Despite some signs that the current “unicorn bubble” is deflating, funds are more than willing to give money to startups trying to solve practical issues through technology. That’s good news for startup founders in need of cash, especially since skilled talent is only getting more expensive.
But once you’ve secured initial rounds of funding, hired your first tech pros, and launched a product, the hard part is only just beginning. Sam Altman, president of Y Combinator, has written a blog posting about what it takes for startups to succeed once they’re one or two years old. (Spoiler alert: while technical progress continues to matter, effective management becomes increasingly important.)
Altman believes that every founder needs to develop an effective management structure once the startup’s headcount surpasses 25 employees or so. “All you need is for every employee to know who their manager is and for everyone to have exactly one manager,” he wrote. “Every manager should know who their direct reports are, and you should try to cluster people into teams that make sense.”
Sounds simple, right? That’s exactly the point. Some startups try to create “innovative” management structures that just end up convoluted and confusing.
In addition to a management process, Altman suggests that startups of a certain size begin building up an effective HR system, with a defined onboarding structure and career paths for early employees.
Altman’s column contains even more advice on PR management, making deals, and much more. While it’s not as complete as a business-school course in management, it’s nonetheless a useful document for founders who are wondering what challenges their startups will face over the next few years.
According to data from the National Venture Capital Association, venture-capital firms invested $12.1 billion in promising tech companies in the first quarter of 2016. Many of those startups were already well established, complete with a path to profitability; no doubt their management structure was examined, as well. When it comes to startups, having a great product that succeeds on the marketplace is just the beginning—you have to manage the growth.