Understanding Startup Organizational Structure

Man sitting at a conference table.

As a startup founder, how you structure your team can make a substantial impact on the success of your business. Several factors can influence how you build an organizational structure chart that works for your startup, such as the stage your company is in, the type of startup you’re running, and the number of team members you have.

This guide covers the basics of startup organizational structures, why they matter, and how to adapt your company structure as your startup grows.

What Is a Startup Org Structure?

A startup company structure is how team members, executives, and managers are organized. An effective tech startup team structure clearly defines the roles and responsibilities of each team member as well as how each team will collaborate.

There are several types of organizational structures that startups can implement, depending on the business’s unique needs. A startup’s organizational structure will shift as the startup grows, brings on new members, and takes on new funding.

The key to building and implementing a successful team structure is to create an organizational structure chart to help all team members and leaders understand their location within the overall structure.

Why Does Startup Organizational Structure Matter?

Company structure is a necessity for the success of a company, providing teams with a clear understanding of their role and responsibilities within it and ensuring the business functions smoothly. Without an organizational structure, businesses waste time on slower decision-making while staff may have unclear expectations or a vague managerial structure.

In short, establishing an organizational structure for your startup offers several benefits:

  • Streamlined business operations
  • Faster decision-making 
  • Simplified performance evaluations
  • Increased productivity

Types of Startup Organizational Structures

There are seven common types of startup organizational structures — some more popular than others. The type of startup organizational structure you choose for your company will largely depend on the type of business you’re running, the stage you’re at, and the number of team members your startup has.

Flat Structure

A flat company structure or horizontal structure essentially means there’s no hierarchy or tiers of middle management between the employees and executives or leaders of the company. This decentralized structure grants employees equal power and relies on staff members to hold themselves accountable to meet company goals. 

Hierarchical Structure

The hierarchical structure is the most common organizational structure. It features a board of directors as the company’s guide and one primary leader, such as a chief executive officer (CEO), at the top of the hierarchical pyramid with the rest of the management tiers and staff below.

Functional Structure

A functional structure is similar to a hierarchical structure but rather than the startup team structure being rooted in hierarchy, it is organized by skill level and expertise into multiple teams. This is another one of the most common organizational structures.

Matrix Structure

A matrix structure requires staff members to report to more than one leader, such as a project manager and a department head. This allows team members to move seamlessly between departments as their skills are needed. This structure is similar in many ways to the hierarchical structure, but it allows management to call on talent with greater flexibility. 

Team-Based Structure

A team-based structure places the power in the employees’ hands, grouping staff into teams that work cooperatively to operate the business. This allows department heads to leverage the skills of team members in several departments, providing managers with a higher level of flexibility and prioritizing experience over tenure. 

Divisional Structure

Similar to a team-based structure, the divisional structure divides employees into divisions. But, each division operates independently and sometimes implements its own internal hierarchies. This structure more often occurs in large corporations or enterprises that can allow product lines or brands within the company to operate with autonomy. 

Network Structure

Rather than operating as a traditional structure with a hierarchy in place, a network structure is commonly used by large corporations with globally distributed teams that often work with freelancers and contractors. This structure organizes staff by location rather than team alone, and it provides clarity on the roles and responsibilities of each team by location. 

How Stage Impacts Startup Organizational Structure

The stage of the startup lifecycle has a major impact on your company’s organizational structure. As your startup grows, the best organizational structure for your team will evolve. Here are some examples of how a startup’s hiring strategy and organizational structure may shift as the company evolves through funding stages.

Early Stage

Early stage or founding-stage startups typically have less organizational structure than later-stage companies. During this stage, the founder or cofounders are generally the only team members.

Due to this, there usually isn’t a need for titles or a hierarchical model so it’s a flat structure. However, this is commonly the stage at which startup founders also bring on cofounders with complementary skills. For example, one founder may be technical and work toward developing the minimum viable product (MVP) while the other non-technical founder focuses on operations.

Seed Stage

At the seed stage, startups may need more organizational structure to support the company’s vision and begin to grow the business. This is often the stage where startups begin to move away from a flat structure. While there isn’t an excess of administrative hires at this stage, startups will generally appoint their first C-suite members like a CEO and a chief technology officer (CTO).

A CEO is the guide for a startup’s overall vision from product and marketing strategy to team expansion — especially at this stage. A CTO, on the other hand, focuses on actually building the product. Additional hiring during this type is usually dedicated to supporting these efforts, such as a product manager and a growth manager.

Growth Stages

When a startup moves out of the early stages of its startup life cycle, the team will undergo necessary expansion. This typically involves bringing on additional members and leaders to help guide the startup toward its goals.

Series A

During a Series A round, startups have a product, traction, and proven potential. This stage may involve hiring vice presidents or other leadership positions to help guide specific departments, such as a design, operations, and/or business development manager.

Series B

A Series B round is growth-focused and generally involves establishing a larger C-suite. This may include hiring a chief operating officer (COO), a chief product officer (CPO), and more leadership or vice presidents to head departments for sales and marketing.

Series C

Most often representing the last funding stage before an exit, Series C startups at this stage will generally continue to build out their C-suite by filling a chief marketing officer (CMO) role, adding a chief financial officer (CFO), and hiring leaders for other subcategories of existing departments like a vice president of accounting or communications.

Late Stage and Exit

During the later stages of the startup life cycle, most companies will look to go public through an initial public offering (IPO) or to be acquired. The organizational structure of the company will need to adapt to this new phase by potentially hiring more C-suite roles to respond to a growing staff. These roles may include a chief people officer (CPO) as well as roles reporting to this position, such as head of human resources (HR) or a head of culture.

Late-stage startups also may require a chief communications officer (CCO) and leadership roles pertaining to the business’s public relations strategy as well as roles to execute its mergers and acquisition (M&A) strategy and investor relations.

Frequently Asked Questions

What is a flat organization structure for a startup?

A flat structure involves little to no hierarchy, giving all employees the same level of authority and responsibility. This organizational structure is most common with small and early stage companies.

What is the best organizational structure for a startup?

The most advantageous organizational structure for a startup largely depends on the company’s stage, size, and type. The most popular organizational structures for startups are the functional structure and the hierarchical structure, however, because they provide a clear chain of command while giving the business and its team direction and organization.

What are the disadvantages of a flat organizational structure?

A few of the drawbacks of a flat organizational structure include potential conflict, slower decision-making, and lack of accountability for staff members.

What is a tech startup organizational structure?

A tech startup organizational structure is the method by which a startup organizes its team members, executives, and leaders.