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Nepotism and the end of innovation

I live near the Bay Area of North California and we always hear of startup success stories. It seems to start with a small highly enlightened group. Those early days are filled with bright new ideas, and long nights and then their product hits the market, the world finds it cool and soon everybody is talking about it.

After the honeymoon is over what happens next ? Slowly we hear about how the software is buggy, mistakes with a new release and such. So where are those super people (founders), have they all of a sudden stopped their association with their own brainchild ?

What I think happens is that as the company grows the founder have their hands full, so they now have to hire outsiders. Soon people start to recommend friends and family and like. Now as the company grows the quality of hire starts to fall. Newer and newer hires have an insider to back them up, so now it is not about innovation but just a cool job in a hot startup.

In fact deserving candidates can be overuled by nepotism, and soon the star startup goes downhill.

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