Startup Complexity

242 Pages·2016·3.93 MB·English

by  Antti Hyrkäs

Department of Social Research
Faculty of Social Sciences
University of Helsinki

Startup Complexity
Tracing the Conceptual Shift Behind
Disruptive Entrepreneurship

Antti Hyrkäs

ACADEMIC DISSERTATION
To be presented, with the permission of the Faculty of Social Sciences of
The University of Helsinki, for public examination in Auditorium XII,
University main building, on 20 December 2016, at 10 am.
Helsinki 2016
Publications of the Faculty of Social Sciences 38 (2016)
Sociology

© Antti Hyrkäs
Cover illustration: Ulysses and the Sirens, Herbert James Draper (Wikimedia Commons)

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Abstract

This dissertation examines the rise of startup entrepreneurship as a cultural phenomenon, and builds a model
for understanding the systemic logic behind this culture. While proceeding with the empirical research, the
dissertation develops conceptual tools for modeling cultures as “whirlpools” that condition the transitions
between different contextual rationalities.
The empirical research answers the following questions: Why has this specific form of new venture creation
developed such a popular sub-culture, jargon and identity? Why does it display counter-cultural tendencies in
relation to the business world in general? What does it enable, as a differentiated cultural form and as a
worldview, for the entrepreneurs and for the world around them?
Observing popular startup success stories, startup methodologies and articles from various business magazines,
the research traces the general patterns of startup stories as well as the conceptual reservoir of startup
entrepreneurship. Based on these investigations, the dissertation constructs a model that visualizes startup
culture as a whirlpool of different systemic logics, and as a solution for a specific dissonance between these
contexts. The findings suggest that startup culture is as much a culture of speculation as it is a culture of
entrepreneurship. It has appropriated venture capital’s perspective on potential markets and on venture
financing, and turned these into everyday entrepreneurial jargon.
In this culture, two levels of speculation are kept methodically separate: the technological speculation with
problems and their solutions, and the economic speculation with possible business models and with the
valuation of the startup. Startup culture can be said to condition this dissonance between the two forms of
speculation. For the startup, this division creates obvious room for innovativeness, as the system of economy
appears as culturally distant. At the same time, startup culture has opened a new popular form of inclusion into
economy: the entrepreneur as a technological speculator, who is himself a token of speculation for venture
capitalists.
Along with the empirical research, the dissertation offers new ideas on how to model culture while doing
qualitative analysis. If we accept that new cultural forms develop in a mostly self-organizing fashion, then we
must accept that they have their own logic separate from the logic of the actors. Thus, the theoretical interest of
this dissertation is how to model and visualize the inner logic of cultures.
The proposed solution draws heavily from the systems theoretical sociology of Niklas Luhmann and its later
applications. Specifically, the suggested approach to modeling combines Dirk Baecker’s ideas on how to model
“complex forms” of communication in society with Niels Åkerstrom-Andersen’s ideas on Luhmann’s “semantic
analytical strategy” for doing conceptual history. When combined, and slightly modified, these two applications
of Luhmannian systems theory can act as a basis for an empirical approach to modeling subcultures as complex
semantic forms of communication. Here, the analogy of a whirlpool is a fitting one: as opposing currents
sometimes create a whirlpool, it is a steady state forming inside a non-equilibrium. In a similar fashion, cultures
emerge out of the opposing contextual logics in society. When we model culture in this manner, the logic behind
cultural evolution becomes clear: culture fills the “gaps” between different subsystemic contextual logics, thus
enabling meaningful transitions between different forms of sense-making.
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Acknowledgements
Firstly, I would like to express my gratitude to my primary supervisor Risto Kangas. Our relaxed meetings never
failed to fill me with clarity and motivation.
A big thank you is due to my friend Mikko J. Virtanen. Many of the insights in this dissertation have resulted from
epiphanies and creative misunderstandings during our stimulating conversations.
I would also like to thank Matti Kortteinen, Risto Alapuro and Pekka Mattila for encouragement and good advice.
Furthermore, this dissertation would not have been possible without the generous research grant that was
awarded to me by Kone Foundation.
Finally, I would like to thank my family: my sister who has always offered a helping hand, and who introduced me
to interesting people in San Francisco; my loving mother who has always been there for me; and my late father
whose playful and curious mind I hope to echo in this dissertation.
Helsinki, December 2016
Antti Hyrkäs

