How a startup loses its spark

Total company size. The book argues, if I recall correctly, that over that size, there are too many moving parts within the organization to be focused on anything but preservation of the organization at large, rather than the product or service the organization offers. It's been a while since I read the book but it was quite a good read - highly recommended.

As a corollary of these people problems, I would add:

1. Not correcting problem hires fast enough.

First time founders are often too hesitant to give negative feedback, demote a too-technical manager who should have stayed an IC, or remove a problem employee who isn’t working out.

The anecdote that comes to mind is a local startup that hired a C-level executive’s UI designer friend into their VP of Product role. He was wholly incapable of doing the job but they kept him in the job for 2 years to “give him a chance to grow into it.” Everyone below VP level openly talked about how the VP of Product was incompetent and how to work around him.

The company’s product initiatives ultimately failed to even get started and they had to pivot to entirely services based work. Do not stay at a startup that insists on keeping unqualified people in leadership positions long after everyone in the company has given up on them.

2. Firing the wrong people

The same startup was forced to downsize, largely because their product plans failed to even become defined enough to start under the incompetent VP of Product.

It was the perfect opportunity to fire the VP of Product and his sprawling empire of people who did very little, but they avoided that due to his connections to a C-level executive. Instead, they started cutting engineers. They focused on cutting engineers with the highest compensation out of a misguided effort to cut as few people as possible.

In the process, they lost their key engineers who were holding things together. They sent a message to everyone that incompetence is tolerated if you know the right people. And they lost even more core engineers who quit in the months after those layoffs.

Everyone makes hiring mistakes. It’s how you respond to those hiring mistakes that will seal the fate of the company.

The first startup I worked for was a slow-growth company that had slowly expanded over 7 years to only about 50 people. A dinosaur in startup terms.

It still had the same problems as above. Expanding slowly doesn’t automatically protect you from these things.

I think that’s probably still reductive — in some environments (like a couple years ago), it was very hard for companies, especially startups, to lure in talent.

Perhaps, though, if you only hire when you need, you can be more competitive with pay.

> Our fantastic VP of Engineering became CTO, and hired a middle management moron as VP

Hardest lesson I learned when I got promoted to upper leadership positions: Hiring middle management is incredibly hard. The number of absolute sharks in the candidate pool is wild. People will show up, sense that you’re new, and tell you everything you want to hear about how they’ll solve all of your problems. They’ll claim they’ve done exactly what you need at every prior company they’ve worked for. They’ll flatter you and tell you they’ve been waiting for an opportunity to work or someone like you.

Imagine the schmooze-iest IC candidate you’ve ever interviewed, but 5 times better and harder to see through. These people have charisma you wouldn’t believe (when you’re new) but they don’t really care to do the hard work. They just want to worm their way into the company and then extract. They’ll extract compensation for themselves, extract headcount to hire their friends and build an empire, extract compensation for their friends (who will return the favor at a future company), extract lucrative contracts for their contracting buddies (where they might even be in on the take). Years can pass before people realize they haven’t really done much despite producing a flurry of activity. They may have even driven away the good employees who got tired of their BS or were pushed out for identifying their incompetence.

I was unlucky-lucky to watch this play out under a fast rising CEO at a lesser known unicorn. The number of sharks who showed up and charmed him after he became successful was unbelievable. The same thing plays out with less experienced middle managers who get thrust into high-budget positions at smaller companies.