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Exploring New Paradigms of Work
How can we innovate beyond the corporation to enable different, potentially better work lives?
This has turned into an impromptu series on the structural nature of work, which I guess is unsurprising given that this is an area that currently occupies a plurality of my thinking these days. In Well Fed and Unsatisfied, I attempted to make the case that elite workers in the Innovation Economy are increasingly unfulfilled, creating a rough framework to start defining the issue. In Foundational Frameworks for Strategic Growth, I plunged fully into the conceptual world, walking through and attempting to make sense of’s various frameworks for understanding the structures of work within the corporation itself.
Here I’m going to start bringing these two together; to explore how the structures of work directly contribute to some levels of unfulfillment by their very design, and to explore how we might design different systems of work to better serve the needs of our most creative – and potentially improve total productivity in the process.
Impacts on Type of Work
I’ve previously made the argument that many corporate jobs are increasingly unfulfilling precisely because the bureaucracy ratio increases over time. More and more of a worker’s time is spent maintaining this bureaucracy rather than conducting individually productive/gratifying work, and this is especially true of executives. We can frame this using the GUTS framework I dissected last week:
Most corporate environments exist in a convergent state, with a clear vision of what success looks like and a maniacal focus on efficiency to achieve that success. Efficiency here will typically manifest automation – great for the company, not so great for the worker – and greater levels of automation will typically lessen the actual time a given worker realistically needs to spend on her job each week. In a concentrated work portfolio, this high bureaucracy ratio should necessarily yield dissatisfaction.
Greater volumes of “divergence” (the top two quadrants above) should, in theory, yield a bit more fulfillment for creative types precisely because the outcomes are not wholly knowable from the outset. More time can be spent on discovery, which itself can be a highly creative endeavor.
If the Convergent Corporate environment is relatively stifling for most hyper-talented seasoned workers, an obvious suggestion is startups. More specifically, we might recommend (as I have) pulling hundreds or thousands out of our typical corporate environments and encourage them to found startups en masse. This would certainly be beneficial societally, but with an individual fulfillment lens, “go found a startup” has significant limitations.
Founding is not executing
“Founder” is a very odd role indeed. Though I’m certain I’ll receive ample pushback on the assertion, a venture-style founder is primarily a fundraiser, and thus “founder” is a label that’s primarily important externally. It doesn’t actually fit on an org chart, and it’s more of a permanent title than a formalized structure. In the venture world, progress is measured in 12-18 month funding cycles. For the first 5 years or more of a given startup’s existence, founders must necessarily spend a huge portion of their time fundraising just to keep the lights on.
Note that a founder’s primary job is NOT running the company, nor is it focused on building something. This is the role of the CEO or CTO or CXO of your choosing. Often we concatenate the two - “Founder/CEO” - which unfortunately conflates the expectations for each.
Although a16z and others have evangelized the Founder/CEO as the ideal long-term structure, such dogma unfortunately restricts, and in my cases harms, the very people who take on these roles. Let me say this plainly - when analyzing the venn diagram of skills required for a founder vs CEO, the overlapping area is incredibly small indeed. We have IMO done considerable harm to our Innovation Economy by perpetuating the myth that the Founder/CEO must necessarily be preserved in all cases1.
Though taken from a completely different industry (restaurants), I find the following quote from the founding chef of Chicago’s Ever to coherently sum up the challenge:
“It is so weird because when you’re building, you’re a builder. You’re not a chef when you’re building. You are in construction. So HVAC is your life. Plumbing is your life. And then what’s weird is that the second that thing’s done, now you get to clock in as an operator. And if you’re talking about ground up, the next move is to hire and train. So you have to be a great human resource person. You have to be a good manager. I mean, I’m describing a superhuman, basically.”
A founder is a chef, and a CEO is a builder. Occasionally these roles can be optimally filled by the same person. Often they cannot and should not. This is not just about skills, but about ambitions and motivations, because…
Not everyone wants to be a founder
Even if someone has both the skills and ideas to do so, the founder path is simply not the optimal path for everyone (including many people who have founded companies!). The prototypical founder is a Type A who is categorically driven to build Product X, and will run through walls to make it happen. As Kevin Kwok writes:
“As an industry we seem to often want to see machismo and martyrdom in founders. A decade ago it was wanting founders to be willing to mortgage their house and their kids’ college fund. Now it is founders wanting to be in charge of every aspect of companies. If founders aren’t willing to put everything on the line for the company their companies will be worse is the thought. As an ecosystem it doesn’t appear the data bears this out. Everything we do that has expanded opportunity and decreased the friction to more people becoming founders has led to huge benefits for the industry.”
