The Mitochondria in Startups

Mitochondria … act as the power plants of the cell.— Nature.com

I believe all employees in a startup are on a spectrum between two poles:

On one side, there are employees who think of the company like a job. They come in, they work hard, and they do their job. Some excel at doing their job. But ultimately, it’s a job. They want to make sure they’re fairly compensated for their work, and have interesting projects to work on. As long as they believe those things are in balance and the compensation arbitrage they can get by going to another company is within a certain bound, they’re stable and stay. In summary, they are rational actors, and the value they add to the company, while valuable, scales linearly.

Then there is the other side of the spectrum. This group has a different DNA – they act more like founders than employees. They pour their passion into the company because they believe in its mission, and it is how they operate. They add value to the company beyond their job description and responsibilities. They ask and do what is best for the company. They work hard and late, because for them, the company isn’t a job. Most of all, they best embody the company’s values, and because they do, their value is not linear: they energize and power startup teams through good times and bad. I think of this class of people as the mitochondria in hypergrowth startups.

It’s a founder’s job to attract and retain mitochondria through all stages of a company’s growth. At the early stages, this rare group of individuals is the core of the company. As your startup scales, they are your leaders. They should be cherished, recruited, and the mindset encouraged in other employees. This starts with three things:

Awareness

Awareness is always the first step. Who are the mitochondria in your company? Make that list. Invest in your relationships with these people, and in the people themselves. Stay informed about who falls into in this group and what they are thinking.

Value interviews

The values of a company should be a blueprint for how to be successful in that company; the canon for how the team behaves and makes decisions. As I mentioned earlier, mitochondria aren’t just good at what they do — they best embody a company’s values. It follows that in order to maximize your chances of hiring mitochondria, you can’t just interview for competence. You need to interview for values.

A values interview helps you determine if the candidate is going to be a match with the core values of the company. These interviews should be done by the founding team, or as you scale, by mitochondria that are already working at the company (takes one to know one).

To be clear, interviewing for values doesn’t guarantee you’ll hire mitochondria. But if you don’t interview for values nor communicate the importance of your values during the interview process, your hiring process is suboptimal at best. Just like actual mitochondria, mitochondria employees won’t scale directly to total employees if you don’t make efforts to replicate them.

Be ready to break “bands” / “levels”

At some point, a company formalizes its compensation structure — what it offers to new and existing employees based on the job and experience level.

The biggest mistake I’ve seen startups make is using the same comp scale for these two classes of employees. Comp levels are a rational structure to overlay on an irrational commitment and impact. Companies that don’t break bands will undervalue the energy-giving impact the mitochondrial employees have, which will ultimately challenge their ability to motivate and retain them.

I realize this suggestion might raise concerns of creating inequality throughout the team. To be clear: I’m talking about a very small percentage of your employee base, and for them, their outsized impact should be self-evident.

That said, this is a mindset you want to encourage in all employees. One way to do this is emphasize values or impact outside of your job description as part of the performance review process. For example, at Pinterest, we had a 2x2 where one axis was “Impact”, and the other was “Values”. According to my partner John Lilly, at Mozilla they talked about impact across project and company. I suspect either way works — the importance is emphasizing something bigger than the individual, particularly in the most critical stages as a company scales from a few dozen people, to a several hundred. As startups scale to companies, it becomes harder and hard to make this part of the culture.

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As an investor, I’ve started to share this team framework with the entrepreneurs I meet. I’d welcome feedback on it. I believe that companies that understand how to attract and retain their mitochondria have a far greater chance of succeeding over the long term. If you don’t, someone else will.