July 29, 2019

European startups are not investing enough in people

European startups are too focused on talent acquisition over people management says Kiana Sharifi, head of talent at European venture capital firm Balderton

Kiana Sharifi

5 min read

Of the many legendary companies in tech, which one comes to mind when you think of the ultimate dream team?

For me, it’s Fairchild Semiconductor. Founded in 1957 in San Jose, California, Fairchild’s founding team built what is considered by some to be the first-ever trillion-dollar tech company. Their success fuelled the meteoric rise of what became known as Silicon Valley.

But Fairchild might never have been founded had it not been for one leader’s failure in people management. 


The team that later founded Fairchild originally came together through the brilliant recruiting efforts of William Shockley. 

The farther back you can look, the farther forward you are likely to see.” ― Winston Churchill

Shockley was an icon whose contributions to the development of semiconductors were celebrated with a Nobel Prize in Physics.

In 1956, at a time when the semiconductor industry and its engineering talent was concentrated mostly on the East Coast, Shockley boldly decided to leave the New Jersey juggernaut Bell Labs and move west to build his own laboratory.

His reputation and the audacious move to California helped him convince a number of genius rebels from across the United States to join his lab.

But in a matter of months, Shockley had managed to alienate his team of talented young researchers with his increasingly autocratic leadership style. Fed up with their overbearing boss, his eight researchers resigned en masse and set up their own company, Fairchild Semiconductor. They became known as the traitorous eight

Looking to the past

In just three years, Fairchild’s annual revenues had reached over $20m. A few years later, the company crossed $90m in annual sales. But even more impressive than Fairchild’s commercial record is the company’s lasting impact on the Silicon Valley ecosystem. 

In 2014, an Endeavor Insight study traced over 2,000 tech companies – including some of today’s biggest names such as Instagram, Palantir, LinkedIn, WhatsApp, Twitter and YouTube – back to the traitorous eight. 

What does it take to make a Silicon Valley here? What it takes is the right people.” ― Paul Graham

“As Fairchild started to grow, employees began to leave the firm to launch new spin-off businesses. Many of these firms also grew quickly, inspiring other employees still working at the company,” writes Rhett Morris, the director of Endeavor Insight. “The growth of these new companies started to reshape the region. In just 12 years, the co-founders and former employees of Fairchild generated more than 30 spin-off companies and funded many more.”

Along with the companies they inspired and helped to launch, the Fairchild clan shaped the culture and mindset of fast innovation that is now the hallmark of Silicon Valley. They were not just creating successful companies but a viral movement that would take over the world in the coming decades.

Given the legacy of the traitorous eight, it’s safe to say that William Shockley was highly skilled at identifying and recruiting top talent. But his failure in leading the great team he had assembled led to their departure and the eventual demise of his own fledgeling venture. That same team under a different condition flourished, achieving huge success for themselves and laying the foundations for many future successes.


Seeing to the future

2018 was a special year for European tech. With Spotify, Adyen, Farfetch and others going public, the combined market capitalization of big European tech IPOs surpassed the total value of equivalent American companies going public that year. I had moved to Europe from Silicon Valley only a year earlier to focus on helping startups here build dream teams. 

In the last two years, I have experienced the incredible momentum of European tech first hand. That there is something quite real and exciting happening here is palpable in every hub. The future of tech in the next few decades can be shaped by companies being built in Europe today. 

But this will not happen without a more deliberate focus on building a great team, raising the performance bar, and developing great people leaders. 

Much of the conversation around talent in European startups is focused on talent acquisition, not people management. Compared to the Valley, there is a striking underinvestment of time, energy and resources in building a culture of high performance and supporting the growth of individuals in their roles. 

The future of tech in the next few decades can be shaped by companies being built in Europe today.

The argument I often hear when I discuss this topic is that the relentless pace of scaling a company forces harsh prioritization and a focus on the short term. In other words, talent acquisition is the immediate need, whereas increasing productivity and engagement is a future problem. 

But the logic of that argument doesn’t hold. Say you have five engineers now who are very good but need some training and guidance. Making these five twice as productive and engaged makes more sense than hiring another five engineers. That is not to say you should have five people doing the work of 10, but you also don’t want 10 people doing the work of five.

The challenge is that adding more people seems easier and more straightforward than figuring out how to boost productivity and engagement. But once you are in the process, everyone learns that hiring is not easy at all. Finding the right talent is tough. The evaluation process is fraught with errors. On-boarding and ramping up takes time. And wrong hires are very costly.

You can try to build the perfect hiring process using tools and tests, as many companies are doing today. Let’s assume you succeed in this. Still, if you fail to address the gaps in people management, you may end up sharing the same fate as William Shockley.

It is true that you can have some success with a somewhat dysfunctional team. And you can still fail with a stellar team. But you certainly won’t build the next Fairchild without one. 

So as you evaluate your team today and envision your future organization, think about the people you need, not the roles you want filled. You may find you already have the right person. If not, think carefully about who you want to hire and why. What will their impact be on your team? How will they make your company successful? How will you make them successful? And how will your dream team shape the future of European tech?