After Working at 7 Startups, here are the Early-Stage Attributes that led to Profitability, including Unicorn Status or Successful Acquisition
For over 15 years, I’ve worked in a People role at seven startups in the early stages (what can I say, I love the pursuit of a dream!) Of the seven, only a few achieved profitability, including unicorn status or successful acquisition.
Did the successful startups have something in common in those early days? Was there an observable contrast from the ones that didn’t make it? YES.
To begin, I’m a champion of founders and entrepreneurs in the trenches who are trying to build financially sustainable companies with an inspiring mission. Not everyone is courageous enough to take on this endeavor. But it takes more than courage to make a company succeed. Startup success starts at the founder level.
Six Attributes to Startup Success
Based on my experiences, successful startup founders either innately understood the positive correlation between high team engagement and a well executed business model, or they knew how to ask and listen to others (executive coaches, other company leaders, the team itself) to learn about it.
In the startups that became successful:
1. Co-founders agreed on decisions and got along on a personal level.
Many startups have more than one founder. And when co-founders are aligned in strategic decisions and have a friendship between them, the work environment is conducive to more productivity and less friction and politics.
If as a co-founder you want to measure how aligned you are, simply ask your team. They will share their experience.
On the flip-side, I’ve witnessed C-level leaders hold personal resentments which grew out of disagreements. One particular conflict led to a co-founder’s departure, creating volatile leadership and work disruptions that the team struggled to manage both during and after.
2. The team stayed.
Successful startups will experience low employee attrition or turnover. In general, it feels like no one’s leaving. There might be a termination once in a while for performance reasons, but on those occasions, other team members will have observed the performance issues themselves and agree with the decision.
What you don’t want to see is organizational turnover reaching as high as 30+ percent, with leaders communicating the departures as ‘performance issues,’ but the team doesn’t believe it. This creates distrust.
If a high volume of employees leave either voluntarily or involuntarily, something is broken within the organization. Pay serious attention to the feedback from the existing team and from the exit interviews and you might hear about lack of empowerment, support, or toxic leadership. Ultimately, the loss in intellectual capital and instability of continually losing resources is detrimental to success.
3. The team had momentum.
A startup on its way to success feels like significant progress is being made and the team expresses excitement. Objectives and goals are consistently achieved and the company’s performance metrics are in place and trackable. Some would even describe this period of productivity as feeling ‘magical’ with great talents joining the team and all the right people are in the right places. The momentum just keeps building.
On the other hand, I’ve seen short-sighted decisions where goals were only set for some ‘priority’ departments, like sales and engineering, but not for others. The lack of a unified goals system across all teams and individuals created silos and miscommunication. Team movement felt sluggish and some employees felt apathetic, not knowing how they directly contributed towards the goals.
4. Employees grew professionally and got promoted.
Even if you haven’t built out full career pathing or professional development programs yet, you will still see the early stage employees growing and moving into other next level roles. If you hire more experienced talent and leaders to join the team, set expectations for those new hires to mentor and support existing team members in their growth. There is room for every good performer in a growing company.
What you don’t want to see is new talent coming in to entirely replace and discard existing ones. This creates animosity and the existing employees will feel unvalued for their early contributions that made the company incrementally better for the new hires.
5. The company identified their values and actually lived them.
Lived values are the foundation of a company’s culture and identity. A company’s values are critical because they can be tied to hiring, performance management, rewards and recognition, and other company processes. Therefore, company values should be identified, practiced and believed within the organization. What helps achieve this is to start by having company values originate from the team itself — not just from management or management consultants. The company’s words matched by its behavior builds trust inside and outside the organization.
The flip-side of this is when company values are beautifully displayed on a wall but few employees exhibit the values or really understand what they mean. Even more useless is if an employee can not remember or name the company values.
6. There was transparency in communication.
Transparency is when necessary information is shared with the team and makes them feel included and trusted; they feel like owners. I have come to define transparency as employees have the information they need to do their jobs. Transparency fosters trust. Employees feel comfortable asking questions to the founders and they get back honest answers.
Accessibility to information also reduces office politics. Without transparency, you’ll see guarding of even basic information and many decisions being made behind closed doors without explanation. I have observed founders who don’t share high level information on financials, board meeting news, or the approach to compensation and equity. It showed the founder’s lack of trust in the team, and so it was not surprising when that distrust was reciprocated.
The Choices
There you have it. All six of the above attributes: leadership alignment, low turnover, momentum, professional growth, values and transparency were strong in the startups I’ve been at that achieved profitability including unicorn status or successful acquisition.
While there are other critical business decisions that can change the course of a startup, I’ve witnessed these as the most prevalent and consistent markers of success or failure.
These attributes were not accidental but rather a direct result of choices made by the founders. And the aggregate of those choices lead to higher team engagement and a better executed business.
And for the amazing employees who work or want to work at startups, here is something to consider. While the promise of building something special and earning the financial upside through equity is enticing, they say 90% of startups fail. With the emotional investment and time being so high in startup creation, if you choose to invest your talents, mitigate your risks by looking for startups that have these attributes.
These are the workplaces where BOTH you and the startup will thrive.
