Many people have noted and describe the culture shift that occurs at startup companies - curiously, usually at a headcount right around Dunbar's number. Of course, differences occur over the causes.
One explanation from personal experience as a consultant at multiple companies (full post here) is that the influx during this growth phase consists mostly of people who are middle- or lower-tier contributors, whose strategy is primarily that of seeking a stable institution and burrowing in. This is a rational strategy for these folks, because as the company grows, the individual's contribution (especially the lower-level, later hires) is less important to the company's health and therefore feeds back less to the individual's fortune. There's no reason to knock yourself out, if you know it won't make much difference to your future well-being, and you don't have confidence in your talents anyway.
(When aggressive young managers talk to these people, it sometimes feels like you're playing two different games on the same field. Manager is rewarded by scoring. S/he wants to perform, and wants others to perform, so risk-taking and occasional annoying of others with non-company-aligned-goals is worth it. Late-comer wants to keep a low profile and not rock the boat and often seems frankly confused at any suggestion that they should take a risk to accomplish something, but of course s/he can't say this out loud. Or sometimes, they actually do. I once had an employee, a recent college grad, who looked at me with surprise at the start of such a meeting and said, "This isn't me, this job isn't what I really do." I was grateful for this honesty because it saved time. Not in the way that I think this employee was expecting.)
Netflix has a set of slides that's been making the rounds in the Valley recently, with a different (though not necessarily conflicting) explanation. This explains the dilution of high performers as an efflux of talent (driven out by bureaucratic process sclerosis) rather than the influx of low performers. This certainly occurs as well though in my experience, it's a much slower process, as people tend to stay at a company they believe in with colleagues they enjoy even as administrative annoyances accumulate.
Culture from Reed Hastings
I also think that they're being too kind about the motivations behind the proliferation of bureaucratic rules, which they ascribe to well-meaning management trying to control the chaos at a company that's become too large and complex to run informally. I think there's a lot more conscious justifying-of-one's-own-existence processes that new administrators put in place, although I concede this is easier to do and probably happens more in my regulation-heavy world of biotechnology than in the tech world that the Netflix people know.
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