How Failure to Communicate Nearly Killed My Startup

Nathan has been a member of Founders Network since September 2011. He’s been a prominent FN member in our San Francisco chapter.To receive peer mentorship from Nathan and over 600 fellow Tech Founders, please request an invite and join our global network.

This is part 1 of  a 2 part series on “How to Grow Your Team’s Emotional Intelligence (EQ).” 

After my co-founder and I raised our Series-A we celebrated by taking our team out to dinner at Kokkari. Our company was nine people and we had been in the trenches together. Over the next three months, we hired six new employees, including two senior executives, a director and three junior employees.

A few months after our new hires joined, my co-founder confided in me, “I thought hiring more people was going to reduce my workload. Instead, I’m struggling to get anything done. I spend 50% of my day acting as a mediator and therapist.”

What begins as a sign of success—growing your team—can easily push your startup into a tailspin. Why? Because, as your company grows so will your human challenges.  

“What begins as a sign of success—growing your team—can easily push your startup into a tailspin.” – Nathan Parcells

1. Metcalfe’s Law:

The first reason this happens is because of Metcalfe’s Law.

When you start a company, you usually have just one relationship to manage–you and your co-founder (and even that is tricky). When you hire a third founder your number of relationships triples to three. At 10 employees there are 45 relationships, and at 20 employees, there are 190.

The complexity of your startup’s communication grows exponentially with your number of employees.

Adding to this challenge are the types of people who join your company. Scaling means hiring more people, from more backgrounds, including senior leaders who have strong personalities and complex professional histories.

In a matter of months, team communication can go from the amateur-level to Olympic-level and it catches many founders off guard.

“The complexity of your startup’s communication grows exponentially with your number of employees.” – Nathan Parcells

2. Old vs New:

After my startup, I worked at a post Series-B company, where happy-hour conversations always revolved around how the company culture had changed for the worse. Early employees resented new hires, who “Didn’t get it,” and new employees felt left out of early company cliques.

Only a handful of people were doing the hard work of integrating the two groups.

At your startup you need both entrenched early-hires and new specialists and to make these two cohorts work as one you need to have hard conversations with teams and individuals, about how the company is changing and why.

3. Outgrowing a role:

One of the hardest decisions I made as a founder was choosing to hire a CMO over myself. Unfortunately, for our startup (and myself), my co-founder and I waited too long to have a conversation about this change, causing us both months of agony.

When a team leader–who manages a large team, significant resources, and influence–needs to be changed, deciding how and when to communicate this can make or break your startup.

4. Taking Risks

The ability for a startup to survive is determined by your team’s ability to take calculated risks.

With every risk, whether that is launching a new product or killing a business unit, the ability to make these changes with minimal employee fallout is critical. This can only be accomplished through skilled team communication.

All of the above challenges—from sharing a cohesive company vision to helping employees adjust to new roles, to taking risks, require you and your senior leaders to have exceptional EQ. Oddly enough EQ is rarely taught in school or by mentors and instead is learned in a trial by fire. This causes startups, founders and their employees unnecessary pain and even a worse a surprising number of startups to fail entirely.

“With every risk, whether that is launching a new product or killing a business unit, the ability to make these changes with minimal employee fallout is critical.” – Nathan Parcells

Check out part 2 of this series: Learn 5 ways you can increase your EQ today.