The growth stage of a startup is scary and painful. With perfectly good intentions, founders make this mistake, that may lead to the company’s failure.
When a startup is born, its founders are the creators of everything. They are the ones responsible for product (or service) development, for initial marketing and sales, and everything else that’s needed. They get their hands real dirty. When they get a significant round of financing (typically round two or three, measured in millions or tens of millions of dollars), they realize that they must grow, and they start hiring. And that’s when they make this mistake.
Hire big
Being a serial startup founder myself, I remember an investor telling me that I needed to hire executives from large companies. I must hire to where the company is going, and not to where it is now. If I plan for the company to be a $100 million company, I need to hire executives who ran companies that size, and preferably even bigger. People who will not need to learn how to run a company that size. And there lies the problem.
Culture
Innovation sets successful companies apart from unsuccessful ones. Innovative companies gain 6 times the market share and 3 times the profits of the average company, and they do 50% better during recessions.
My own doctoral research showed that the culture in startup companies is more, much more conducive to (and supportive of) innovation than the culture in large, mature companies. The latter focus more on bureaucracy than on autonomy.
The importance of building the right culture is higher than the importance of developing the right strategy.
If the employees are not engaged and passionate about the company’s direction–the company’s objectives will not be reached. As research showed, you cannot financially incentivize employees to be innovative. You cannot incentivize employees to create exceptional customer service. You must motivate and inspire them to do so.
The right and wrong hires
Since research suggested that large, mature companies have a culture adverse to innovation and creativity, then when you hire executives from those companies, you are essentially killing your company’s culture. Don’t hire executives based on the size of team they led, or the size of businesses they ran.
Hire them based on the culture they created in their companies.