The last 6 years, I have been breathing Entrepreneurship, Startups and Venture Investing. I have more or less confronted most of the pitfalls that you read about in blogs and books about entrepreneurship or startups. I have been focusing a lot about the Principles of Leadership and Win-Win agreements for a specific reason, I have realized that when investors are involved the bargaining and or negotiation capacity of the Startup Founders gets rather skewed. I have seen time and time again, founders getting marginalized to a point where it makes no meaningful sense for the founders to participate in the painful journey of building companies. I have tried my best to stick to my mission which is to help Entrepreneurs and stand on their side when it comes to building their startup irrespective of the role I play. I meet many investors who have had some success in some investments and they try to invest in Startups and they start thinking that they are more important than the founders of the startup. I wrote about this a couple of weeks back. The best way to the poor house is getting into investing in Startups and ventures where the investor adds no tangible value other than money. There is a better and easier way to lose money than this route.
I was reading a post by Hunter Walk titled “You’re either venture-backed or a lifestyle business: a big lie“, here is an excerpt from the post
What I want to focus on instead is our proclivity as an industry to demean these smaller companies as “lifestyle businesses,” which suggests an easy path, a coasting team, the four hour work week. Bullshit. These companies represent the majority of entrepreneurs across the US and should be celebrated. The profitable seventeen person company with an enterprise value of $20 million, 90% owned by its founder? That’s awesome even if you’ll never read about them in TechCrunch.
I vote for building companies the above way than raising money from anyone. The challenge every entrepreneur has is the cost benefit analysis of raising money vs bootstrapping. My advice has always been if you can bootstrap a business that you own 100% just do that. You are in charge of your destiny, you don’t have to answer to anyone other than your customers and team.
I have seen startups where the founders have been sidelined for some professional manager, I think that is a wrong approach, typically suggested by “investors”. When you look at tech companies that have endured the test of time, Apple, Microsoft, Google, Amazon, HP, Cisco etc all these companies had their founders playing a key role in the development of the company through thick and thin. And then we have other examples where companies that just flounder once the founders step aside Dell, and Yahoo come to mind. The jury is still out on Facebook, Twitter etc My belief is that Founders need to play a meaningful role in the building of the company that they founded. In addition, the investors who are “feeders” and not “leaders” need to support and help the entrepreneur in making the company really reach its true potential. Too many times I see investors and the Board of Directors act like they know it all and make dramatic decisions that at best are compromises and at worst Lose-Lose outcomes, rather than building a culture of Win-Win and really focusing on building a Win-Win company.
There was an important post by Fred Wilson titled “Founders and CEO” and there is a quote that really resonates with me:
One thing I know is companies are better off when their founders remain involved in the business, even if they are not the right person to run it. That is not always possible and sometimes a scenario like what happened to Steve Jobs plays out. But it’s not the ideal way to resolve these conflicts.
I believe the ideal way to resolve conflicts is to search for the 3rd alternative, it is not your way or my way, it is our way which is better than anything either of us have come up together. The power of Synergy where 1+1 = 100 or 1000 or 10000. How sweet it is to be part of those discussions…
I really like this post and especially the quote by Hunter Walk.
Couldn’t agree with you more.