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Contents

INTRODUCTION ............................................................................................................................................ 6
SHORT PREFACE TO THE EMPIRICAL PART OF THE STUDY..................................................................................................7
SHORT PREFACE TO THE THEORETICAL PART OF THE STUDY ........................................................................................... 10
THE MODEL-BUILDING APPROACH: GOING BEYOND QUALITATIVE AND QUANTITATIVE DESCRIPTIONS .................................... 13
STRUCTURE OF THE STUDY ....................................................................................................................................... 15
CHAPTER 1: THE STARTUP SPECTACLE AND THE SYMBOLIC MANAGEMENT OF EXPECTATIONS..................... 18
THE STORY OF THE FOREST CODER ............................................................................................................................ 18
OVERLAPPING SPECTACLES: ENTREPRENEURSHIP AND STARTUP ENTREPRENEURSHIP ......................................................... 19
STARTUP UNCERTAINTY AND THE FIGURE OF THE FOUNDER .......................................................................................... 21
THE SYMBIOTIC RELATIONSHIP BETWEEN VENTURE CAPITAL AND STARTUP CULTURE ........................................................ 24
A REFERENCE POINT: UNCERTAINTY AND SYMBOLIC LEADERSHIP IN BUSINESS ORGANIZATIONS .......................................... 26
THE CELEBRITY CEO AS A SYMBOL OF CONTROL FOR INVESTORS .................................................................................... 29
PROBING FOR A SOCIOLOGICAL PERSPECTIVE: LEADERS, CHARISMA AND THE “ACTIVE CENTERS” OF SOCIETY ........................ 34
CONQUERED COMPLEXITIES: LEADERSHIP STORIES IN A FUNCTIONALLY DIFFERENTIATED SOCIETY ....................................... 39
CONCLUSION: ECONOMIC UNCERTAINTIES, CULTURAL SOLUTIONS .................................................................................. 41
CHAPTER 2: CONCEPTUAL AND METHODOLOGICAL FRAMEWORKS ............................................................. 43
MYTHOLOGIES AND SYSTEMS EMERGING FROM CONTRADICTIONS ................................................................................. 44
DOUBLE CONTINGENCY AND THE RESULTING SURPLUS OF MEANING .............................................................................. 45
DIFFERENTIATING CULTURE, SEMANTICS, MEANINGS AND COMPLEX FORMS ................................................................... 48
METHODOLOGICAL FRAMEWORK AND THE FOUR LAYERS OF INQUIRY ............................................................................. 52
ON THE BENEFITS AND PITFALLS OF THEORIZING ON (CONTINGENT) FUNCTIONS .............................................................. 55
CHAPTER 3: COMMON PATTERNS IN STARTUP STORIES .............................................................................. 58
STORIES, MOTIVES AND THE CONTROL OF INTRANSPARENCIES IN CULTURE ...................................................................... 59
THE RELEVANCE OF MEDIA NARRATIVES FOR THE STUDY OF STARTUP ENTREPRENEURSHIP ................................................ 62
ACTANTIAL MODEL AS A HEURISTIC TOOL .................................................................................................................. 64
FIVE CANONICAL STARTUP STORIES AND THEIR ACTANTIAL MODELS .............................................................................. 65
THE GENERALIZED ACTANTIAL MODEL OF STARTUP SUCCESS STORIES ............................................................................ 76
THE THREE AXES: DESIRE, KNOWLEDGE AND POWER IN STARTUP STORIES ...................................................................... 87
EXCURSION: STARTUP STAGES, STARTUP CURVES AND TEMPORAL HORIZON OF A STARTUP ................................................ 89
REFLECTING ON WHAT HAS BEEN LEARNED: STARTUP AS A MEANINGFUL PATTERN OF ACTIONS AND ACTANTS ........................ 93
CHAPTER 4: THE SEMANTICS OF STARTUP ENTREPRENEURSHIP .................................................................. 94
SEMANTIC ANALYSIS: OBSERVING CULTURES THROUGH THEIR CONCEPTUAL RESERVOIRS .................................................... 97
CONDENSATION/MEANING: OBSERVING AND RE-CATEGORIZING STARTUP CONCEPTS ...................................................... 101
THE SEMANTICS OF RETREAT.................................................................................................................................. 102
