How to build a unicorn startup: culture, roles, equity splits

Is culture more important than strategy? Amit Somani and Shripati Acharya, Partners at Prime Venture Partners, dive deep into how to intentionally shape a startup's culture from day one.

Saturday September 21, 2024 , 5 min Read

In the world of startups, conversations often revolve around growth, fundraising, and go-to-market (GTM) strategies. Yet culture—the unseen force behind every thriving organisation—often remains neglected until it’s too late.

This episode offers practical advice on how co-founders must decide who should be the CEO, how equity should be distributed between co-founders, and how to balance friendships and professional relationships. It also provides insights into how to measure performance and hold each other accountable right from the start.

As Shripati Acharya puts it aptly, “Culture is one of those things that gets created, whether you like it or not.”

Whether it’s the way decisions are made, how teams are built, or how conflicts are resolved, culture starts forming in the very first months of a startup’s journey, long before any formal values are written on office walls.

Building culture from day one

Amit Somani says, “Culture is what employee number 50 or 500 or 5000 says. It’s not what’s written on a fancy wall—it’s about how things get done when the founders aren’t in the room.”

Successful startup founders who understand that culture is the glue that binds a team’s vision mirror similar insights across history.

Acharya stresses that startups need to be deliberate about this from the start:

“In the first 9, 12, or 18 months,” he says, “you’re shaping the culture—whether you’re conscious of it or not. Might as well be deliberate about it.”

For early-stage founders, this is framing the very DNA of how the company operates and that means defining not just your vision for the product or market.

The importance of defining roles early

One of the most critical, and often neglected, decisions that early-stage startups face is determining leadership roles. Many founders avoid difficult conversations about who the CEO should be or how equity should be split, hoping that these issues will resolve themselves over time.

Acharya shares his diligence process as an investor, “Who is the CEO is the first test case of how evolved and firmed up the relationship between the founders is.”

Both discuss that founders often confuse friendship with professional roles. While trust is essential, especially in the early, turbulent days of a startup, a professional relationship must be established alongside personal bonds.

Somani cites examples of companies that have struggled because these discussions were delayed. “When founders say, ‘We’ll figure it out,’ it’s a signal that they’re setting themselves up for future conflicts.”

King or Rich? The hard truth about equity

Equity distribution is another minefield that founders often step into without adequate preparation.

Acharya emphasises that equity should be reflective of the contribution each founder is expected to make, both now and in the future. “It’s not just about who’s smarter, it’s about what the future contribution is going to be," he says.

Somani refers to the ‘Rich vs King’ dilemma faced by many founders, a concept made famous in Professor Noam Wasserman’s book, The Founder’s Dilemma. Do you want to be king—retain control and potentially stifle growth—or do you want to be rich, allowing for greater success by sharing leadership and equity?

For startups aiming for unicorn status, the answer is often the latter.

“If you want to be rich, you need to think big,” Somani advises. “You may own a smaller percentage of a much bigger pie, but that pie could be huge.”

Scaling and performance evaluations: a professional approach

As startups grow, the challenges of scaling go beyond just product and market expansion. Founders must continuously evaluate their own performance and that of their co-founders and teams.

Acharya notes that performance reviews, even for co-founders, are often neglected in startups.

“Years can go by without a formal performance evaluation. You have to create a cadence for this, or you’re setting yourself up for some serious trouble later on.”

Somani agrees, highlighting the importance of 360-degree reviews from both employees and board members.

“The CEO reports to the board, and the board should give feedback not just on ARR or revenue but on how the leadership team is performing,” he says.

Lessons for startup founders: embrace the difficult conversations

Ultimately, the path to success for any startup is filled with difficult conversations, be it about leadership roles, equity, or scaling challenges.

As Acharya puts it, “The foundation of friendship and trust is important, but you need to add another pillar—professionalism. The sooner you have that conversation, the stronger your company’s foundation will be.”

Somani echoes this sentiment, underscoring the importance of being deliberate about culture and leadership from the start.

“Culture, just like product or GTM, can be an ultimate differentiator,” he notes.

For founders who are serious about building long-term, scalable businesses, these early decisions—around culture, leadership, and equity—are just as important as building the product itself.

The future of a startup isn’t just about the technology; it’s about the people, the culture they create, and how well the team is aligned on both professional and personal levels.