Beware the ‘Edifice Complex’ — and 9 Other Ways to Damage a High-Growth Startup

Here are 10 ways to damage your fast-growing tech startup — and hurt the perception of Silicon Valley in the process. None of these are specific to any one company; they’re general patterns we’ve observed across multiple cycles of tech startups.

#1 Only hiring — or training/motivating/incenting your managers to hire — without focusing on firing. Or on performance management and efficiency optimization.

#2 Selling too much of your own personal stock too quickly, which alienates employees and leads people to question your long-term commitment as a founder. On a related note, letting private stock sales by employees get out of hand creates a “hit-and-run culture” — and forces your company to take on the burdens of being public before actually going public.

#3 Diluting the crap out of the cap table by being sloppy and undisciplined with stock grants to early employees. This also plants hidden “morale landmines” for later employees.

#4 Maximizing absolute valuation of each growth round, which not only makes later rounds harder and harder to achieve but can trigger a disastrous down round.

#5 Letting investors (including, occasionally, private equity firms and hedge funds) suck you into terrible structural terms on growth rounds. You’re guaranteed massive trauma if anything goes even slightly wrong there.

#6 Going public too soon! Going public before you’re a fortress, before you can withstand all assaults leads to a stock-price death spiral and ends up in a train wreck for everyone.

#7 Pouring huge money into overly glorious new headquarters — “The Edifice Complex” — then repeating two years later. There’s also a danger in signaling to employees “we’ve made it, we’re amazing” (and while everyone hates the cramped but collaborative space when they’re in it, they miss it terribly after the move).

#8 Assuming more cash is always available at higher and higher valuations, forever. This one will actually kill your company outright.

#9 Confusing the conference circuit — and especially the party scene — with actual work. This also creates a toxic culture on multiple fronts by encouraging alcohol/drugs and valuing so-called “ballers” over other important, less “loud” contributors.

#10 Refusing to take HR seriously! This issue isn’t specific to just tech-heavy environments; it’s prevalent in any highly creative, highly skilled workplace. At a certain company size, you need both the ability to manage people and an effective HR person. (Even though it is absolutely worth training company leadership in good HR practices, most managers are dangerously amateur at doing actual HR). Without smart, effective HR, terrible internal managerial and employee behavior leads to a toxic culture that can catalyze into a catastrophic ethical — and legal — crisis.

 

 

 

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