THE SEMANTICS OF RESONANCE ............................................................................................................................. 109
THE SEMANTICS OF EXPERIMENTATION .................................................................................................................... 116
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THE SEMANTICS OF VALUATION.............................................................................................................................. 124
CONCLUSION: THE STARTUP DIFFERENCE .................................................................................................................. 133
CHAPTER 5: STARTUP AS A COMPLEX FORM OF COMMUNICATION ........................................................... 137
BACKGROUND OF THE MODEL: RE-ENTRY OF THE FORM INTO ITSELF ............................................................................. 138
MODELING OBSERVER-CULTURES AS COMPLEX FORMS OF COMMUNICATION ................................................................ 141
FIRM AS A COMPLEX FORM OF COMMUNICATION ..................................................................................................... 147
FIRM AND STARTUP: INITIAL REFLECTIONS ON THE DIFFERENCES IN BETWEEN THE TWO FORMS ....................................... 149
HACKING THE BAECKER MODEL, PART 1: UNCOVERING RE-ENTRIES THROUGH SEMANTIC CATEGORIES ............................... 151
HACKING THE BAECKER MODEL, PART 2: THE THREE OSCILLATORS OF AN OBSERVER-CULTURE ........................................ 154
UNITY/DIFFERENCE: THE COMPLEX FORM OF STARTUP .............................................................................................. 156
SOME REFLECTIONS ON THE FORM MODEL ............................................................................................................... 168
CONTEXTUALIZING THE CONTEXTUAL MODEL: CONSIDERING THE “NICHE” BEHIND THE CULTURE ..................................... 170
CHAPTER 6: THE (CONTINGENT) FUNCTIONS OF STARTUP OBSERVER-CULTURE ......................................... 175
PROBLEM/SOLUTION: THE OBSERVER-CULTURE AS A SOLUTION FOR (POSSIBLE) PROBLEMS ............................................ 176
ORGANIZATIONAL PERSPECTIVE: ORGANIZATIONAL IDENTITY AS AN ITERATIVE PROCESS .................................................. 177
ECONOMIC PERSPECTIVE: OVERCOMING THE “LIABILITY OF NEWNESS” PROBLEM OF STARTUPS ....................................... 181
STARTUP ENTREPRENEURSHIP IN THE CONTEXT OF SOCIETY: CONSIDERING A FUNCTIONAL EQUIVALENT ............................ 186
WHAT CAN WE LEARN FROM STARTUPS? ................................................................................................................ 191
CONCLUSION: FIVE THINGS TO LEARN FROM THE EMPIRICAL RESEARCH ........................................................................ 193
CHAPTER 7: LESSONS LEARNED IN MODELING CONTEXTUAL COMPLEXITY ................................................. 194
OBSERVER-CULTURE AS A METASYSTEM? ................................................................................................................ 194
CONSIDERING A BETTER ANALOGY FOR THE MODEL: A KNOT OR A WHIRLPOOL?............................................................ 197
SUGGESTED GUIDELINES #1: PROCEEDING FROM SEMANTIC ANALYSIS TO WHIRLPOOL MODELING .................................. 199
SUGGESTED GUIDELINES #2: STEP-BY-STEP GUIDE ON CONSTRUCTING A WHIRLPOOL MODEL .......................................... 201
SUGGESTED GUIDELINES #3: USE IN DIALOGIC ORGANIZATION DEVELOPMENT .............................................................. 205
CONCLUSION: SOCIOLOGY AS THE SCIENCE OF CONTEXTUAL COMPLEXITY IN SOCIETY ...................................................... 206
CHAPTER 8: FROM FINDINGS TO FURTHER RESEARCH ............................................................................... 209
BIBLIOGRAPHY ......................................................................................................................................... 212
APPENDIX 1: HOW THIS RESEARCH CAME ABOUT ..................................................................................... 225
APPENDIX 2: FURTHER EXAMPLES OF CONTEXTUAL MODELING ................................................................ 227
ILLUSTRATIVE TOY MODEL #1: THE CONTEXTUAL WHIRLPOOL AND NICHE OF ROMEO AND JULIET ...................................... 227
ILLUSTRATIVE TOY MODEL #2: THE CONTEXTUAL KNOT IN THE GAME “PAPERS, PLEASE” .................................................. 229
APPENDIX 3: A FORMAL LANGUAGE FOR SOCIOLOGICAL THEORIZING ....................................................... 235

