Startup Mechanics: Culture comes from the Top
Culture comes from the top. This isn't true only in start-ups. It's true for all social organizations. (Revolution on the other hand comes from the grass roots.) But it's very important to think about culture as you find your co-founders and especially as you begin to hire your first employees.
I discovered Andy Monfried's awesome post (via Seth Godin) that describes the difference between a start-up's cultural environment versus a traditional company. This is the sort of cultural leadership you embrace. This is why I prefer small companies over big companies.
Indeed, as the company grows, one no longer can simply consider the culture, but one has to determine how best to transmit it. I've been having a debate recently with a friend on how culture transmits successfully. Some organizations seem to be able to pull it off (e.g. USMC and Judaism). Many can't.
I suspect that culture begins to break down when the people at the bottom observe there's a multi-tier culture in place between the executive management at the top, and the plebes at the bottom. When the observed reward systems, punishments, and purposes begin to diverge, the cultural system breaks down rapidly. ("It's okay for me to <re-state options | sexually harass a direct report | focus on competitors instead of customers>, but not okay for you.")
Published "values" and hallway art work don't transmit culture if the observed behaviour contradicts the message. If you want your best employees to be the next line of outside-the-box innovators to grow your business, then you need to be outside-the-box first!