This isn’t simply about personality type - it’s also about one’s life situation. Parents are fundamentally disadvantaged as founders because (a) a significant portion of their time must necessarily be devoted to their family and (b) financial requirements mean that the typical founder path of proactive poverty is simply non-viable.
Let’s take a founder at Betaworks as an example:
“But as a product guy, what he really wanted to do is to build something that works and people use, then refine it and do something else. And because he already had a family, the high-risk startup world was not his best option. On the other hand, the creative environment combined with the safety that Betaworks provided was the ideal playground for him”
We might call this type of person a “reluctant founder”, which has traditionally been frowned upon by the establishment even though the most valuable SaaS company of the past decade followed this exact track. I’m referring here of course to Snowflake, now run by Frank Slootman, which was originally incubated within Sutter Hill Ventures by Mike Speiser:
“After convincing co-founders Benoit Dageville and Thierry Cruanes, both ex-Oracle engineers in their mid-40’s, to start Snowflake, managing director Mike Speiser came on as the company’s founding CEO, with SHV leading Snowflake’s $5 million Series A funding round.”
Note that these are highly seasoned, middle-aged “founders” who needed to be convinced to start a company - not at all the “prototypical” startup founder - and the value created from this coercion, from this contra-narrative approach, has been tremendous. Note as well that in Snowflake’s case, Founder & CEO were not conflated; these were designed as separate roles from the outset.
Kevin Kwok goes much deeper into Speiser’s personal playbook.
“Often he takes on the interim CEO role himself for the first year or two. This has many advantages. The biggest is that it reshapes the ideal founding team profile. He can focus on getting the right top technical co-founders that will have strong views on what to build and the ability to build it—even if they are people who don’t generally view themselves as having a natural inclination to be founders.”
What I’m essentially highlighting here is that startup founding today looks a bit like a well-funded selection effect - only certain personality types, typically coupled with a specifically formulated social network, become founders, and we thus ascribe “founder characteristics” to this cohort of individuals, even though such pattern matching says very little about the maximal efficacy of potential founders.
As Kevin Kwok again writes:
“There are people who often don’t want to be CEO, or even to start a company. They are driven by their conviction of what the future should look like, as well as their frustration with the internal dynamics they confront at legacy incumbents that prevent them from creating that reality. But they are still unlikely to start a company due to all the inertial cruft that comes with founding a company—and especially with being CEO. They want to build what matters, not set up a new corporate structure, manage fundraising, or build a sales team.”
A major reason for this trepidation is the levels of risk and uncertainty that simply don’t appeal to a large swath of talented executives:
“Considering [Eric Yuan] was VP Engineering at Webex and still unable to build what he thought was important should be a very discomfiting reality shock to large companies about the very real economic harm the malaise of their internal processes have caused. However, for every Eric Yuan, there are countless others that never leave and start a company. The inertial barriers are too high. They can stay at their company and struggle to work on what they know should be built. Or leave and take on more uncertainty and risk than they want.”
Some (especially the more dogmatic traditionalists) may scoff at these characterizations and claim that such a reluctance to found is a signal that such a person is a poor choice for founding. As you probably expect, I think such claims are bullshit, and that we should instead explore different structures that can enable as many of these reluctant founders as possible.
Motivated Founders Must Look the Part
Even if one IS motivated to found a company, the industry as constructed today has very specific ideas about who should and shouldn’t be allowed into the club. As I’ve written about extensively, venture capital is today a man’s game:
90% of investors are male
Less than 30% of founders are female
Female founders raise significantly less than their male counterparts even with equivalent or better offerings.
That is, the VC ecosystem is well-tuned for a specific founder funnel, and in this area performs quite well. But as a system that wishes to maximize returns through 0 to 1 building, it is insufficient at best. I expect the industry to substantially improve its equitability over time, but we’re likely talking decades here. Where should talented, not always reluctant founders turn when the dominant ecosystem summarily rejects them?
Rise of the Startup Studio
One potential “new” structure has sprung up in the last decade in the form of the startup studio. The core premise here is relatively straightforward:
A seasoned, cross-functional team (the “studio) ideates, experiments, and prototypes different startup ideas.
