BESSEMER CLOUD COMPUTING LAW #9: Culture is key

October 2012
Authors: Umesh Padval
Related Companies: DocuSign, Inc. and SelectMinds
Related Strategies: Cloud Computing

Bessemer has enjoyed the privilege of backing hundreds of companies throughout our rich history, and the one single determinant of success above all else is the quality of the team and how well they work together.  This not only applies at the early stages when we may first get to work with a founding team, but also to the extended team that they hire as the company grows.  Success as a private company is all about navigating evolving markets and complex partner, customer, and competitive dynamics.  Therefore we cannot emphasize enough how important it is for you to hire super star talent at every level and for every position.  With this in mind, it is also encouraged to reject candidates for the reason of “not a cultural fit.”  Oracle, Google, and Apple are all great companies, but with very different cultures.  They all enjoyed success due to their ability to hire specific employees that could be successful in those organizations.  Not surprisingly, we often hear our companies talk specifically about the companies they want to target for candidates based on having similar corporate cultures, and ones they intend to avoid.

Keith Krach
CEO, DocuSign

“Building a world-class high performance team is my favorite part of being a CEO – and my most important role as a leader. The company with the best people wins. Creating a lasting, high-growth company requires that we surround ourselves with people better than us, align our team to an inspiring vision, and constantly raise the standard so we keep getting better and better.”

In terms of the other elements of talent management, three personality traits that we see our best CEO’s repeatedly screen for are: 1) a clear pattern of success 2) a will to win and 3) self critical and accepting of failure.  In terms of success, it often doesn’t matter as much where the candidate is coming from previously as that the she has been a part of success.  This often includes the obvious (Salesforce.com, VMWare, etc.) but increasingly includes success in other industries or fields such as Google, NASA, Cal, sports, or the military. 

The second element is all about personality and drive.  Startups require a special breed of talent that wants to tackle the hardest problems with very limited resources, and have fun in the process.  It’s a “run through walls,” “take the hills,” and “will to win” drive that is tough to teach and tough to fake, but is magic when present in talented employees.  The third element is humility to admit mistakes, accept input, and change direction, because startup executives will face failure many times along the path to success.

Talent management isn’t just at the point of hire, but is ongoing.  Most people agree that “A players” hire “A players”, and 5 excellent engineers can beat a really good team of 50.  Yet many still compromise.  We let that marginal person stick around, because we figure having someone in the job is better than having no one.  Most of us have been tired of the long search so we decide to settle for the best candidate we’ve met, or let an exec hide an under-performer on his or her team because he’s liked by everyone and tries hard.  Read Jack Welch’s book, look at the data from Cornerstone OnDemand, or talk to a CEO who has ever had to do a layoff, and they’ll all tell you that firing the bottom 10% of the company will actually make you stronger and increase your output.  Tech markets are very efficient with talent and small companies don’t allow really weak performers to hide for long, but the same principles apply.

Anne Berkowitch
CEO, Select Minds

“Team building is a critical part of our company, as well as our product. Culture is central to recruiting - particularly in driving referrals - and can even be powerful when looking to rehire past employees from your alumni network.”

Similarly, everyone involved with the company is part of the extended team.  You should approach adding an advisor, a BOD member, or an investor with the same rigor that you do other members of your core executive staff.  Ask questions and check references to make sure the person is going to bring real expertise to the discussion, relationships and perspective that is additive, and a style that is strong fit with the team.  Of course economics are always a part of these decisions as well, but focus on the person first and then making sure it’s a “fair” deal.  You aren’t going to build a dominant company by selecting second tier executives and advisors in order to save money on their compensation packages, or by selecting second tier investors for a little less dilution.

For young and/or first time CEO’s, one of the most powerful things you can do to add experience to the management team is to mix in experienced external hires with young and aggressive startup operators.  The extreme examples of this are 20-something founders like Mark Zuckerberg at Facebook and Aaron Levie at Box who have both done a fantastic job of hiring extremely experienced executives while still preserving the energy and culture of a hot startup. 

Team is the single most important factor in determining whether or not we want to invest in a company, because our history shows that it’s the single most important determinant of company success.

For a PDF of Bessemer's Top 10 Laws of Cloud Computing and SaaS please click here.