What is the Startup Culture Cascade?

What is the Startup Culture Cascade?

Where does culture at startups come from? It is not from logos, slogans or websites. It is from actions, decisions and habits, especially by the founders.

What influences the behaviour of founders? If the startup has external investors, they are typically one of the strongest forces of impact on the founders through the way they communicate both formally and informally.

What influences the approach of startup investors? If the investors are venture capital funds, then the team’s interaction with their own investors, the limited partners, is a critical factor in determining how they engage with startups.

In order to fully understand the culture of a startup, it helps to look at their investors and even the limited partners of their investors: the startup culture cascade.

If the founders of a startup are originally mercenary and their investors are mercenary, then there is likely to be a clear outcome: extremely aggressive behaviour. This can lead to financial success in certain cases because of the sheer pressure applied but many times it simply results in a mess.

If the founders are mission driven and their investors are mercenary, then there is likely to be some confusion: a company with strong ideals but an inconsistent implementation of those aspirations. The mercenary influence of the investors will be in conflict with the core mission of the founders.

If both the founders and the investors are mission driven, then there will be alignment on purpose and culture. Of course, this does not mean everyone sitting around a campfire and singing songs all the time. There are always going to be difficult decisions that need to be made, but at least those decisions will be made based on a shared set of values in terms of priorities.

As mission driven investors, we start with people first. Our philosophy applies equally to choosing both startups and limited partners. For example, we have a significant mix of female co-founders in our startups (currently 50% of our startups have at least one female co-founder) and also women as limited partners because of our approach. To be clear, we do not have quotas in either case but we do make a proactive effort to communicate our beliefs, which attracts people with shared values.

Rather than seeing a false trade-off between mission and financial returns, we believe starting with people first actually leads to higher financial returns. It also means that we say no to both mercenary startups and mercenary limited partners because of the misalignment in philosophy and values.

Like a waterfall, there is a cascade of culture from limited partners to investors to startups. When trying to understand the true culture of a startup, go upstream to find the answer in the startup culture cascade.