Culture Eats Strategy for Breakfast

Section 1: The Importance of Defining Startup Culture

As Peter Drucker famously said, “Culture eats strategy for breakfast,” and this is especially relevant in startups. One of the critical tasks for founders is to design a culture that provides clarity on making “right” decisions to every employee and allows us to scale the company by delegating responsibilities to as many people as possible.

However, to empower every individual in the organization, we need a value system that is concrete enough to discern whether the decision being made is proper or wrong, broad enough to encompass all aspects and domains in which we need to operate, and flexible enough to adapt to our startup’s growth stages.

This value system, known as the company’s culture, is unique to each organization and

exists either tacitly through reactive interactions among stakeholders or actively designed by founders. Understanding that culture is something that “happens,” it is ideal for founders to take on the role of using culture as a tool to develop the desired company, analyze it, define it, and

communicate it as clearly as possible so that it is embraced by the organization and shaped by the founders.

Culture has many components, including your leadership style, communication style, decision-making process, handling conflicts, symbols, and fears. However, one way to start is by determining the principles, values, and beliefs underpinning that culture. However, these values will only be significant and valuable if they are courageous and allow you to differentiate yourself from other companies.

It may sound like a challenging task, but as Tony Fadell states in his book “Build: The Definitive Guide to Building a Successful Startup,” 90% of a startup’s culture is based on the set of values, attitudes, practices, and behaviors of the founders, which then evolve from there.

Section 2: Case Studies of Famous Tech Companies

Let’s delve deeper into the cultures of some renowned tech companies during their early stages:

1. Google: In its early days, it fostered a culture of innovation and openness. The company’s “70–20–10” policy allowed engineers to spend one day a week on personal projects, creating Gmail and Google News. This is how Larry Page and Sergey Brin describe the company.
2. Facebook: Facebook’s early culture was defined by the motto “Move Fast and Break Things.” This encouraged rapid innovation and risk-taking. However, it also led to several privacy and security issues, forcing the company to change its motto to “Move Fast with Stable Infra.” This is how Mark explains this core value.
3. Apple’s culture under the leadership of Steve Jobs was one of secrecy, perfectionism, and a relentless focus on the user experience. This culture led to groundbreaking products like the iPhone and iPad. However, it also created a high-pressure work environment, which critics often criticized. So also is great to see how Steve explains his evolution and how his work shapes the culture.
4. Amazon: Amazon’s culture has always been customer-obsessed. Jeff Bezos instilled a culture of frugality, long-term thinking, and a willingness to invent, which has been a critical driver of its success. However, this culture has also faced criticism for its demanding work environment.
5. Tesla: Tesla’s culture under Elon Musk, has been one of relentless ambition and a refusal to adhere to industry norms. This has led to revolutionary products like the Model S. However, it has also led to production issues and clashes with regulators.
6. Uber: Uber’s early culture was aggressive and growth-focused, which helped it rapidly expand into new markets. However, this culture also led to numerous scandals and legal issues, forcing the company to undertake a significant cultural overhaul. Travis is an excellent example of the tradeoff you can face.
7. WeWork: Adam Neumann initially fostered a culture of community and entrepreneurship. However, its culture of excess and lack of governance led to its downfall.
8. Nvidia: Nvidia’s culture has always been one of innovation and technical excellence. What Jensen Huangs proposes sounds like everyone does, but you can see how they implement it in the recruiting process in this video.

Section 3: Personal Experiences:

In my journey as a founder, I’ve experienced firsthand the power of a strong startup culture and the principles that guide it. For example, we were an underfunded startup when we founded Digital Ventures, a company we eventually sold to NewsCorp. So bootstrapping was crucial for our survival and growth.

One of the principles we operated with was analyzing the “payback” of each action we took. This principle was born out of necessity but became a cornerstone of our decision-making process. For example, we would prioritize the one with the shortest payback if we had two experiments. This approach helped us be efficient with our limited resources and fostered a culture of pragmatism and strategic thinking.

