This type of startup never fails
How founders shape the destiny of their companies
In early 1990s, James Baron and a group of experts did a study on how founders shape the destinies of their companies. They interviewed the founders of nearly 200 high-tech startups in Silicon Valley in different sectors such as computer hardware and software to telecommunications and networking, medical devices and biotech to research, and manufacturing to semiconductors. They asked the founders about their original blueprints and the organizational models they had in mind when they started their companies.
They found three dominant templates:
- Professional: The professional blueprint emphasizes hiring candidates with specific skills.
- Star: The focus is less on current skills and on future potential, placing a premium on choosing or poaching the brightest hires.
- Commitment: Skills and potential are fine, but cultural fit is a must. The top priority is to employ people who match the company’s values and norms.
Baron’s team wanted to see which founder blueprint predicted the greatest success. When they tracked the firms through the internet boom of the late 1990s and after the bubble burst in 2000, one blueprint was far superior to the others: commitment.
When founders had a commitment blueprint, the failure rate of their firms was zero — not a single one of them went out of business. The future wasn’t nearly as bright when founders used other models: Failure rates were substantial for the star blueprint and more than three times (3x) worse for the professional blueprint. The commitment blueprint also meant a better chance of making it to the stock market, with odds of an initial public offering more than triple (3x) those of the star model and more than quadruple (4x) those of the professional model.
Family & love
The commitment blueprint involves a unique approach to motivation, too. Whereas founders with professional and star blueprints give employees autonomy and challenging tasks, those with commitment blueprints work to build strong emotional bonds among employees and to the organization. They often used words like family and love to describe the companionship in the organization, and employees tended to be intensely passionate about the mission.
Downsides?
Cultural contribution and commitment from all team members is the ultimate solution for building sustained success. However, there’s a dark side to blind commitment that I’ll write about next time. What do you think it is?
This is the twenty third in a series of posts about our investment criteria and ecosystem resources and is inspired by the book Originals by Adam Grant. It was also posted on LinkedIn. We’d love to hear from teams with crazy (but commercial) startups. If you’re looking for funding don’t forget to get your IV Score to prepare for your next VC meeting. If you’re funded and are looking for coaching, start here.
