Navigating Bureaucracy: Insights for Late-Stage Founders

Late-stage founders must actively engage to cut through bureaucracy and understand their companies better.

### Navigating Bureaucracy: Insights from Late-Stage Founders
* 🏢 Late-stage founders often struggle with bureaucracy, which can **distance them from the day-to-day operations** of their companies, making it **challenging to grasp what is truly happening** within their organizations.
* 👥 At a recent YC alumni event, Brian Chesky emphasized that regardless of a company's size, founders can **enact change to combat bureaucratic inertia**.
* 📈 The event gathered late-stage YC founders who have achieved **product-market fit** and are managing **significant teams**, highlighting the **common challenges they face as they scale**.
* 🔍 A key issue discussed was the tendency for founders to become **disconnected** as they hire executives and layers of management, leading to a feeling of operating as a "**marionette**" rather than being **hands-on**.
* ⚠ Brian shared that conventional wisdom often pushes founders to delegate extensively, but this can lead to a **loss of insight into customer needs and product effectiveness**, which should remain priorities.
* ✊ He encouraged founders to develop techniques to **cut through bureaucracy**, such as directly engaging with individual contributors to **understand problems** rather than relying solely on management layers.
* 🛠 The conversation also touched on the importance of **hiring great executives who recognize the value of a founder's involvement**, contrasting with the common scenario where **bureaucracy sidelines founders**.
* 💡 Ultimately, Brian's message was clear: "**It doesn’t matter how big your company is and how big your bureaucracy is; you can change it**," urging founders to **take responsibility and learn from their experiences**.

you got to figure out your technique for cutting through the bureaucracy you've built. Yes, to figure out what's going on. I think the really encouraging thing from Brian's talk is that it doesn't matter how big your company is and how big your bureaucracy is; like, you can change it. This is Dalton plus Michael, and today we're going to talk about founder mode. Oh jeez, founder mode. So um, we were at the YC alumni event and um, saw the founder mode talk and more than that, like we've interacted with tons of YC late-stage founders over the year and kind of know um, a lot about what happens when companies get late stage and um, I think a lot of people in the room were really excited. Yeah, yeah, I mean, so to set this up um, we did a special event just for growth stage, late-stage YC founders. Yes, you know, so picture a room, couple hundred people, you know, pretty full y um, all the founders of late-stage, growth-stage YC companies, companies making tens of millions or

hundreds of millions, so not B companies. When you think of YC companies, you may be thinking, Oh, you know, two-person startups. No, not that. These were the folks that have hit product-market fit and who have a lot of employees. And we brought them together to learn from each other and share notes. And, of course, Brian Chesky was one of the speakers that we had there because he is a hero of running a late-stage company and, yeah, going through all sorts of things. And the prompt, as I understand that he was given, was to give a talk specifically tailored for the later-stage companies, right? Like, especially for what you went through with Airbnb. What do people need to hear that are also late-stage founders? Yes, okay, so that's the setup. That it's worth mentioning we were there. Pretty relevant, pretty relevant setup, yes. And I think that the core message that I really think is hard for early-stage founders to understand is that when you're a late-stage founder and you have

to hire executives and then layers of management. It's hard to have a feeling for what's happening in your company. You know, you very quickly hit Dunbar's number, and none of the people include people who are maybe talking to customers or writing actual code or making designs, especially if you don't curate that list well. And there are a lot of people who are slowly starting to feel like, you know, almost like they're operating a marionette, like it's not my own hands and my own eyes anymore doing the work in a company. I'm like so separated, it's hard to understand what's happening. And I think that's a problem that a lot of later-stage founders have. And so that's really kind of, yep, the kickoff was like, Hey, are you feeling like that? Yeah, well, well, again, the context is if you're a later-stage founder. I experienced this at my startup, and I know you did too. It is very typical for your investors and your board to say, Hey, you need a big

management team. You need to delegate, and you need to hire all these experts, and they know better than you, and so you need to stay out of the details. And again, you would never—investors would never say this to a two-person team. So again, to the extent people out there in the world are trying to understand how this relates to their tiny startup, it does not. It doesn't. It's just what you know. If you scale, yes, scaling means hiring executives and delegating major parts of your business and kind of assuming they know better than you because they have a fancy resume, okay? And so the real point Brian was trying to make, and then PG in his blog post, I would argue, was, Hey, this thing that is considered conventional wisdom about how to operate a growth-stage startup seems wrong, and no one's ever talked about that before. G, and I would argue that there's been some critique on this point. I think that critique is accurate. I don't think there's a business book you can find that says, like, You know what the

