this post was submitted on 15 Mar 2024
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I often wonder exactly what the pathway is to a company growing in response to a huge influx of cash.
It seems like a company could simply not let itself be transformed, but it never happens.
Why not? Is it in the nature of people who run companies that they can’t constrain themselves from 10x-ing the staff? Are there Men in Black type folks who show up and start threatening you if you don’t try to grow the company?
For most small companies that break big, they want to use the new resource to make more stuff, because most of these types of companies are in creative industries. Then when those things aren't also breakout successes, they get saddled with extra staff and costs and spend up in the machine.
So they want to implement their pie in the sky dreams? But they’re less careful about market fit than they were with the first project?
Or maybe they expand their staff to shoot for the bigger goal, and the expansion is too fast and the new team can’t execute as well as the previous team?
Generally that’s true but there are outliers. Valve for example continues to rake it in while not turning immensely shitty. (Not saying they aren’t without issue, but they are vastly better than many others in the industry)
Similarly, the route that Hello Games took. They started off with an unfinished product rushed to market, but took the money made and invested back into NMS, continuing to release big free expansions to this day.
I think a big part is “don’t go public.” As soon as you go public, your dedication is no longer to your product / your customers, but to quarterly growth / gains for shareholders
I wonder if there are other forces analogous to that public stock commitment, even with private stock. When I’ve been in startup circles, I’ve met people who are “money experts” who have like zero conception of what quality is, or even the joy of work. It’s like a blind spot in their mind.
What I want to know is how do these people worm their way into positions of control? Is it a CEO getting invited to rich people dinners and they slowly get talked into what they “have to” do now that they’ve got big money? “Oh you’ve got to hire Dave he’ll help you navigate this money thing” and then Dave is soulless ghoul?
I would imagine it’s very common. “Serial entrepreneurs”, angel investors and the like are often like sharks but their blood is maximum ROI with minimum turnaround time, and I believe they do their best to get people into leadership positions who’s greatest goal is to exit as early as possible based on some minimum ROI, whether that exit be by acquisition or IPO. Especially if the original startup founder is more focused on the product. “Hey man, you focus on the code, let me and Dave handle the business side of things, we’ll keep the sharks off your back” when usually they themselves, are in fact the sharks
This makes me think there are (at least) two kinds of naïveté. One is about business and money. That’s the kind that people know they have. They think “Oh I do need this shark on my team because I’m not savvy enough”, because they think of themselves as naive.
But there’s also naivete about the nature of quality and morale. There are limits to how far one can get from “the tao”, ie their passion, ie the pursuit of beautiful quality, and still maintain contact with it.
I would say the sharks are even more naive about this (maybe?), and it’s on the founder to discover this for their self and to protect it. Like, it’s definitely not a childish thing, but a transition to adulthood to understand and take responsibility for the spirit of their company.
One must be ruthless about that.
I’m not really sure what I’m trying to say. Maybe that the ruthlessness of the sharks is what is needed, but not in service of the sharks’ usual goal of maximum ROI. One must be ruthless in ensuring they keep their eye on whatever X they originally set out to create.
I mean generally I think it's cause the people who start these more creative focused companies like video games have a bunch of things they want to do but can't because of money. But when they get lots of money suddenly they're able to do all these cool ideas and hire the staff to make them happy. Then just naturally as companies get bigger they become harder to manage and the CEO who probably was just wanting to do creative stuff now is managing stuff instead so a new CEO comes in and that's when things start to become more profit focused and start to go bad. Or just when the original owners get greedy and take it public to try and make even more money.
The developer of Minecraft did this. Later, he eventually sold it to Microsoft for like $2 Billion, if I recall correctly.