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INTRODUCTION
This dissertation aims to achieve two goals, one of which focuses on an empirical phenomenon and the other on
a theoretical-methodological issue. On the more empirical level, the study approaches startup entrepreneurship
as a cultural movement that has translated speculative high-risk entrepreneurship into something more
mainstream and popular. The study poses – and then seeks to answer – questions about why this popular
cultural movement sustains itself along the more operative side of startup entrepreneurship, when the failure
rate of new technology ventures is so high. Sociologically, we have to consider what this cultural form actually
does, not just what it claims to stand for. Offering a new collection of concepts and stories this culture
rearranges how different logics of communication are conditioned in relation to one another. By strengthening
some connections while constraining others, the culture of startup entrepreneurship transforms the way that
different communicative logics are incorporated into each other, most notably altering what can be included as
relevant topics in economic communications. Resting on Niklas Luhmann’s1 concept of structural coupling
(presented in Chapter 2), we may formulate the empirical research question (or “EQ”) in the following way:
EQ: What conceptual shift can we see when observing startup culture and startup narratives?
Sociologically speaking, what new couplings (between the different logics of various social systems) does
the startup culture bring forth in society, and what do these new couplings enable as a new perspective
– a new “observer-culture” – for observing the world?
The end result of this pursuit is the deconstruction of startup success stories and, following that, the
reconstruction of startup entrepreneurship as a cultural pattern that is able to couple various logics in society in
new and meaningful ways. Thus, the study opens up a new way of understanding the startup phenomenon and
its cultural drivers.
On a more theoretical level, the study takes regular detours to consider how we can model cultural movements
instead of just describing them. As we proceed with this, I will combine two methodological approaches (see
Baecker 2006 and Andersen 2011), both originating from the sociology of Niklas Luhmann, and will seek to
combine them into one approach. This theoretical-methodological part of the study is intertwined with the
empirical part, and will be developed along with the empirical research, so that we can better see how it works
in action. In the empirical parts I will map the relevant “conceptual reservoirs” (Andersen 2011) of startup
entrepreneurship, and see how these make a difference with regard to the more general model of the “form of
the firm” (Baecker 2006). The theoretical-methodological goal is to find out – while proceeding with the
empirical study – how this combination of approaches develops and develop these conceptual tools during the
process if needed. What we hope to find here is a solid way of modeling cultural movements by using primarily
qualitative data. We may formulate the theoretical research question (or “TQ”) in the following way:
TQ: Can Dirk Baecker’s (2006) approach to modeling contextual knots be used as a research tool in
empirical research – especially if we want to understand the logic of emergent discourses and/or
cultures in society? Could we use Niels Åkerstrom-Andersen’s (2011) conceptualization of “semantic

