Start-up stages based on number of employees

I had a fun meeting with three guys from a start-up I’m looking at investing in; it made me re-live my own start-up days and I realized I’m envious of their road ahead. One of the guys asked me how to establish a culture in a start-up. My answer was, “it depends on the size of your start-up and what stage you are in”, which of course led into a discussion of what the start-up stages are.  Here is how I see the stages unfolding – what are your thoughts? I’d like to know other view points.

1 to 8 employees
The founders and the first employees ARE the culture. There is no separation. You don’t have to go out of your way to create/establish a culture, it’s already in the DNA of the company your building just by the nature of who you are, so don’t over think it.

In the early stages everyone is wearing any and every hat. If you need to figure something out, one of you will end up learning whatever it is at 3am and implementing it the best you can the next day. You’ll find that work and social lives combine, your co-founders/employees are best friends, a family, and you have each others’ backs. The start-up consumes every ounce of effort and excitement so nothing else maters. This is your life and you love it.  Most of the time you don’t have a clue what you’re really doing but that’s what’s so exciting; if it doesn’t feel that way, you are over thinking it and haven’t let go of your old life.

9 to 15 employees
Here comes the pressure of a growing start-up. You may have thought Stage 1 was going to be the stressful part, where you are putting your livelihood on the line, but now you’re hiring individuals who rely on you! Hopefully these folks know more than you and have more experience, but that means they have lives and families that rely on them and the success of this start-up.  Trust me, the pressure grows exponentially as you realize how far the effects of a failed company would reach.

Now, if you’re one of the founders or early employees,  young, and not used to life pressures outside of work (mortgage, husband/wife, kids, dogs, etc.); I suggest you focus on interacting with these new employees.  Embrace the reality of your situation and theirs. Get to know the challenges they are facing even if you’ve never faced them or don’t know what to say. Become a second family to them and them to you. Even if you don’t have anything in common,  take care of them like you would a sister or brother. Family binds you and you’ll get loyalty from these folks regardless of what they face in their personal lives.

16 to 35 employees
Roles for the founders or initial employees may change at this stage. You’re getting to the point where some middle management might be necessary. Unless you all know how to pivot and adjust how you contribute, you’ll most likely find the company stuck at this size and stage. Lots of companies can’t push beyond this stage/size because the founders can’t adapt and/or get out of their own way.  When companies remain at this stage, many call it a “life style business,” I call it the “control trap”.

Here are a few examples of necessary adjustments to look out for: 1. A founder who was great at sales for smaller clients might not be falling short with larger clients or relationship building as the dynamics of who he’s selling to changes. Don’t be afraid to switch up roles in order to maximize each employees’ strengths. 2. At the beginning you might have taken on any client/project. It’s OK to start saying “No” or “goodbye” to bad relationships and projects. 3. Founders and initial employees likely started off as “jack off all trades”, but at this stage you need to start excelling in specific practice areas and disciplines. Know your strengths and weakness, let go of control and pivot to an area of the business that needs you most. You can’t have a say in every detail anymore, so let go of the ego to push through to the next stage.

You’ll also find that winning great clients/projects starts to become the driving force in the culture. You could still embrace a family and social/work mash up culture, but the burden of payroll and cash-flow will start to create a performance culture you should embrace.

36 to 70 employees
Some of the founders and initial employees may not be able to pivot and adjust. You need to part ways quickly, otherwise you’ll get stuck and start tearing up the company (everyone will know who isn’t adjusting/contributing but won’t say anything until it’s too late). You need to start relying on senior management, who are often much smarter and stronger than some of the founders or initial employees. This will cause issues of loyalty in the family.  At this point, you may also need to establish a sense of purpose, goals, missions, values, etc. to define the company and the culture (written statements). Be sure that these statements reflect the initial DNA and culture of the early stages. That was what made you and defined who you’d be, it now needs to be pushed down to the middle/senior management and below. Try to spend time with every new employee, take an interest in them and their family, help them embrace the stories of all the founders and initial employees so they understand the road that’s been taken and the culture that’s been built, and what’s still to come.

Some founders tend to counter the direction of the management they’ve put in place (unknowingly) because they are so used to making snap decisions on their own. Instead start elevating your leadership and presence, keep your managers in the loop as often as possible. If you’ve not learned to delegate effectively and let go of the details, you’ll be stuck at this stage.

70+ employees
Your no longer a start-up, but rather an established business. Your people are the most important asset; they rely on your company and so do their families. Always remember this as it’s what helps maintain a positive culture.

As you grow you’ll need scalable processes for your management team to thrive and operate. Hire smartly and rely on them. The wrong personality, however smart, will destroy the culture you’ve built. Employees from earlier stages might not be able to adjust and pivot- part ways with gratitude.

Above all, in all stages, though you’ll hear many voices and opinions, trust in your gut and lead with quick and precise direction. Don’t ponder, show uncertainty, or weakness; you might be wrong from time to time, but you will learn that small failures have big lessons. When things don’t go right, quickly try something else even if you’re unsure of the results.

Good luck with the rest of the journey!

Love your comments good or bad. Thanks.

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