Has “startup culture” changed for good?

When thinking of “startup culture,” what first comes to mind?

Perhaps foosball tables, pizza lunches, bean bag chairs, slides?

But what about bullying, aggression, toxic behavior, sexual harassment, and outright lying?

Sure, we’ve all seen photos of the Silicon Valley headquarters of various tech startups. They seem to value a “new way of working,” complete with the “perks” listed above.

But, that’s the surface of startup culture. What matters is what’s below.

Elevating the superficial side of startup culture isn’t just misleading but also potentially harmful, as it glamorizes and glosses over a host of troubling issues.

The real culture of many startups is much darker and more problematic.

The Truth of “Startup Culture”

It’s no secret that startup culture is inherently rife with problems. A quick Google search on “toxic startup culture” will get you a few million search results (5.4 million results, to be precise, as of our last check).

For example, much of the well-documented ‘bro culture’ that’s become synonymous with tech startups comes from the fact that entrepreneurs have often been allowed to get away with not prioritizing diversity in the workplace. In fact, according to Silicon Valley Bank, only 26% of startups have programs in place to improve diversity among their leadership teams.

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Does this represent all startup culture? No, of course not. But unfortunately, there is no denying that it is a common issue in the highly-competitive startup world.

However, there’s some evidence that the tables are beginning to turn regarding startup culture. Founders that want their entrepreneurial dreams to survive will need to adapt.

Startup Culture: The “Bro”

Uber’s co-founder, Travis Kalanick, could have written the book on bro culture.

In case you were wondering, “bro culture” is typically fueled by aggressive behavior with overt arrogance, encourages cutting corners, and is all about excess – particularly partying and spending on things with no clear business objectives.

Built on speed over sustainability, bro culture often fosters an aura of overconfidence, which can leave the organization lacking resilience and without a clear sense of foundation. Companies that embody bro culture become corporate frat houses where employees are often hired based on “culture fit,” and women rarely get promoted (if they’re even hired).

Travis Kalanick lived and breathed bro culture, building a literal brotopia at Uber.

Take a 2013 letter that Kalanick sent to Uber’s then 400 employees ahead of a company party in Miami. In the email, Kalanick cursed, advised staff how to have sexual relations at the company outing, asked them not to throw beer kegs off tall buildings, and levied a $200 “puke charge,” amongst other highly-unprofessional comments. The memo read like rules for a boys weekend rather than a message from the head of a skyrocketing company.

(Kalanick was reportedly proud of the email and spoke of it often.)

That attitude didn’t hinder Uber’s growth. By July 2015, Uber was the world’s most valuable startup, valued at $51 billion after its funding rounds. But while Kalanick’s actions created an immensely valuable startup, those same actions also laid the groundwork for a slew of scandals that inevitably led to his ousting.

At the heart of the Uber story lies the crux of the problem with toxicity in startup culture: badly run companies, sometimes, do extremely well.

An Industry of ‘Bros’

Of course, Uber is hardly alone in its rampant toxic culture.

The collapse of WeWork was big news – like really, really big.

The company was once considered a unicorn of all unicorns. In 2019, WeWork was valued at $47 billion. Since launching from a single coworking space in New York, the company had become massive in less than a decade.

It was an impressive feat. That is until co-founder Adam Neumann’s “vision,” bro mentality, and iron grip on the company came sharply into focus and brought many actions into question.

A scathing Wall Street Journal article chronicled what it labeled as the reckless management of the startup by Neumann. The piece detailed Neumann’s heavy drinking, use of marijuana, and habit of making over-the-top declarations – such as wanting to be elected president of the world, living forever, becoming the first trillionaire, and that his descendants would still be running the company in 300 years.

In the weeks that followed, a public offering plan was scrapped, Neumann was pushed out, WeWork’s valuation plunged by nearly $40 billion in just a few months, and SoftBank Group Corp bailed the company out.

Much of this unfolded because Neumann was inspired – and enabled – by the bro culture of the startup world. Esquire referred to him as “a messianic tech-bro who capitalized on the post-financial crash era.” Indeed, many Glassdoor reviews of the company paint a far from rosy picture, with one post from November 2020 calling it “crazy, misogynistic bro-culture…the experience is awful if you are a woman or a person of color.”

There’s also Zenefits, a human resources software startup, that was seen as operating more like a frat house than a corporate office. In an attempt to overhaul the startup’s rambunctious culture and repair its tarnished reputation, the company’s leadership had to go so far as

asking employees to stop drinking beer at the office and avoid sexual acts in the stairwell. Yes, really.

And what about Rivian, an electric vehicle startup whose former sales and marketing vice president sued the company for discrimination, stating that it has a “toxic bro culture that marginalizes women.” In a post on Medium, the former executive, Laura Schwab, said she was fired after bringing concerns to human resources about gender discrimination from her manager. She filed a lawsuit against the company alleging gender discrimination.

The list goes on, and there are countless startups that could be on this it. But, the question remains: how did these companies, in operating this way, do so well?

Well, many Silicon Valley stalwarts utilize the age-old method: fake it ‘til you make it.

Fake It ‘Til You Make It

A toxic startup culture isn’t just attributed to male founders, and certainly doesn’t stop at the frat house atmosphere.

As proof, look no further than the epic rise and chaotic fall of Elizabeth Holmes and Theranos.

The idea of ‘fake it ‘til you make it’ in startups has been around for ages. It’s the notion that entrepreneurs should “pretend” to be successful before there is any proof of said success. And by “pretend,” we don’t mean for it to sound as innocent as kids playing dressup. We mean companies that go so far as to fake sales numbers, overly project, and present findings that are, if not entirely, partially made up.