1 Niklas Luhmann is known for his social theory (Luhmann 1995) and his theory of society (Luhmann 2012 & 2013). For a summary of Luhmann’s
ideas see, for example, King 2009; King & Schütz 1994, Lee 2000, Borch 2011 and Moeller 2012.
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analytical strategy” to ground this modeling practice to data? How can we use such empirically
constructed form models?
The end result of this theoretical pursuit is an increased understanding of how we can approach cultural
movements, and how we can conceptualize and visualize them. As we will see, cultural movements reveal
themselves through their distinctive stories and jargon and, with our refined model, we can display them as
contextual couplings that sustain bridges between logics of communication. These models can be used in
sociology, but also in consulting, as they offer us new insights on what matters in a given culture, and why.2
During the study, it became clear that EQ could not be solved without also solving TQ, and vice versa. As I
proceeded with the data, it became clear that I needed certain kinds of tools for analysis, and as I was using the
tools, new insights were uncovered. Thus, EQ and TQ emerged differently from a single question, but their
differentiation from each other made them dependent on each other. On a further note, EQ and TQ are
presented here as “research questions” for the sake of clarity, but in reality the study began with simple
“empirical wondering” (Andersen 2010, 115). The core of this empirical wondering was simply the fact that
during the past decades, startup culture has emerged as a highly popular and peculiar subculture of the
economy. The actual question that began my inquiries into the subject matter was thus neither EQ nor TQ, but
rather something like this: “What is happening here, and how can I best make sense of this as a sociologist?” My
sprawling and repeated attempts to make sense of this phenomenon eventually led to the formation of the two
research questions, EQ and TQ. They are thus retrospectively formed but, as will be shown, they are fitting
questions for the answers I have found. Appendix 1 will offer a more detailed account of how the actual
research, and the thinking behind it, proceeded.
SHORT PREFACE TO THE EMPIRICAL PART OF THE STUDY
What makes the empirical part of the study relevant in the context of current sociology is the fact that there has
been no sociological theorizing on startup entrepreneurship as a differentiated cultural form. Startups are often
approached simply as “new-ventures” or “entrepreneurship,” thus utilizing the ready-made conceptualizations
used in economics while trivializing the culture, narratives and conceptual reservoirs that have emerged around
startups, or that have been appropriated by them. Extensive sociological reflection on entrepreneurship has
been offered, for example, by Swedberg et al. (2000) and by Bill & Johansson (2010), and the popularization of
the figure of the entrepreneur has also been noted by Boltanski and Chiapello (2005). However, these projects
do not distinguish “startup entrepreneurship” as a differentiated part of the entrepreneurial discourse.
If there is a lack of research and theorizing on startup entrepreneurship in sociology, this is not the case in
management sciences, especially in its more popularized form. There we can find theorizing on how to succeed
with a startup (e.g. Ries 2011, Blank 2005), and scientific research on various details that have affected this form
of enterprising, e.g. how a specific historical situation gave birth to the first ecosystem of startups Silicon Valley
(Saxenian 1996). However, the majority of research in economics and management science prefers to focus on
the more general category of “new ventures,” being careful not to distinguish startup entrepreneurship as a

2 As will be shown, the model can be used as one approach to ”dialogic organization development”, as it is a good starting point for discussions
about how the different environments are ordered for the organiszation, different departments, for customers, etc. For more on dialogic
organization development methods, see Bushe & Marshak 2015.
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separate area of venturing. This is reasonable, as economics and management science is less interested in
analyzing cultural patterns and meanings, and more focused on being an instrumental science that can be
applied by firms as tools for success. Thus, the main research current aims to develop better tools and heuristics
for “doing business,” thus securing a clear system reference towards the economic system while preferring to
observe other social systems as secondary or simply as externalities.4 This study, on the other hand, is concerned
with how startup entrepreneurship should be understood as a cultural form that operates in a specific niche of
our present society, incorporating different logics of communication into a seemingly unified pattern. This
pattern – of narratives, concepts and culture – hides a specific complexity so that communication and action can
keep going even when paradoxes and uncertainties abide. Paradoxes flourish where logics are set against each
other, so we will be on the lookout for the central conceptual tension – i.e. the “niche” – in which the culture
lives, and which it is able to solve in its own way. Paradoxes that are not resolved logically get resolved in culture
– much like scar tissue provides a “solution” for a wound, or like a neurosis haphazardly “corrects” a failure to
make sense of some traumatic or disturbing event.
The present study holds that a need exists for a sociological theory of startup entrepreneurship – one that
observes it not only as an instrument of economic growth or technological progress, but also as a cultural form
that handles meanings in a unique way. In other words, startup entrepreneurship is not just a way of doing
things, but also a cultural movement offering fresh significations, thus opening up new inclusions into the
economy.5 With this perspective, we will not be doing economic sociology in its most common forms, i.e. we are
not trying to see how social forces structure markets or guide economic transactions. We are not observing
markets or even firms, but a specific cultural niche that has emerged parallel to the firms and markets, adding
new ways for these to connect, new ways to “speculate” (Stäheli 2013). Thus, I am more interested in the
“cultural codes” that have emerged than in the accompanying “blueprints” for startup success (Aldrich & Yang
2012). At the same time, in analyzing this culture, I will refrain from judging it as futile or as “false
consciousness”, but will instead search for latent functions. I will ask, why has this cultural form differentiated,
endured and disseminated? Why has it not died, as there are other ways of observing things, and as there is
extreme uncertainty in the “game” of startup entrepreneurship? As we will see, the latter question is an answer
to itself – the cultural form of startup entrepreneurship is a pattern of sense-making tailored to resolve a very
specific uncertainty. This uncertainty is the societal “niche” where the culture operates. The uncertainties, the
cultural solutions that have emerged in reference to it, and the following implications, are the three things that
this research seeks to map out.
The data for the empirical part of the study is four-fold: magazine articles, books about famous startups, startup
guidebooks, and a small amount of participant observation and interviews. The data will be presented as we
proceed, but a brief overview of the data is given in Table A (see below). I began the empirical research with
articles compiled from the archives (mostly electronic) of Fortune, Forbes, Fast Company, Inc., and Entrepreneur.
These magazines were chosen because they represent the more entrepreneurial side of business magazines,