greatest CEOs did hard a bunch of Zex and went on vacation. So like I don't actually think anyone is arguing the other side. That's a no one's arguing. No one's arguing that. I think it's much more like oh hiring Executives and Management's hard. Yep. And when you don't do it well you kind of get in this trap. Yeah. And I think a lot of what Brian was trying to do is get people advice and like how do you get yourself out of this trap. Yeah. Well here's a really concrete example or rubric for it. It's just how many layers of management there is relative to how large your company is. I was even reading a an article recently that Amazon's about to do a big reorg. Kind of sounds like it was influenced by founder mode if I'm real. Maybe not. Maybe it's a coincidence. But they're just trying to look at how many layers of management between yes the entry level folks in the CEO and just try to move several layers. And what's hard to

understand when you have an org that's like 2,000 plus people. It sounds so complex, especially because it's a software company. Just knowing what's going on is really hard. Like, just like you would be shocked at the questions that a startup can answer about its users and its products, that a large company, the answers are tricky. And like, I've heard of companies, you know, hiring consulting firms because like, we don't really know how to answer the question, Who are our users? And yeah, let's pay McKenzie to find out who our users are. Yeah, it's really tricky. Um, and like, that doesn't like, it's hard. It's really, really hard. I think the other thing that people don't realize is that when a company gets to these thousands of people, bureaucracy sneaks in. And bureaucracy isn't a government problem, it is an organizational problem. And how many people need to weigh in on a decision? How many people need to approve a decision? How much, how many additional pieces of approvals are created because one bad thing happened?

once yes so there's now all this red tape 'cause this one thing happened 10 years ago. Years of one-off bad thing. This can never happen again. They just pile up yes and then suddenly the things that are important which are you know talking to your users understanding what the complaints coming in from customer service are using your own product understanding how your product fails people like those things. It's it's weird to say it out loud but those things somehow get shoved down the list and it's easy to trust other people like hey I need to manage this bureaucracy and it's your jobs to do what I used to do which is like serve the customers and I think that mentality is is is wrong is very very wrong. It's interesting because you know Parker from rippling came to talk to YC and give a similar talk actually to Brian's talk. He illustrated what he does when a problem gets to his desk and I I love this explanation because he's basically like look if I'm seeing a problem many many people below

me did not fix it right, and he's like sending some message like if a problem is sneaking all the way up the, uh, the chain to get to me, sending some message all the way down and expecting the person at the bottom to like hear it. That's never going to happen. And so he has this technique where he takes every layer of management all the way down to the individual contributor doing the work, and they all together go and talk to the individual contributor and figure out what the hell is going on and how do we fix it. And there's like a subtle message that anyone below him, I could have done that exercise without him, and maybe the problem would have gotten to his desk. And I think that like that's one of many techniques of Founders that Founders use to cut through that bureaucracy and to figure out what the hell's going on. And I think a lot of what Brian's was really saying is that like you got to figure out your technique for cutting through the bureaucracy you've built, yes, to figure

out what's going on, and if people are preventing you from doing that, that you hired. Well, he made an interesting point that he was disinvited from his own meetings at his own company because he was seen as causing problems and not, you know. And so again, this was one of his points, which was the bureaucracy was so big that it was trying to keep me out of it, and it was my own company. Yes. And so again, is this relevant to a two-person startup? No. Is this relevant to a 10-person startup? No. It's a stretch. Okay, I don't think so. No, not even close. No. The kind of dysfunctional setup you have is very clearly for what happens when you have such a large number of humans in your organization. Yes, that the founder is sort of put on the sidelines and told to just stay in their lane and no longer be involved in the mechanics of running their company. And what's interesting is like I would flip it around because I think when you

hire great managers and great executives. You get a very different vibe when you hire great managers and great executives. They understand the power and the authority of a founder, and they often are trying to figure out how to use the founder, use the CEO, to accomplish some goal versus trying to build some Thom or trying to protect the founder from what's really going on. And I think that it's really hard to hire really good executives. Not only are they rare, but there are a lot of big companies that pay a lot of money. And so for a startup, even at 100 million of revenue, what's the likelihood they're going to nail the best executives? Like, it's really, really hard. It's really, really hard. And I think this is why that talk was so relevant to the people in the room. It's like you get people trying to figure out how to manage their kind of B and C-grade executives, and it ain't going well.

