As companies grow in size and scale, they tend to slow down in productivity. This is well understood among successful entrepreneurs who have been a part of growing organizations and seen both sides, but maybe less obvious for others who haven’t experienced the contrast. As small flat organizations grow, they tend to become hierarchical with layers and reporting structures. Each layer inserted into an org chart tends to create less dynamic collaboration between the broader team, and more insular communication between that horizontal or vertical segment. Allan Engelhardt published interesting research on this phenomenon, suggesting that for each 10% additional employees, an organization loses 1% productivity. He chose profits per employee as the metric and charted each sector of the S&P. The financial sector is graphed here:
Engelhardt also references leading research on the topic by Clayton Christiansen and McKinsey all slicing the data in different ways to make the same point.
This is the issue that Soapbox set out to solve with a suite of mobile-first software products that foster better communication and collaboration between teams, top to bottom. As companies grow stratified, the front line workers who are seeing the problems and possible solutions up close are so far removed from management that opportunities for innovation are lost in the milieu. Soapbox is solving that problem by helping management solicit ideas from all corners of an enterprise and communicate with individual contributors in a public forum that encourages deeper employee engagement by all. In a sense, they’re helping big companies operate flatter and more efficiently; more like the startups they once were. Despite being a young company, Soapbox has already managed to attract some of the largest companies in the world as customers, undoubtedly the result of their special team. The company is led by one of the more dynamic founding teams we’ve come across, each with diverse but relevant experience to solve this problem. And they're in Toronto, which we consider a big plus.
For all these reasons, we’re excited to share the news of our investment in Soapbox’s recently announced seed financing, closed a few months ago. We were joined by our friends at Golden Venture Partners and Accomplice on the financing and look forward to watching what this team can accomplish together. Onward and upward!