Company Culture Counts

What a great week I had last week. On Tuesday I attended the Splunk Worldwide User Conference. On Thursday I attended the SAY Media all hands meeting. (On Wednesday I had board meetings for StumbleUpon and Ebates -- they're building awesome companies as well, but that has nothing to do with this blog post). Both events reminded me of what excited me enough to invest in these companies over a half a decade ago. And both events reminded me that company culture really matters.

There is no single culture that assures a winning startup. Splunk and SAY have very different cultures. But I have found that successful companies have distinct cultures that reflect the values of their founders and the focus of the business they're building. What's more, successful startups have founders who really care about culture. And that desire to build a purposeful company sets the tone for the business as it grows.

When I invested in Splunk and SAY, each had fewer than half a dozen employees. Today both companies employ several hundred people and are growing rapidly. Yet despite growing by dozens of people a quarter, their company cultures are stronger than ever. This is in no small part due to the fact that both companies prioritize maintaining culture. New employees are not left to discover company culture on their own. Employee "indoctrination" (and I mean that only in the most positive of ways) begins at orientation and is an ongoing effort. As a result, culture is transmitted and propagates from one generation of employees to the next.

Since the early days of Splunk, it has been characterized by a sort of geek hipness (no, that is not an oxymoron) that has proven a fantastic cultural glue for the company. In many ways that hipness is reflected in the name Splunk itself. The company started out its life as Oplicity, then Transaction Engines, but neither name captured the attitude the company was trying to project. Along came the name Splunk -- a play on the idea of spelunking your log files -- and a culture and attitude were born. Splunk rules the trade shows with their often edgy t-shirts ("Taking the SH out of IT" remains the classic), which are worn with pride by customers, employees and board members alike. As Splunk has grown and delivers increasingly powerful solutions for giant corporate customers, the geek chic attitude continues to permeate the company and provide a unifying identity that will long outlast those of us who witnessed its birth.

SAY Media has always had an equally quirky company culture. From its inception, SAY has encouraged its employees to think creatively about its products, its brand, its attitude. The company's marketing materials have always featured employees. SAY videos have been produced starring its employees as actors and musicians. Company parties showcase employee bands. Company t-shirts are conceived of and designed by the people, of the people, for the people. The openness of SAY Media's culture assures that it is molded by the creativity of the employees from the bottom up, rather than by mandate from the top down. The culture that has emerged was clear at last week's All Hands Meeting, the highlight of which was the awarding of the "Raddies" -- a crowd-sourced award for those employees who exemplified the cultural values of SAY Media. The creation of the Raddies, the nomination process, the design of the trophy, and the awarding of the prize, all reflect the very same open and creative culture that they celebrate.

That all sounds like great fun and games, but why am I so high on company culture as an investor in startups? It is because culture matters. Companies with a strong culture inevitably find it easier to recruit like-minded employees. What's more, a strong culture dramatically decreases attrition. Companies with a shared purpose are more efficient -- they work well together in pursuit of a common goal. Employees can appreciate their company's priorities and focus on the stuff that matters. And, at the end of the day, fun and games matters. People would rather work at a company that they genuinely enjoy and believe in than one that lacks any real sense of purpose.

No two companies in which I have invested have the same corporate culture. Each has its own unique history, priorities, and traditions. But like Splunk and SAY, each of my portfolio companies has found its unique voice and is working hard to promote and protect that culture.

Comments

[Mark Littlewood]

Great post. Reminds me of a very interesting talk by David Russo, the head of HR at the Saas Institute last year at Business of Software (http://businessofsoftware.org)

He made the point that note only does culture matter, a lot more than people think, but that it is very hard to change. He shared some research that showed that if a company needs to change culture at some point after formation, it reduces the likelihood of an IPO by about 50%.

You can see my notes here http://thebln.com/2010/10/david-russo-business-of-software-company-culture/

[Dave Kashen]

Thanks for the great post! I couldn't agree more, and I think most entrepreneurs do themselves a disservice by not focusing enough on intentionally building a strong culture that supports their company's vision and strategy. It's been surprising to me how much more work has been done on defining best practices and methodologies for building a technology/product that meets customer needs than on the equally important work of building a culture that enables you to repeatedly and scalably continue to meet customer needs.

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Agreed! Companies often focus too much on their external image and not enough on who they really are...who their internal stakeholders are (which is what is truly driving the company forward). Intentional internal public relations (creating the sense of "we" as a team)encourages individuals to do more than they would if trying only for themselves.... Inspiration then begets inspiration...as catching as a smile.

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