will you should be so lucky to have this problem. This is the problem you want. This is great. Yes, yes, I will say this. I think one of the threads that this took, which I found weird, was it changing it from a conversation about Executives and management versus founder CEO to a conversation about Investors versus a Founder CEO, which was weird. It was kind of like, Oh, at the board, we know what to do, and the founder is not doing it. I thought that was kind of a weird take on it, but I think if you're an investor commenting on Founder mode, maybe it's easiest to just make yourself the main character. Yeah, I didn't get that either, honestly, but that wasn't actually part of the like, there was no point in the conversation where it was like, Oh, my investor told me to do this, and I disagree with it. Like, that was irrelevant. And I do think that like, if your investors are telling you what to do, you have a problem. It's just, it's different than this. There's a different

there's a different name for that problem. Yeah, it's a different problem. Has nothing to do with this. Any idea that goes viral and gets popular. Yeah. Becomes a sort of like Rorschach test where everyone sees in it. Yeah. Their own thing and they inadvertently. A lot of. I saw a lot of projection. Yes. Where you could kind of tell. Yes. Who. Uh. Yeah. Who was a little triggered by some of this stuff because I think they may have saw themselves in it. I don't know. It was. It was fascinating to watch all of the. Yeah. The news cycle about this because I feel like I learned a lot about people's. Yeah. Minds that they didn't mean to reveal by their reaction of the founder mode essay. Yeah. Well, and it was so weird because it was kind of like I didn't realize this would be a conversation for Twitter at all. Exactly. And so I think this is a good. A good tip for just consuming the news or consuming things on Twitter in general, which is to realize when something gets sufficiently viral, it

gets decontextualized from the person that said it and what the context was and just turns into like basically a flame War. You click whatever a clickbait flame War about whatever your preferred topic is. Yes, you know, oh gee, here's something that's getting viral. Let's weigh in on it with my preferred thing that I'm mad about. Yes, I remember when the essay first went out being like, Oh, everyone's going to weigh in on this. You could just tell that this is going to be one of those things. So remember, friends, don't fall for the clickbait, I guess. Yeah, yeah, fake news is fake news. And I do think that if you're one of the very, very few Founders who do have this problem, you should talk about it. You might be surprised at other people having this problem. And like, I think the really encouraging thing from Brian's talk is that it doesn't matter how big your company is and how big your bureaucracy is, like, you can change it. Y and uh you

can start running your company again. Well, the key thing is he was saying this was my fault. He wasn't passing the buck. The point of the story is I made a mistake. Learn from me. Don't do what I did. It wasn't to blame people working at Airbnb. Only one person messed up. Yeah, right. And he was owning it. That was the message. Yeah, all right. Great chat. Sounds good. Thanks. [Music]

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Navigating Founder Mode in Late-Stage Companies

Late-stage founders often struggle with bureaucracy and losing touch with their company's operations as they hire executives and build layers of management.

The challenge of feeling disconnected from the work being done can lead to a sense of operating like a marionette.

The recent YC alumni event aimed to bring together late-stage founders to share experiences and learn from each other, with Brian Chesky's talk addressing the common struggles faced by these leaders.

Scaling a startup involves delegating tasks and hiring experts, which can be difficult and complex.

The conventional wisdom of hiring executives and management may not always be effective, leading to potential traps for the business.

As companies grow, bureaucracy can sneak in, making decision-making and understanding the organization's dynamics increasingly challenging.

The Impact of Bureaucracy on Organizations

Bureaucracy can accumulate over time due to past mistakes, leading to a shift in focus away from customer engagement and problem-solving.

Effective leaders, like Parker from Rippling, address issues by involving all layers of management and individual contributors in the problem-solving process.

This approach challenges the traditional hierarchy and aims to cut through bureaucracy, ensuring that founders remain actively involved in the mechanics of running their company.

Hiring great managers and executives is crucial for a startup's success, but it is a rare and challenging task.

The conversation often shifts from managing executives to the dynamics between investors and the founder CEO, which can be confusing.

The viral nature of the founder mode discussion led to varied interpretations and projections from others, revealing their own reactions and mindsets.

The Impact of Clickbait and Taking Responsibility

Clickbait often leads to decontextualized arguments and online flame wars.

The speaker encourages founders with similar problems to speak up, as they may find others facing the same issues.

The key message from Brian's talk is the importance of taking responsibility for mistakes and recognizing that change is possible, regardless of a company's size.