When one demonstrates substantial promise, a person outside of the studio is brought in to continue scaling and grow that product into a company.
After hitting certain growth benchmarks, the company is spun out as an independent entity, run by the external CEO, and will typically raise its first round of venture funding at that stage2.
There are two interesting innovations taking place here. First is that a startup studio is only as valuable as the portfolio of startups it creates. This is a diversification strategy that strictly contrasts with prototypical startups.
Second is the explicit separation of founder and CEO. As I’ve discussed here, these are in fact different roles and can be taken on by different people. In this case, the startup studio itself is the founder of the company3, and in its systemic design seeks to never become the CEO – founder only.
Tying back to last week’s piece, startup studios are also interesting (to me at least) because they hypothetically take advantage of “economies of scope” by centralizing the core functions of a startup that would otherwise be redundantly deployed across multiple individual startups.
Studios were very rare indeed for the first 15 years or so of their lifespan, but that is no longer the case. From the GSSN Report “Disrupting the Venture Landscape”, such studios massively proliferated during the free money bull run of the 2010s:
IdeaLab is credited with being the first startup studio, and
IdeaLab, the progenitor of the startup studio movement, has built more than 150 companies in 25 years of operation, with pretty staggering success:
While IdeaLab is a bit of a unicorn unto itself, startup studios tend to show much more favorable batting averages, though not necessarily slugging percentage (aka valuations):
This is approximately double the rate of reaching a Series A for all startups in the ecosystem. Since IdeaLab kicked this off, we’ve seen three waves:
The growth has been so voluminous, and so sudden, thatstarted tracking them in a dedicated substack – Venture Studio Index. I can hear the criticisms from traditionalist VCs (and founders) reverberating in my head:
“Startup studios are copycats, not innovators!”
This is undoubtedly true of Rocket Internet, and it certainly didn’t help the movement that Rocket was such a large (initial) hit that it cast a shadow across the rest of the ecosystem. But notice some of the other brands in there and tell me there’s not real innovation occurring. Betaworks, Atomic, PSL – these are all well-respected innovation hubs, and I suspect that, like YC, respect for the model will come in due time. And that respect will ultimately be earned through value creation.
Because they’re located in Europe, eFounders is not a household name, but their scaled success has been pretty incredible:
In just over 10 years, they’ve launched 35 startups with a cumulative valuation north of $5B. Yes, this means an average per startup valuation of “only” $140M…which is itself impressive! But creating a portfolio from scratch that reaches unicorn status should not on its face be discarded, simply because the individual companies “fail” to be game changers (at least as of this writing).
Startup Studios Scratch an Itch
There is something conceptually fascinating about the startup studio structure. For one, it borrows both the “studio” moniker and many principles in its operations with the movie studio business I love so dearly. But it’s also a grand experiment on the structure of innovation itself. I’ve seen critics effectively arguing that “innovation can’t be built in a factory”, which completely misses the point.
The primary goal of a studio is not efficiency, though that is one potential outcome. No, the goal is persistence of creative inputs - a team unburdened by scaling can continuously and perpetually innovate, collectively, and when a product finds traction, it’s handed off to an operator to take it the rest of the way. Those who love and are best-suited for going zero to one can effectively remain in this role indefinitely, which is simply not possible in a standard startup.
As with any nascent model, though, there are many many more learnings to be had; many more experiments to run. Even calling these “startup studios” is a bit limiting, given that (almost) all of them are building valuation-based rather than cash flow-based companies4. I’m fascinated enough by this model that I’ve begun experimenting on it myself, within our own studio, and I’ll use that internal research as a basis for further exploration…next week.
This is not to say that we should return to the pre-1990s era of founders being replaced by default. The point here is that dogmatic views in either direction are unhelpful.
I'm painting with a broad brush here. There are variants to this model, including some who bring in external funders to contribute capital to each cohort of products being prototyped. But the majority are self-funded by the studios themselves, which is why so many studios are directly associated with venture funds.
This is causing significant cap table consternation within the VC ranks, to such a degree that numerous VCs actively will not invest in startups spun out of startup studios. The primary issue here is what is seen as a usurious ownership stake - but this is only true if the studio is viewed as an INVESTOR rather than a FOUNDER. If viewed as the latter, the startup studio's stake is totally normal and reasonable. But this is what happens when new models enter the territory of incumbents.
Pejoratively called "lifestyle" businesses, a phrase I'd love to wipe from our collective vernacular.