Startups Are Dictatorships Not Democracies

Or At Least They Should Be

🟰The Perfectly Democratic Startup

Four friends. Four partners. We’ll divide everything four ways.
Every decision must be unanimously agreed on.
What could go wrong?

The year was 2001 and the .com bubble had just burst.
There was no playbook back then for bootstrapped startups.
Really, they didn’t exist.
So we were flying by the seat of our pants.

In the beginning our operating agreement made perfect sense.
We were making websites for people, working 24/7, having fun.

The trouble started when we started winning big.

We had picked up a contract with AOL which was basically king of the internet back then.
We had to design better banner ads. Our take was to make them less stupid & more professional because at the time they all looked like used car ads with flamingos & flashing lights. It was a home run and the contract grew, becoming worth over $500k, which was a lot of beer money for us.

Some of us wanted to use the money from our service business to fuel R&D into a product business. The problem is this transition is hard because the more time you spend on R&D the less time you spend on making money. This made the unanimous vote on how to move forward impossible.

This began a rift that ended up destroying the company despite mediation attempts.

🫡The Benevolent Dictator

So what’s the answer? Really you want a CEO where the buck stops and is a benevolent dictator for the company. They listen to others but ultimately make the calls.

And you want other sub dictators for each department. Engineering, Product, Marketing, etc. Those leaders should get some level of input & feedback from their teams & subordinates, but one person needs to be able to make the calls.

You also need to be careful with too much discussion & consensus because that can lead to compromising & making everyone happy. Making everyone heard is not the same as making them happy.

Jeff Bezos said "The advantage of compromise as a resolution mechanism is that it's low energy, but it doesn't lead to truth.” Companies win with truth.

In every organization because people want to play nice, there is a tendency towards democracy & compromise. A few years back Zappos had a thing called a Holocracy which was essentially 100% democratic and was all the rage. Nothing could be worse.

Create your culture to be like a championship sports team or elite special forces unit. Not a koomayah circle.