be happy

Can you optimize your startup for growth, profits and happiness? That’s a question that Tom Preston-Werner, president (formerly CEO) of GitHub, the sizzling San Francisco-based hosting platform for collaborative software projects, addressed in an insightful blog post published a few years back. In it, he claimed that bootstrapping his company had helped him “optimize for happiness” instead of chasing after gobs of venture capital or fantasizing about an eventual IPO.

He wrote:

VCs want to see quick success or quick failure. They are optimizing for money. There’s nothing wrong with that as long as you want the same things they do. But if you’re like me, then you care more about building a kickass product than you do about having a ten- figure exit. If that’s true, then maybe you should be optimizing for happiness. One way to do this is by bootstrapping a sustainable business with infinite runway. When there are fewer potentially catastrophic events on the horizon, you’ll find yourself smiling a lot more often.

Eventually, GitHub, with its liquid, non-hierarchical corporate structure – few have job titles and there are no middle managers — did raise $100 million from Andreessen Horowitz, but that hasn’t changed how the company operates. A lot of thought is given to maximizing employee engagement, allowing each person to work on projects that she finds appealing even if it crosses traditional project lines. In fact, just today Preston, who had been running the show as CEO, swapped jobs with his co-founder, Chris Wanstrath, who had been working without an official title. Now Wanstrath is CEO and Preston has moved into the new position of president. It seems raising a truckload of cash hasn’t changed the company’s pro-happiness tilt.

The idea, as 37signals partner David H. Hansson puts it, is to achieve “maximum happiness for the maximum amount of time.” As with Github, 37signals measures success based on touchy feely concepts that might seem more appropriate at a convention of metaphysicists (if that’s a word) than a corporate board meeting.

So what? While in an era where so much of the tech world is obsessed with “billion dollar unicorns” it may be rare to build sustainable businesses that both customers and company workers can thrive in, but it’s still an attractive notion. If a guy only cares about one thing – making money – he’s probably a pretty miserable sort of person, yet this is what companies do: maximize profits. But companies, which are really just artificial constructs anyway, are made up of people. Without them you’d have no company. Shouldn’t our well-being count for something?

One way that businesses can optimize for happiness is to make sure they make decisions based on their long-term vision and not short-term wins. A good example is recruiting. I think companies are too often focused on hiring rock stars. But the “best” people may not best for your culture. A fully focused, committed, and cooperative team will outperform a bunch of egomaniacal-rockstars any day. You see this play out in sports all the time. Five all stars on a basketball team means you need at least two or three basketballs. The really good teams have role players. I’d like to think that this attitude is what has helped Sweden (a tiny country of 9 million) remain competitive on the international sports stage. We love our great teams.

But for a startup to pursue happiness, it probably has to forgo outside investors, who often have an attachment to generating revenue. So you’re probably limited to bootstrapping. (I can imagine hearing some gruff investor say, “Happiness doesn’t put meat on the table,” or some such nonsense.)  Yet one of the benefits of paying as you go is that it forces you to focus on your product and your customers. After all, their experience is the only thing keeping your business alive. Instead of prioritizing corporate-biz-dev deals, you need to focus on building a kickass product. That maximizes your users’ happiness and the cycle is complete.

If you don’t, well, you know about the sad tale of Friendster, right? Its investors/partners pushed the team to focus on media deals, while the software fell further behind and the company couldn’t keep its servers up and running. In other words, it couldn’t scale. With each successive funding round the company fell further behind in terms of product.

According to Inc:

The result was a kind of corporate schizophrenia. Rather than improving the software, Friendster went on a partnership binge, resulting in a hodgepodge of incongruous and poorly integrated features: blogs (with Six Apart), video sharing (with Grouper), personalized searches (with Eurekster), VoIP (with GloPhone), and Internet radio (with Pandora).

Then one day: poof! Friendster practically disappeared.

Building a company, a team and developing a culture can be a beautiful thing, and there are infinite ways to do it. There is no right way and each company is different. But before you take that VC meeting, think long and hard about what kind of company you want to build. You might find that optimizing for happiness is the right path for you.

Because, in the end, it doesn’t matter if you’re GitHub, 37signals, Blackberry or Apple. If the stuff someone else builds kicks more ass than yours does, your company will die anyway, so it’s better to enjoy the ride.

[image via Beto Galetto]