This experience has shaped my perspective as a venture capitalist at NXTP. It has reinforced my belief in the importance of an evident, strong culture and the power of principles in guiding a startup’s decisions and actions. It has also underscored the importance of aligning with entrepreneurs who share our values and our commitment to long-term success.

Venture capital firms often decide between being a relationship-driven fund or a transactional fund. A relationship-driven fund, like NXTP, focuses on building long-term, meaningful relationships with entrepreneurs, investing time and resources into understanding their vision, and supporting their growth. This approach fosters deeper insights, stronger partnerships, and higher trust. However, it requires significant investment per portfolio company, limiting the number of assets the fund can effectively manage and provide a much better return in the long term.

On the other hand, a transactional fund emphasizes the potential return on investment and diversification of its portfolio, placing less emphasis on building deep relationships with entrepreneurs. While this allows for more acquisitions, it may miss out on deeper business insights and need to be more well-positioned to support entrepreneurs. At NXTP, we’ve chosen to be a relationship-driven fund, aligning with our core values and commitment to long-term success, despite the trade-off of managing fewer investments.

Section 4: Conclusion

Defining and articulating your startup culture is one of the most essential tasks for founders. We encourage founders to start describing their current culture and analyzing if this is the culture and their emotional connection. If you share our values, we want to hear from you.

Section 5: Additional resources:

If you want to learn more here you can have a list of my recommended books that cover the startup’s culture:

1. “Why You Do Is What You Are” by Ben Horowitz — Explores how a company’s identity is shaped by its culture.
2. “Start with Why” by Simon Sinek — Discusses the importance of understanding your company’s purpose.
3. “Zero to One” by Peter Thiel — Offers insights on how to build a startup that creates new things
4. “The Launch Pad” by Randall Stross — Provides a behind-the-scenes look at the world’s most prestigious startup accelerator, Y Combinator.
5. “The Startup Way” by Eric Ries — Discusses how to foster a culture of entrepreneurial management.
6. “The Founders Dilemma” by Noam Wasserman — Explores the emotional journey and the decision to be "king" or "rich' from a founder's perspective.
7. “Principles” by Ray Dalio — Shares Ray Dalio’s unconventional principles that led to Bridgewater Associates’ success.
8. “The Culture Code” by Daniel Coyle — Delves into the secrets of highly successful groups.
9. “Why Startups Fail” by Saqib Rasool — Offers insights into the common pitfalls that cause startups to fail.
10. “Bold” by Peter H. Diamandis and Steven Kotler — Provides a roadmap for driving exponential growth.
11. “The Almanac of Naval Ravikant” by Eric Jorgenson — Shares wisdom on happiness, wealth, and success from the CEO and a co-founder of AngelList.
12. “The Effective Executive” by Peter Drucker — Offers timeless wisdom on management and leadership.
13. “The Scout Mindset” by Julia Galef — Discusses the importance of truth-seeking over defending one’s existing beliefs.
14. “The Lean Startup” by Eric Ries — Introduces a new approach to business that’s being adopted worldwide.
15. “The Hard Thing About Hard Things” by Ben Horowitz — Offers advice on building and running a startup.
16. “Rework” by Jason Fried and David Heinemeier Hansson — Shows you a better, faster, and easier way to succeed in business.
17. “Founders at Work” by Jessica Livingston — A collection of interviews with founders of famous technology companies about what happened in the earliest days.
18. “The Innovator’s Dilemma” by Clayton M. Christensen — Explores how successful, outstanding companies can do everything “right” and yet still lose their market leadership.
19. “Good to Great” by Jim Collins — Discusses why some companies leap to superior results, and others don’t.
20. “The E-Myth Revisited” by Michael E. Gerber — Dispels the myths surrounding starting your own business and shows how commonplace assumptions can get in the way of running a business.