4 In this study, “economy” is used to mean a system of communications that attempts to solve problems through payments. It is thus seen as a
communicative processing logic that structures the world in a certain way, i.e. as scarcities to be solved with payments. This view is derived from
the sociology of Niklas Luhmann and will be elaborated in later chapters.
5 For a research with a somewhat similar goals and similar background, see Urs Stäheli’s (2013) study on the semantics of speculation.

8
and because they frequently write about startup entrepreneurship.6 Most articles were from 2011-2013, and
the early saturation of my coding was achieved with these (see Appendix 1). Later I added more recent articles
(2014-2015), but I found no difference in the way that startup entrepreneurship was generally presented.7
Books on famous startup success stories, and biographies of famous founders, were important in order to see
how the “startup canon” – i.e. the holy stories of this cultural form – fit my observations. The startup
guidebooks, on the other hand, were important to go deeper into the central concepts of startup
entrepreneurship. Of these books, the most important ones were The Lean Startup (Ries 2011) and Four Steps to
the Epiphany (Blank 2005). Along with the textual data, I made some participant observation and interviews. I
frequently visited startup events in Helsinki and especially in Aalto University’s Startup Sauna (and former
Venture Garage). For two weeks I was in San Francisco, where I conducted informal interviews with
entrepreneurs, investors, and people operating in the startup world. I also visited various locations and events
there, such as the Blackbox Startup Mansion, the Berkeley Startup Weekend, Pitch San Francisco and two weekly
“meet-ups” arranged for entrepreneurs. The conversations and participant observation function as secondary
data in the study, and is referred to only sparsely. However, these conversations were important as they
corrected some of my early misconceptions about the phenomenon.8

6 It should be noted that most of these magazines were founded long before the new “scalable startup” phenomenon began. They do, however,
correlate with the rise of computer technology. Of the magazines in my data, Fortune and Forbes are several decades older, but the others were
founded around the 1980s, when general interest in entrepreneurship started growing. As Aldrich and Yang (2012, 3) write: “From 1982 through
1995, the number of articles on business ownership increased by more than fivefold in major national newspapers (…). The number of magazines
and books on entrepreneurship exploded in the mid-1990s, and there were more than 26,000 listings for ‘entrepreneurship’” At the time of
writing this introduction (13 Dec, 2015) there were over 73,000 listings in Amazon for “entrepreneurship”.
7 The data is not listed separately, article by article, but the articles that have been referred to appear in the bibliography and are referenced in
normal way.
8 See Appendix 1 for a more detailed explanation of how the study actually proceeded. In the main chapters of the dissertation, I have decided to
let the argument dictate the form and content of the study. Appendix 1 attempts to better clarify the chaotic reality of the research process.
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