| Dec 21, 2022

The Hidden Dangers on the Path to Becoming a Unicorn

Startups that manage to reach $1B valuations consistently address the same three areas — leadership, hiring, and process.

There’s no getting around the fact that launching a startup is risky business — more than two-thirds fail to deliver a positive return to investors, and only 80 percent of companies that launch make it past the first year. Most of the conversation about why startups fail centers around strategic problems, such as poor planning or lack of funding. 

But inside every startup are people. It’s this human element that often holds the key to a company dying or thriving. Exposing and facing specific hidden dangers related to the team itself can transform the trajectory of the organization and ensure success.

The leadership

When you’re leading a startup, initial policies often haven’t been solidified yet. You must lean on the staff you hire to build out your rules and procedures. At the same time, the reality of working at a startup is that the tasks of many have to be completed by only a few, which can mean that staff has to work exceptionally hard and put in lots of hours.

For this reason, a startup needs leaders who are open to suggestions and change and are willing to listen to the team they have. Executives and managers need to be receptive to feedback and willing to make changes when a problem arises for their team. 

Good leadership also helps combat potential burnout within the startup team. People working at a startup need to feel like the work they’re doing is rewarding. If they get burnt out, they’re not going to feel that way. Even though team members can do their part to find balance and fight burnout, the way leaders model and communicate with their teams can also influence how well that self-discipline develops. The way leaders hear their team advocating for themselves can make all the difference.

Once when we were planning to hire a new employee, one of my team members confessed that she and her department were under tremendous amounts of stress and felt they needed to bring on multiple people, not just one as was originally planned. When she brought her concerns to our executives, they did not gloss over or deny her feedback. In fact, they were so receptive to her concerns, they ended up hiring four new employees for that team member’s department, instead of just one. 

In addition to being receptive to feedback, startup leaders can also support their team when they lead by example. Our leaders engage in their work within the boundaries they encourage their team to set. For example, they rarely log onto our communication channels after hours, except to joke around or make casual conversation. This reminds employees to function as a team both personally and professionally.


Hiring and retaining workers

Turnover at a startup can happen for the same reasons it happens at companies that are better established, such as the business failing to offer competitive pay or workers just wanting to try something different. But a lack of transparency can make the startup turnover rate — which is already high at 11 percent or more — even worse.

People who work at startups need to work hard and be passionate about what the organization is doing. A failure to be honest about what life at the startup is actually like will lead to a failure to find the people who have the attitude and personality necessary to help the business move forward. People can be disillusioned and become dissatisfied as they discover the reality of the business.

However, when leadership is transparent, companies can avoid those higher turnover rates which often lead to impulsively hiring new staff and closing the door on a chance for more open lines of communication. When leaders have honest conversations with their teams, both sides can recognize the unique challenges each role faces, and can get ahead of and reduce stress from all sides.

So don’t make the mistake of hiring just to fill a need for bodies, which can lead to hiring the wrong people. Hire to cooperatively face both the challenges and opportunities head-on, and because you know that the person you’re bringing onto the team has the right skills and demeanor to handle your environment. 

The processes

Even when leadership has a fully open and cooperative attitude, formal processes influence their ability to help their startup team. People need to know how to analyze the business and what to do when they see an issue. They also need to be logical and realistic in the way they approach those processes.

Let’s say your sales team is killing it. You might anticipate that, at the end of three months, they’ll have brought in another 100 clients. Maybe you figure you can wait those three months and hire more people once those clients are onboard. But if other people on your team outside of sales are already pushed to their limits, frustrated, or even looking for other jobs, that delayed  timing for hiring might tank morale and quality. 

As you look at these types of considerations and work with the team to create sufficient structure, a good rule of thumb is to keep your communication direct. When I do my budget analysis and try to fight for compensation, I set up meetings and explicitly show leaders what the numbers look like. But keep sight of the fact that the goal of these direct, rational communications is to unify. You’ll know you’ve built the right processes and you’re using them well when you can see that both leadership and team members are happy and productive. 

The path to becoming a unicorn

Any startup has the potential to reach the coveted unicorn status. The reason most don’t is that, in focusing too much on strategy or what’s quantifiable, they run out of the gate unprepared to navigate and care for the people who will build the business. By addressing the leadership, hiring, and processes, your business can defy the odds, outpace competitors, and grow to dominate the market.

Kristin Woodruff
Kristin Woodruff
Executive Author

Head of People, Massive Alliance

Kristin Woodruff is Head of People at Massive Alliance with specific expertise in improving company culture. view profile


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