The Story of Away Reminds Us Culture is King (or Queen!)

Last week employees revealed that Away, the unicorn “It” luggage company, had a “toxic” work environment. 

Employees alleged that the CEO used a public forum to shame employees into working long hours without compensation; that executives engaged in Slack bullying; that restrictive communication rules had been implemented in the name of transparency, but they created a culture of intimidation and constant surveillance.

Public humiliation of employees or pushing a 24/7 work culture starts with the CEO. No question. But what role do VCs play or should they play in developing a healthy corporate culture? Where was the Board? 

This is an interesting question for me as I spent several years as a lawyer advising public corporations on governance best practices. Yes, the legal requirements are different for private companies and the dynamics at play with VC-backed companies are different, but the main principles are not. It is about a system of checks and balances between management, the board and investors. 

The experiences at Uber, Theranos, Zenefits and others highlighted the need for us to ask these questions. When the Uber Board didn’t do enough in the face of a string of corporate scandals, the investors got together and sent a letter to Travis Kalanick calling on him to step down immediately. Who needs to check a CEO that has turned into a bad apple?

Role of the VC

The mandate from many VCs is growth. Growth at any cost. Particularly, when you are pre-IPO the pressure to hit your numbers builds. Companies are pushed to scale faster and, often, that is faster than a healthy culture can scale. Do VCs have a responsibility to their portfolio companies to not only encourage but also help them develop a sustainable corporate culture? 

I think more are starting to appreciate the impact of culture on the bottom line and, therefore, are trying to assess culture as part of their due diligence process. What about once they have a direct interest in the outcome? Why not mentor and coach portfolio companies on how to create a positive culture, they already do so in many operational areas. In October of 2019, True Ventures, a San Francisco-based venture fund, hired a V.P. of Culture. Maybe more will follow suit. 

Early-stage funds are well positioned to impact culture – getting involved in key hires, setting company values and norms. Late-stage funds, the ones pushing for an exit, may have a harder time turning a culture around at that stage, but nonetheless they should be asking questions to understand the culture, looking for red flags, and coaching their CEOs. 

Founders should focus on scaling a business that delivers steady growth and a sustainable corporate culture that supports innovation, adaptability, and execution. Hopefully recent examples, like WeWork, have shown that growth at any cost isn’t always the best course. 

Role of the Board

For a public company, the role of the board is oversight. For startups, is the Board’s mission also growth? To support growth without regard to company stakeholders, -- employees, customers, partners, and investors (even the little guys). 

What can boards do to help promote and implement positive cultures? Boards are only as good as the questions they ask but are limited by the level of transparency. Certainly, Theranos’ board should have been asking questions and digging deeper but then again Elizabeth Holmes was a master at lying and deceiving. 

Boards of VC-backed companies are in a challenging position because directors (investor representatives and management alike) have a direct interest in the success of the business.  They cannot separate out what’s best for the company versus what is best for them. Initially, startups do not have an independent director, but they should add them as they scale. 

The fact is most of these CEO/Founders are not professional executives, they aren’t trained on culture and management, and they haven’t built a business before.  This is where mentors and coaches can help. Boards and VCs should be paying attention, asking questions, and providing oversight.