The One Sentence That Tells VCs You Have A Culture Problem

One of the biggest challenges for early stage VCs when evaluating investment opportunities is determining whether the founding team has what it takes to cultivate a culture that drives high performance and turns the company into a talent magnet.

Culture has been a growing meme in the ecosystem for many years but in today’s hyper-competitive hiring environment, it’s widely regarded by both founders and investors as an absolute must-have. Without robust culture, companies cannot hire and retain high-quality talent, impeding their prospects of short- and long-term growth and success.

I was reminded of this earlier this week during an introductory meeting with a team of entrepreneurs. We were discussing the company’s short-term hiring plan, and in particular, a leadership position that the team wanted to fill as soon as possible. The CEO mentioned that there was one candidate who was a particularly good fit. He then listed 3 reasons, one of which was that the candidate “… gets along well with <one of the company’s core employees>”.

“Alarm Bells Are Ringing, Willie”

This was one of these rare-ish instances when entrepreneurs – who are typically guarded when speaking to investors – involuntarily reveal little tidbits about what’s going on behind the scenes. In this case, what the CEO said about the candidate gave me some concerns about the culture that is being built (or in  this case, enabled) by the founding team. Here’s why:

You have a jerk on board.

I covered the basics of startup culture building in a previous post. Among the key elements of building a healthy, successful culture is picking the right people.

If a core employee is so hard to get along with that it becomes a leading hiring criterion, it means you haven’t been doing a good job picking the right people. And what’s worse, you’re enabling bad culture foundations by building around the problem instead of dealing with it head on.

As a founder, I certainly know how critical core employees can be to the growth of the company. That’s exactly why I like founders who have picked their core teams judiciously and have very low tolerance for risks to the current and future company culture. These founders understand that Culture Debt is one the most expensive debt a young company can take on.

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