What do Investors Care About When it Comes to Culture?
A post by Brock Benefiel. Brock is a Digital Marketing Consultant, Tech Writer, and Author of the upcoming book Flyover Startups.
Everyone finds time to talk up culture. You can find literally tens of millions of articles preaching the importance of establishing the right startup culture and enforcing it. If you’d like, you can spend endlessly amounts of time reading up on it and hear over and over again why it matters.
But you’ll never have enough time to talk to your investors about culture. Instead, you’ll be forced in board meetings and company reviews to get straight to the point if you want to convey what’s important about your all-important company culture. So speak the language of your investors: use metrics, cite examples and show change. Your passion for your startup’s culture will be visible on your face and 80% of culture is expected to come from the founder. But your strategy for culture and any changes along the way should be put on paper and pushed in front of your investors regularly. Then, no one will be able to question its importance.
So, how do you concisely and effectively communicate to your board that you’ve adequately defined your culture and have made it a successful one for your business? Use these strategies:
Employee NPS scores
If it’s works for customers, if we advocate it for investors, then don’t second guess the power of NPS when it comes to addressing the need for a quick and easy gauge on employee satisfaction. NPS is a hard metric and one that you can track, share with investors and work to improve. You company reviews are loaded with growth stats and NPS fits in nicely among the bunch.
At HubSpot, they dig into the raw data from overall NPS and segment scores by department, tenure of employee, office location and gender in order to spot specific problem areas. Then, they can reach out to groups of employees most likely to be unsatisfied and find reasons for their disapproval.
Hand the overall and segmented NPS numbers to investors and you’re already have shown your testing your employees on their satisfaction. “The employee Net Promoter Score is by no means a comprehensive way to measure employee engagement,” Jamie Nichol writes in CultureIQ. “Instead, it serves as a useful metric to track at a regular frequency over time.” NPS will never tell you the full story. But it’s a hell of a way to start the conversation.
“Even if the founders have invested a lot of time instilling culture into their core team, as the company scales and silos naturally form, negative culture can take root and easily get out of control,” Eric Blondeel and Moufeed Kaddoura contend in YCombinator .
Your investors aren’t going to expect a flawless office environment. But they will expect a founder to be the one to quickly recognize the inevitable culture problems that arise and fix them just as fast. Your reviews and board meetings are great opportunities to cite specific examples of something that went awry and quickly explain the solution. Attacking it and fixing it shows you have your finger on the pulse of the company’s culture and can handle things as you scale. That’s a qualitative case of both founder and startup growth and investors will always care about that.
The culture elevator pitch
You are bound to grow a culture that is nuanced, complicated and worthy of long, flowery descriptions. But you need an elevator pitch for culture – have a few succinct examples of what makes your startup great. “You want people to say your startup is different from everyone else. But in what way?” First Round Review notes. “Figure it out early.”
These takeaway examples serve as talking points for your investors. They are conversation starters when mentioning your business to potential investors, customers and employees. It’s also proof on your end that you care about culture and possess the ability to make it distinct. In his reflection five years after he sold the company, Eric Tobias can name specific aspects of his former company’s culture that made the business what it was and why it can be easily commerated no much how much time has passed. Culture is best when it’s sticky and easy to explain to anyone.
Talk one-on-one meetings
Have a meeting and talk about other meetings. How sexy?! How meta?! Okay, it sounds a bit ridiculous. But any good business treasures one-on-one meetings. They make one-on-ones a priority and have the leadership team spend these sessions asking detailed questions to find out what employees like and what’s frustrating them. These frontline efforts are key to getting a sense for your startup’s culture and how to improve it. If you need a helpful set of feedback questions, YCombinator has one here.
Let your investors know you have a process in place that allows your managers to monitor the company’s culture and another measure to spot problem areas before they get out of control.
Finally, a simple but essential one. If you’re sharing your retention rate, your investors will appreciate the transparency because this can be an uncomfortable one. If your retention rate is low, you’ve got a culture problem on your hands. Either you’re not providing a valuable experience for the employees that are heading out the door or you haven’t defined culture well-enough for hiring managers to know how to spot it in potential employee interviews. A drop in employee NPS can be the canary in the coal mine but if retention rate plummets that’s when the emergency alarm goes off. Show your investors you’re monitoring it closely and prepared to act if you’re experiencing unnecessary churn.