How to avoid losing the startup “edge”

Successful startups are often defined by a passionate management team, their ability to execute on a shoestring budget, a willingness to take risks, and the nimbleness to pivot on a dime.

But as time goes on and startups begin to transition into enterprises with a more defined chain of command, problems can arise. Small, close-knit teams tend to warp into dissociative business units as the company grows. In many instances, this kind of aggressive growth also begets a degree of paralysis—causing innovation to grind to a halt.

It's been my experience that superfluous titles within an organization (think VP of “whatever” division or Chief Inspiration Officer) are the prelude to any great startup's death.

While some change is inevitable (and necessary) as businesses expand, founders should be careful to preserve the original startup “spirit” that enabled their company to grow in the first place. Doing so can provide businesses with a competitive edge that helps them outperform even the most well-established firms.

However, maintaining the startup mindset and culture is easier said than done. It requires founders to be open minded, risk-seeking, and above all—vulnerable. In this article, I’ll discuss four rules that can help founders perpetuate the startup “edge” throughout the maturation of their company.

1. Keep a small circle

I’m constantly surprised by the number of entrepreneurs who think that more employees = more growth. In my experience, it’s the opposite—not only is a big team more difficult to manage, but a higher headcount can put unnecessary financial pressure on your business and, in some instances, contribute to a groupthink environment.

Although hiring more personnel is likely inevitable in the long run, try to stay committed to a small team. In my experience, small teams often accomplish much more in a shorter timespan than their larger counterparts.

2. Be accessible

Part of the reason why startups can be so agile is because there isn’t a barrier between founders and employees. However, as a company grows, the chain of command tends to warp into a formal bureaucracy. Suddenly, Bob has to check with Richard before he can talk to Maggy about a new idea. This is a waste of time and money.

Instead, founders should strive to keep an open door with their employees. An accessible management team stimulates camaraderie while ensuring that new ideas get the attention they deserve.

3. Incentivize through ownership

Without having a stake in the success of the company, employees will constrain themselves to an employee state of mind. In other words, they won’t go the extra mile.

It’s called skin in the game.

To overcome this problem, founders can encourage employees to take more of an active role in the company by issuing them equity. While this may reduce a founder’s potential upside, companies can only maintain the startup ethos if every member of their team owns shares.

4. Talk about the bad stuff

Last but not least, founders need to talk with employees about the challenges facing their company. The ability to have an honest conversation about potential headwinds is the hallmark of any strong startup, as doing so can rally the troops around a common enemy/challenge.

Any employee joining a startup knows they are getting involved in a potentially risky venture with an unpredictable outcome. So, fill them in—these people are willing to take a risk by working for your startup. It’s an honour they chose you, so be honorable and encourage them to join the fight with you.

In short, founders shouldn’t hide their company’s challenges from employees. Sunlight is the best disinfectant.

The Eternal Startup Mentality

The original spirit of your startup doesn’t have to die just because your business is growing. By keeping a small team, being accessible, incentivizing employees through ownership, and talking about your business’ potential problems, your company can maintain the startup edge.

Aaron Hoddinott

Investor and marketer willing to take big swings at bold ideas.

Aaron Hoddinott

Investor and marketer willing to take big swings at bold ideas.