Why Culture is Crucial to Building a Successful Startup
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Simply put, a company’s culture is the environment its workers work in. It comprises of work ethics, employee engagement and the kind work atmosphere the company provides to its employees and clients.
Why does it matter? Experts and several industry reports say that culture determines the success of a company. “Culture forms the solid foundation for any successful company,” said Priya Rajan, Managing Director, Silicon Valley Bank at TiE Global Summit 2019.
The 2019 Employee Engagement Report of TINYpulse, an employee engagement and feedback software, corroborates Rajan’s statement. About 43 per cent of the 25,000 employee respondents across 20 industries said that they would leave their companies even for a marginal hike because of weak company culture.
Building Strong Culture Should be Top Priority for Startups
Startup investors consider building a strong company culture as the top-most thing founder(s) should concentrate on along with product, growth and customer acquisition. “Founders have to ensure that they are putting in the right practices from day one,” said Anirudh Damani, Managing Partner in Artha Venture Fund, an early-stage VC fund, at the TiE summit.
His rationale for this criterion is simple - how a company treats its employees directly reflects on how they will treat its customers. “If you treat your team the right way from the start, you build a culture where the team will ensure that they treat the customers well and make them happy,” he explained.
Saurav Banerjee, Partner, Kalaari Capital concurred with Damani. “Culture is important because organizations need to have a purpose and it is the founders’ job to define that purpose. Only when the purpose of the organization and that of its people working in it is aligned, the company can succeed in the long-term.”
Related Read: How to Create an Amazing Company Culture
How Investors can Help
Early-stage investors have a major role to play in ensuring that startups build a strong company culture from the beginning. Rohit Sood, Principal, Bertelsmann India Investments, said during the TiE summit that they advice founders of their portfolio companies to lay down their vision with their teams early on. “Communicating with your team goes a long way in aligning the team with the organization’s strategy,” said Sood.
Explaining how it can be done, Banerjee said that building company culture is a three-way process – founder engagement, creating culture document and having a good corporate governance structure.
First, founder engagement is achieved by spending time with the founders and key people in the company to understand how they are thinking, their vision, the challenges they are facing and what the power-equation within the organization is. “Once you gain founders’ trust by engaging with them, you can give them insight based on your research and expertise,” Banerjee said.
Second, impress upon the founders to create a culture document. “A formal document prompts the founders to seriously think about the purpose of the organization,” Banrjee added. Netflix has a 125-page culture document that lays out things that are expected from the employees and what the organization has to give them in return.
Third, the need for corporate governance is crucial because when startups grow rapidly they often postpone putting adequate systems and processes in place that come back to bite later. And it has some major upsides too. “A proper framework helps to not only come up with credible and actionable information but also impacts the valuation of the company. Studies show that companies with good corporate governance have as much as 28 per cent higher premium compared to its peers,” Banerjee pointed out.
Damani also ensures that his portfolio companies have a framework for ensuring good company culture. “An investor can measure this by getting involved in the sale cycle and testing whether everything that was promised in the board room is being implemented or not,” said Damani. His team does this by carrying random check at his portfolio companys’ offices.
Related Read: Is Your Workplace Culture Where it Needs to be