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It’s a known quantity in the world of startups that your failure is your credit. Please re-read the previous sentence. While failure in most walks of life hangs over those who failed sometimes in career-limiting ways, this isn’t true in startups.

Precisely because they’re pursuing what seems impossible, the entrepreneurs who create businesses eager to take us in an all new direction aren’t haunted by their past. Quite the opposite. If you have no stupendous blow-ups to point to, you’ve likely not been reaching very high.

All of this came to mind while reading Sophie Theen’s new book, The Soul of Startups: The Untold Stories of How Founders Affect Culture. Not a founder herself, Theen has many years of high-level HR experience inside startups. Which explains why the book intrigued me. I wanted to better understand the culture of startups through the eyes of someone who has long been the Chief People Officer (or name your title) at businesses that, in Theen’s words, are “born from an idea to solve something that isn’t working right now in our world.” Founders generally get to tell their stories, and great stories they frequently are. This time I wanted to learn more from someone who has worked for numerous founders, and who has helped staff their businesses. Theen delivers.

Where it perhaps might become complicated for some is in accepting her point-of-view. As Theen sees it “No one gets to the top alone,” which means the first step for a successful founder “is taking care of the people who work for you. When you do that, you will succeed. What’s the best way to achieve employee happiness? Hire a fantastic HR professional and don’t weigh them down with rules and policies.” The guess here is that some will embrace the previous assertion, while some will scoff. That founders require talent to execute their vision is not in doubt, but what some may doubt is the somewhat “you didn’t build that” thinking that powers the assertion. It presumes equality where there arguably isn’t. Important as talent and well-taken-care-of talent is, the great founders can win with all sorts of people. On the other hand, all sorts of people can’t win without great founders. This isn’t a quibble with Theen as much as it’s a reviewer aiming to think deeply about what Theen believes. Her thesis is well taken, and broadly believed, but Theen herself is writing a book about how Founders Affect Culture. It all begins with them.

Still, it’s undeniable what a difficult job someone like Theen has. Startups as she makes plain, don’t always make it. See her description of them yet again. They’re “born from an idea to solve something that isn’t working right now in our world.” Translated, there’s more than a bit of a miracle underlying the opening of a new business. These are businesses founded to correct what’s not working in the world’s most dynamic economies, or to provide a service allegedly not offered, or not offered correctly.

In that case is it any wonder that founders are known to be arrogant, charismatic, obnoxious, or all three? These people imagine they know something that the world’s biggest, most successful businesses do not. Which hopefully explains why Theen’s own work is so challenging. She must recruit A-level talent to businesses that more often than not won’t make it. Is it any wonder her comment about the “exhilaration of closing an offer and having the candidate say ‘Yes, I’ll join you’”? It’s no easy feat to sell lower pay in concert with higher odds of rapid unemployment against better pay, and greater odds of maintaining the better pay over many years. No wonder startups are so often staffed by the young and single…

Furthermore, Theen adds that it’s not just about adding headcount. She points to all sorts of headlines about this or that “unicorn” reaching 1,000 or more people in a short amount of time. Theen knows that numbers can often be used to obscure the more difficult underlying truths that she’s looking for. Theen asks, among other things, “How many employees left before they hit the first 1,000,” plus “What do their Glassdoor reviews say?

Perhaps most interesting is not how founders affect culture, but what kind of person follows a founder into the great unknown? The obvious answer is seemingly the possibility of impressive riches born of compensation that is relatively poor on the salary front, but impressive in terms of equity in a commercial concept that will transform how we live and work. Still, there has to be more to the story than money. Theen surely knows, or has a sense, so hopefully this isn’t her last book.

At the same time, her line of work isn’t just difficult in the recruitment sense. How do you keep employees around? No doubt some of this is taken care of by the charisma of the founder, but then the technology world is full of charming visionaries looking to poach already-employed talent. Which made very interesting Theen’s search “for the underlying of cause of these ‘good leavers’ in an organization.” What starts with exhilaration that springs from successful recruitment at times has resulted in “emotional loss” for Theen as the good left the building. Theen’s view is that “their managers don’t always get to control the overall culture or environment in which they were thriving.” The conclusion seems to be that the good haven’t always gotten the “air cover” needed in a challenging work environment. It sounds compelling, but the skeptic in your reviewer says few people leave work or another mate absent options, or the presumption of options. I found myself wondering if Theen has noticed reduced departure of the good during particularly trying economic periods versus ones defined by boom.

She adds that the founder and/or CEO should keep a close eye on departures. For certain. Hiring is expensive, and so is the exit of talent. She calls on company heads to frequently look inward with questions like “How many of us from day one are still here?” So true. Culture matters as Theen alludes, but so does pay. As a rich man once told me, “I always gave employees raises before they asked me for them.” I’d like to try the latter out on Theen as a way of finding out how much she rates day-to-day compensation as a driver of happiness.

