
One can think about the life cycle of startup companies as having two phases. In phase one, we see the excitement of a new idea, service or technology — and the mad scramble to get financing and bring this idea or technology to the market. In phase two, we see the need for structure, organization, procedures and related administrative support services that can be boring for innovators but that are essential for long-term success.
In this analysis, I’ll look at both phases from the vantage point of 30 years in the business. So, let’s dive into phase one here before turning to a discussion of phase two, published separately on this blog.
Building diverse startup cultures
Startups are diverse, and every firm seems to have its own style, shaped by the founders and principals. Some are process-driven and others more spontaneous. Some are open to remote working arrangements (especially now with Covid-19) and others expect you to be there 12+ hours every day.
Cultural fit is important when it comes to building your team. Define your company’s mission and core values and publish these on your website so job seekers can gauge whether their own values and goals align with your company’s.
Hiring the right team
Hiring the right people for a startup is as important as having a great product or idea. After all, it’s people that make a company successful. Poor hiring practices can result in some of the most costly mistakes that a startup can make, as I witnessed several times.
Almost every startup changes and adapts its idea(s) over the course of the development cycle. It’s the nature of the business. Those changes are often prompted by customer and investor feedback – as well as routine technical challenges.
Whether your product development cycle is evolutionary or involves dramatic pivots, every successful firm must be able to count on the flexibility of its employees to keep the process moving.
Even if your company doesn’t pivot completely, your team will learn, adapt and improve as they gather feedback from your customers. And the more feedback you incorporate, the better company you will build. So you want employees who are creative, flexible, respond well to criticism, work well under pressure – individuals who by their very nature are problem-solvers. And you want to be sure that you provide a culture in which such employees can thrive.
Experienced investors — angels and venture capitalists — know this and will always be focused on the quality of the team you have assembled. If they are confident your team can execute the vision, despite potential market or customer problems, they will be willing to consider making an investment – and more likely to stick with you when the going gets tough.
A venture capitalist (VC) is an investor that works with high growth potential startups. They can offer you access to resources and knowledge to grow your business faster than you could on your own. A venture capital fund is a pooled investment vehicle meaning the money invested in startups typically comes from institutional investors, corporations, or wealthy individuals.
When I first started working in the tech industry 30+ years ago I was fascinated by venture capitalists. I went on many pitch trips to VCs on Sand Hill Road in Palo Alto, CA. After moving to Austin, I worked for startups funded by Austin Ventures and Silverton Partners, among others.
It was exciting to be in meetings with high-profile VC firms that had funded so many famous companies in the tech industry over the years.
The best VCs are partners in their ventures, they provide the financing, but the real value they can bring to the table is their direction and industry knowledge. VCs work with a lot of companies, which gives them experience at pattern matching or identifying issues that other companies have faced and recognizing them in new ventures. This helps them understand founder dynamics, conflict management, scaling a high-growth venture, and taking businesses to the next level. This is why startups wanting to progress as quickly as possible often choose to take the venture capital route.
There are potential disadvantages of venture capital financing as well. As soon as you agree to a VC investment in your startup you relinquish a significant degree of control. With a large funding round and aggressive investors, it is likely that your VC partners will want to be involved in decision making. The amount of investment will determine how active they are in shaping the company’s direction.
Depending on the circumstances, the loss of control might be beneficial or destructive if the right decisions are not made. If the VC firm lacks experience and is not familiar with the company, product and target markets, it could be a disaster. On the other hand, if the startup lacks experience and would benefit from active input and additional expertise, a VC arrangement may be the best option.
Founders need to decide if they want to retain ownership of their business or partner in a larger, potentially more successful enterprise.
Smart people with new ideas and strong vision tend to have large egos, which is good for driving product development – but if unchecked can wreak havoc on a company’s morale. You as an entrepreneur must be aware of this tendency, not only as it manifests in others but as it may manifest in yourself. Who gets “credit” for the new product or service? Who is the “face” of the company? What is the narrative/history around the new product or service?
As an example, the CEO of 7 Billion People and a VC investor had frequent ego clashes that negatively affected the business and employee morale. Ultimately, the investor threatened to withhold additional funding if his market positioning strategy wasn’t implemented. The CEO refused and the company shut down two weeks later.
Large egos seem to be fairly common in the venture capital industry. Some VCs after a period of time come to believe they know your product and market better than you do. Finally, customers may presume to tell you how to “improve” your product in such a way that addresses only their specific issues/needs.
Entrepreneurs need to recognize that egos have the potential to cause some pretty serious damage in the workplace if not managed properly.
Read Part Two: Scaling up and Sustaining Long-Term Growth