For many investors, though, this kind of behavior is expected. Entrepreneurs are supposed to be dreamers, innovators, and live high in the clouds of their vision. It’s an attitude that gets people excited about your service, product, or larger organization.

But Holmes took the idea way too far when she launched her supposed ground-breaking startup Theranos, duping tons of investors, employees, a board of directors, and even Walgreens.

Hailed as the next Steve Jobs, Holmes started Theranos after dropping out of Stanford University, offering a cheaper and more efficient method for blood tests. With just a few drops of blood, Theranos claimed it could test patients for conditions like cancer and diabetes. The company grew with tremendous speed, making Holmes the world’s youngest self-made female billionaire, with the company valued at $9 billion before everything imploded.

A Wall Street Journal investigation revealed Theranos’ tests to be completely unreliable. And Holmes played a major role in covering up the company’s lies. She was eventually ejected as CEO and charged with “massive fraud,” while Theranos closed its operations.

Former employees have spoken out following Theranos’ closing, painting the picture of an incredibly toxic culture that was ruled by paranoia, deception, bullying, and retaliation.

In January 2022, Holmes was found guilty in federal court on three counts of wire fraud and one count of conspiracy to defraud investors.

As journalist David Streitfeld noted in an article for The New York Times, with Holmes’ conviction, the fake it ‘til you make it premise was finally getting its “comeuppance”:

“The verdict signaled the end of an era. In Silicon Valley, where the line between talk and achievement is often vague, there is finally a limit to faking it.”

Of course, Theranos was a specific case, and there were many factors that lead to the ultimate conviction of Elizabeth Holmes. While there may be a “limit to faking it,” that line remains extremely blurred. Investors are constantly battling between entrepreneurial excitement and projection and true market fit.

So, what is the future of startup culture, and of the Icarus-entrepreneurs that, oftentimes, fly a little too close to the sun?

The Next Generation of Startup Culture

The future of the workplace won’t look like it did 15 years ago. And honestly, it probably won’t look like we though it would 2 years ago. And as the way we work changes, workplace cultures will also need to adapt.

The pandemic has, unquestionably, ushered in the era of remote work. There is no turning back. While this shift projects to create fewer opportunities for toxic culture to build and spread as it has in office settings, it won’t be eradicated on its own without being addressed head-on. In fact, it may even increase as more keyboard warriors find their voices.

In an article for Forbes, Bretton Putter, CEO of CultureGene, commented:

“If company culture is defined as ‘the way we work around here’ then the one thing we do know for certain, is that the culture of every previous office-based business has changed irrevocably.

“If leaders don’t adapt to this reality and start to develop a new culture for their company that fits remote working, it will have a direct impact on their team’s morale, engagement, productivity, motivation, commitment, and their ability to retain their people over the long haul. Ultimately the success of their business.”

After all, it’s a job-seekers market. And a startup that offers free lunch on Fridays won’t be enough to sway qualified talent. A recent survey by Glassdoor found that 77% of respondents consider an organization’s culture before applying for a job, and 74% of workers in the U.S. are likely to leave a company if the workplace culture falls apart.

Hiring and staffing is a long and arduous process, which is being further exacerbated by The Great Resignation. And what’s the driving force behind the mass exodus of workers? Toxic culture. Now more than ever, workers are jumping ship if they don’t like the view.

In November 2021 alone, a record 4.5 million Americans quit their jobs.

Startups need to realize that talent is their biggest asset. Not being cognizant of the revolution in workers’ expectations could erode a startup’s reputation and even hinder growth by putting a drain on resources.

Doing Away with the Old Boys’ Club

We’re just going to cut the chase here: the bro culture and boys’ club mentality is tired and has no place in today’s workplace. What’s more, it isn’t good for business.

McKinsey & Company found that gender-diverse companies are 25% more likely to have higher profits. That could be in part because organizations that actively prioritize gender equality tend to make better business decisions that impact their success. In fact, one study of some 600 business decisions by 200 different teams concluded that inclusive teams make better choices for the good of the organization 87% of the time.

Plus, job seekers want to know about a company’s diversity and inclusion stance. According to research from Glassdoor, one-third of employees and job seekers would not apply for a position at a company that lacks diversity in its workforce.

And when there’s so much competition for talent, why disregard so many qualified candidates?

“Companies so badly need help that they recruit people from overseas,” wrote Erik Sherman in an article for Inc.com detailing problems with bro culture.

“Except there are still many stories from women who can’t get attention, no matter how trained and skilled they are. Really, you say you want to invent the driverless car or reverse aging or cure cancer and you can’t figure out how to hire more talented women?” Wow. Just, wow.

Not to mention that workers everywhere are fed up with that behavior. Just look at the mass walkouts held at Google offices to protest “a workplace culture that’s not working for everyone,” most notably the company’s treatment of women and its handling of sexual harassment allegations.

Given what we know about the state of startups and startup culture across the country, including many highly-publicized employee liability lawsuits, entrepreneurs need to take proactive steps from the start, which means being appropriately insured, including Employment Practices Liability Insurance (EPLI) and Directors and Officers (D&O) Insurance.

It’s also essential to implement measures early on to avoid potential EPLI claims, which will protect your business from possible lawsuits while also supporting a healthy, positive, and inclusive company culture.

Startup culture can be inherently toxic and won’t disappear overnight, but things are hopefully starting to move in the right direction.

It’s time for entrepreneurs to learn from the epic falls from grace that Neumann, Kalanick, and Holmes experienced. It’s time to give recognition to startups and their respective founders that are promoting an inclusive and positive workplace culture rather than continuing to obsess over and glamorize the Ubers and Theranoses and WeWorks of the world.

They had their moment. It’s time to move on.