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Startup capitalism: A call for sustainable and responsible growth

Startup capitalism: A call for sustainable and responsible growth

Nov 16, 2023

I’ve worked for many startups during my career, and while I enjoyed working at these companies, I always had problems with how the startup ecosystem works. My biggest problem with how this world operates is that it is unrealistic, and its business requirements contradict all the basic fundamentals and laws of economics. 

The idea of how a successful startup should grow is capitalism on steroids. It contains and over represents all the things we hate about capitalism while contradicting sustainable growth with all the requirements a founder of a successful startup faces.

Growth at all prices.    

When a startup gets funded and sets up a board, the problems begin. Most of the board members and investors I knew were only interested in how to triple their money fast rather than how they could help the company succeed. No matter how investors promise help, like opening doors, their investing in startups is usually only a financial investment. I’ve seen many boards operate. Most of them were a burden rather than a help for the startups.

Almost all the startups I collaborated with faced enormous expectations about their growth. I worked for a company where the desired outcome was to quadruplicate their growth year by year. How did this become an industry norm? I’m not saying it is impossible. Many companies, the vast players, could produce much more growth than this, but to do so is one in a million. Making this an essential requirement and an industry-standard is ridiculous. 

A company with healthy and sustainable growth is considered a failure in the startup world. We can predict what inevitably happens to a company that produces quadruple growth yearly–and that is nothing good most of the time. Look at the vast and successful startups and how they transformed into massive companies. Most do more harm than good for people or society–plutocracy, conspiracy theories, misinformation spread, cyberbullying, harassment, closed echo chambers, polarization and division, and privacy issues. Succeeding without goals and this outcome might not be succeeding at all.

The bible of growth

A regular business can operate because it has higher revenues than expenses, so they make a profit. This is a fundamental law in economics. They exist because their operation is feasible. You can hardly even see this play out in the startup world. The valuations are theoretical. Their worth is merely a hypothesis, a bet the investors make on the business which the company plans to reach in profit only in the distant future. It is like horse racing betting. I guess I don’t need to point out who the horses are. Startup companies never know if they will be feasible at one point. In their world, everything is about revenue growth–at all costs.   

You can't simply be just successful enough.

My father was running a furniture company. They were producing furniture for household usage. They started out in a rental basement after he left his job. The company started to grow. They could buy expensive machines to create more sophisticated types of furniture. Later, they could rent a vast and comfortable place to do the production. When the company was the most successful, he had 12 employees. He could pay these employees every month and never was late. Those people were able to provide for their families. Twelve families relied on him and his decisions. The company has been running for 22 years. I could go to college because of that, so this company paid for my education. Of course, it was not an IT business but a well-sustained healthy company. Would you call this a success story? I definitely would. If we view the business through our “startup lens,” it was a disaster, because there was no triple-growth revenue every year and no successful exit. If this company were a startup, the founder would probably be pushed to close it and start a new business after one or two years. 

The ideal image of the successful billionaire founder poisoned our minds. Everyone dreams of becoming a CEO of a unicorn. Being successful and having healthy growth is not enough anymore and is labeled as a failure.This mindset also poisoned how most IT professionals think about success. Let me tell you another example. When we were using Photoshop, there was a very successful little plugin, a color picker. The only thing the tool did was copy and paste the HEX code of the color you picked so you could use it faster within Photoshop. Remember, this happened ages ago when this saved designers loads of time. The price of this plugin was two dollars. They sold lots of licenses. I’m sure that they got a little bit rich too. It is a decent way of running a company. Did they become Zuckerberg rich? No. Have they made the world a better place while they made money and ran a reputable business? Yes, partially, they did. 

We need to rethink what we consider success. In a startup environment, everyone wants to save the world or be the new Steve Jobs. Everyone is in for the quick win now, so it feels like a hustle. We, as designers, talk a lot about transforming from human-centered to humanity-centered design and sustainability, but what about the companies we work for?  

A single focus on the ‘Big Idea’

Most startup founders think that the only thing they need to run a successful company is a great idea and the implementation of that idea, yet much more is needed to be successful at running a company responsibly. Running a successful business requires an organic need for what that brilliant idea can provide. Many startups lack this organic need. 

“Old-fashioned” companies were successful because they solved an existing problem. At least half of the startups are not inventing a solution to a problem but inventing a non-existing problem to a solution. These startups come up with solutions and then search for non-existing problems. 

