Different Models of Company Building

I just read a fascinating interview with one of my professors from grad school, Jim Baron. He shared such interesting insights from his research on startups in Silicon Valley in the 90s and 2000's.

One concept that really stuck out to me was how founders intentionally or unintentionally chose the cultural model of their company early on, and how biased investors were when it came to who they funded. Here are some key excerpts:

"We identified five blueprints that we called engineering, star, commitment, bureaucratic, and autocratic."

"The star blueprint is a variation on engineering. You poach the best and the brightest, then rely on their expertise to figure out what kinds of projects they should be working on. Venture capitalists tend to gravitate toward this model. Most companies that use it fail rapidly, but it’s often fabulously successful when it works. And if you’re a venture capitalist, you don’t care about your average return; you care about your best return."

"A rarely used blueprint, commitment, was also among the most successful. It was based on creating a long-lived relationship between employees and the organization, cultivating a sense of family by hiring people with shared values. It wasn’t a very fashionable approach, however. "

"The returns of the companies that adopted this blueprint were not extraordinary, but they did moderately well financially, they virtually never failed, they had much lower turnover, and they were able to remain leaner with respect to management overhead as they grew larger and older"

In a way this research points to some of the conversations we have today about the downsides of VC money and the trend around bootstrapping.

Are you building a small cohesive team with a commitment to growing at an organic pace? Or are you taking a big risky swing? What does that mean about the culture of the organization you are building? What kind of employee is attracted to one model vs. the other?

Whether you know it are not, these characteristics are baked in from the earliest days of a company's life. And once established, that cultural model is difficult to adjust.