Speaking of compensation, VCs want it. So do employees who yet again trade higher, more stable pay for the distant object of a splashy exit. To be clear about the buyers of startups, thank goodness for them. The liquidity that enables what’s splashy also enables the funding of intrepid founders intent on rushing a different future into the present. At the same time, it’s difficult not to wonder. Theen writes of Freeup, “an early-stage FinTech acquired by Greensil [one senses the book went to print before its own troubles] in early 2019.” Theen acknowledges that Freeup’s success was a function of the “early exit,” but points out how the founders felt the company never achieved its full potential because of the quick sale.

All of the above raises questions. Theen is largely writing about London-based start-ups because that’s where she works. Looking at it from a U.S. perspective, IPOs shrank in number quite a bit in the aftermath of Sarbanes-Oxley. Being a public company is just too expensive, and too time consuming. Also, it can’t just have been Sarbanes-Oxley. It has to have somewhat been that established companies were more readily writing big checks as a hedge against a potentially different future. Still, what about the unseen? Try as acquiring companies might, they can’t recreate the fevered culture that exists in startups facing their end on a daily basis. What innovations haven’t taken place given an ever more liquid market for startups? How much do the startups change once in the hands of the deep pocketed? How much of the now deep-pocketed talent leaves for the next challenge, thus shrinking the quality of those arriving for work each day?

About all of this, it’s crucial to stress yet again that the happy success of startups has ensured more and more early and lucrative sales. But you have to wonder. What would these standalone companies become if private longer, and better yet as standalone public companies? Doesn’t acquisition by large companies insulate them from the daily pressures of singular operation in the private or public sphere? It’s a long way of saying that it’s too bad regulation has made the IPO route more challenging than it once was. What, for instance, would YouTube, Instagram and Twitch look like today if they hadn’t been respectively acquired by GoogleGOOG, Facebook and AmazonAMZN? The unseen always looms large as startups in the words of Theen lose their “independence,” and become “a department rather than an arm of a partner.”   

Most interesting of all to this reviewer was Theen’s comparison of “collectivist” startup concepts versus individualistic ones. Theen gives a fair hearing to the collectivist side, but happily keeps returning to the basic truth as expressed by one of her interviewees that “this wild people-pleasing where everybody gets a say is the main detractor of success.” Amen. Figure that not everyone even wants a say. Some want to be specialists, and they want to be specialists not because they’re not ambitious, but because they want to be great. Theen quotes one interviewee as pithily saying that “this communal type of culture is designed to shoot for the middle where the individualists shoot for the stars.” Yes! While it’s possible I was reading what I wanted to read, Theen seems to conclude from the sources interviewed on this subject that it’s actually not fair to foster a communal or collectivist environment. It’s not because just as “you haven’t been punishing” laggards “for not delivering,” you’re also not rewarding the stars. People need to be led. They want it. Collectivism that doesn’t work in countries logically doesn’t work inside corporations that make up country economies.

On the matter of diversity, Theen happily doesn’t go overboard here. Instead, she cites one of the startups she worked for, and a successful one at that. It was led by “four white guys,” but these white guys couldn’t have been more different. Which is the point. Diversity can’t nor should it be achieved by counting the number of females, black or brown heads, or any other “minority” designation. At the same time, diversity is important for the simple reason that companies need a blend of talents. Seek diversity based on skills, not based on color. Let’s call the latter what it is: reverse discrimination.

Were there quibbles? There always are. I felt there were a fair number of “business school-isms” like “the business is about people,” and then there was an interviewee from a startup called Hopin who talked of how the company is “huge on the emphasis of good communications and shared experiences,” and that the “most distinctive one in our culture I would say is the purpose that was initially was there when our CEO started the company, removing barriers to add accessibility to all.” Ok, what does all that mean?

About one of her own initial failures at a startup that seemingly would have resulted in mass departure absent change, Theen writes about how she and other executives “picked ourselves up to Reset and Iterate,” and from “learning what our people needed through engagement surveys and focus groups, we launched a series of changes that turned us into one of the top companies to work for that year alone.” She adds on that “Employees would say, ‘Thanks for listening to us. I thought the focus groups were really helpful. A few weeks ago, I didn’t think you would ever be able to change my mind about leaving.’” It all sounds great, but Theen never indicated what the problems were, nor the changes made to fix the problems.

Regarding the quibbles, it’s arguable that Theen understandably feels a more detailed explanation of problems discovered and fixed would have amounted to excess. As she so wisely notes, rare is the founder who proclaims “I need help to be a better manager.” Rare indeed, as perhaps would it be rare for seasoned startup executives to think a “how to” startup book makes sense. In Theen’s case, she’s clear from Page 1 that her book is not a “how to” as much as it’s “a compilation of activities.” Which is the correct way of putting things.

As Theen writes late in The Soul of Startups, “you can’t know what you don’t know, and it doesn’t matter how much you read about it.” Precisely. If startups could be taught in “how to” fashion, they wouldn’t be startups. These are businesses aiming to redo how things are done, which means the stories are much better and useful than bullet points about how to do the impossible. Such advice is worthless, while Theen’s memories are not.

John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book is The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage For the Crypto Revolution.

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