I watched an episode of the Hungarian version of Shark Tank, where a startup founder invented a Room Cleaning Shovel made of paper. The main innovation in its pitch message was that you could throw away the shovel after a certain amount of usage, and it will not stink like a regular plastic shovel. Just wash the plastic shovel occasionally! The problem is solved. You don’t need to fund a startup for that.

Many startups discover a non-existing problem they want to solve with their big ideas. It should happen the other way around. It seems, many times, that even the product doesn’t really matter as long as the company is a startup and the idea is good enough to hunt down investors. 

Pro-innovation bias

Pro-innovation bias can be a dangerous blind spot for entrepreneurs and innovators. It's the tendency to view new technologies and ideas through rose-colored glasses, focusing only on their potential benefits while ignoring their potential drawbacks and limitations. This can be particularly problematic when launching a startup, where the success of a new product or service is often contingent on whether it meets a real need or solves a genuine problem for users. Failing to identify and address these limitations can lead to a failed startup and a wasted investment of time and resources. To avoid the pitfalls of pro-innovation bias, entrepreneurs and innovators must approach new ideas with a critical eye, identifying both the potential benefits and drawbacks and conducting thorough research to ensure that their innovations truly meet a need in the marketplace.

Missing company culture

‘Only an independent, long-standing organization can have a culture. For culture to develop, it is inevitably necessary for the unit in question to gain a lot of common experience since shared assumptions can only develop as a result of such an experience-based joint learning process.’- an excellent summary from Jeffrey Pfeffer (Producing Sustainable Competitive Advantage through the Effective Management of People) that summarizes the main problem with startup culture. Young entrepreneurs with large egos are the ones who try to define how a company should operate and what the company culture should look like. The outcome is not bright, most of the time. ‘Bro culture’ lacks genuine empathy and processes. Some of these young leaders try to define the basics of company culture even though their company is their first workplace. I mentioned egos for a reason. Studying how being a young inexperienced leader changes someone’s personality would make sense. My personal experience so far: personalities change in the wrong direction after the first Forbes cover.  

‘Vision Changes’- occasionally or multiple times a year 

I’m not saying that setting a north-star vision is easy or that this vision should never change, but most early-stage startups change their vision dramatically as often as babies need to change diapers. The most edited slide decks are probably the pitch decks of startups. Every time a new competitor launches or technology arises, you will see it first on the vision board of startups. I wonder if I ever worked for a startup where three months passed without some change in the vision that affected my working plans. 

Handling investors’ money

You can tell that most startup founders have never seen or handled real money, because they burn investors' money like there is no tomorrow, which is usually why there is no tomorrow. Their expenditures include weekly team outings with unlimited consumption, premium office spaces with free vending machines, massage, foosball tables, beanbags, free yoga on the rooftop, and free gym passes. Then when reality catches up, they downsize and do a mass layoff. The critical rule for startups to follow regarding money is this: When you get funded, don’t spend the money insanely. Save money instead.  

A disposable business culture

Some founders refer to themselves as serial entrepreneurs. Their main goal is to run a startup. If they fail, they start all over again, and they get support from the ecosystem for this. Their company is like a disposable mobile device for them. They can throw it away every two years. When you hear the phrase, “serial entrepreneur,” you wonder why you first think of serial killers. “Failure is ok” is a mantra of startup practitioners and undeniably true. But it doesn’t necessarily mean you must fail every two-five years and start again with a new business. Betting on a business rather than living off a company became a new norm. Most “old entrepreneurs” had no plan B.  

Some of the startup ecosystems remind me of the various talent competitions on television. Do you ever wonder why almost all winners of these shows lose their fame after a couple of years and disappear? They disappeared because only the television hype around them made them famous. The need for their presence was never there. Meanwhile, other successful musicians who started from zero and made their way up to the top mostly lasted, because the need for their talent was organically there.

Just to clarify, I'm not suggesting you shouldn't consider joining a startup. If you join a startup as a designer, you should concentrate on being a gatekeeper and keeping the company humane and sustainable. While working with startups can be an exciting and rewarding experience, the current startup culture often prioritizes rapid growth over responsible development. As designers, entrepreneurs, and business professionals, we can create a healthier and more fulfilling startup ecosystem by focusing on sustainability, responsible growth, and focusing on how to benefit society.

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