I have been listening to “Founder’s Dilemma – Anticipating and Avoiding the Pitfalls That Can Sink a Startup” by Noam Wasserman. I am 2/3rd done… it is very factual with examples and recommendations from startup founders going through a couple of case studies, more specifically the story of Ev Williams the founder of Blogger, Odeo and Twitter. It also has quotes and experiences from Dick Costelo, the current CEO of Twitter and serial entrepreneur. The book is written based on a data set the author created by running surveys on startup founders. The book’s narrative is sobering if anything, tells you how founders basically fall into a number of pitfalls despite the best of intentions. What was the saying again? The road to hell was paved with a lot of good intentions.
The author more or less documents categorically all the pitfalls, like founder’s background, the stage in their life when they found the company, what kind of co-founder relationships work and how that influences the equity split and how that is so detrimental to the success of the relationship or the startup. The main contention point in a startup always comes due to the two headed hydra, Economics vs Control. Who gets to run the company and what is the monetary compensation split between the original founding team. The data is sobering, friends do crazy things when money is involved. It even gets crazier when the Ego of the founding team is considered, who gets to be CEO and why that matters etc. I recommend the book, just to make sure every founder understands the pitfalls of splitting equity early in the game and how that dictates where the startup goes.
The following is the description of the book in Amazon:
Often downplayed in the excitement of starting up a new business venture is one of the most important decisions entrepreneurs will face: should they go it alone, or bring in cofounders, hires, and investors to help build the business? More than just financial rewards are at stake. Friendships and relationships can suffer. Bad decisions at the inception of a promising venture lay the foundations for its eventual ruin. The Founder’s Dilemmasis the first book to examine the early decisions by entrepreneurs that can make or break a startup and its team.
Drawing on a decade of research, Noam Wasserman reveals the common pitfalls founders face and how to avoid them. He looks at whether it is a good idea to cofound with friends or relatives, how and when to split the equity within the founding team, and how to recognize when a successful founder-CEO should exit or be fired. Wasserman explains how to anticipate, avoid, or recover from disastrous mistakes that can splinter a founding team, strip founders of control, and leave founders without a financial payoff for their hard work and innovative ideas. He highlights the need at each step to strike a careful balance between controlling the startup and attracting the best resources to grow it, and demonstrates why the easy short-term choice is often the most perilous in the long term.
The Founder’s Dilemmas draws on the inside stories of founders like Evan Williams of Twitter and Tim Westergren of Pandora, while mining quantitative data on almost ten thousand founders.
People problems are the leading cause of failure in startups. This book offers solutions.
It is not surprising to see that People problems are the leading causes of failure in startups. The solutions offered in the book so far are not earth shattering but could possibly work. One thing that I thought was interesting was the fact that people who have worked together in a professional setting tend to be much better founders than friends or family or strangers. Another lesson is to make sure there is a good open discussion about how the equity is split upfront and who gets to lead the team. In most cases a simple handshake and quick decision is not the solution, the author recommends a more ponderous road and says it increases the odds of the startup founding team sticking together and resolving challenges as a team.
Bottom line, I recommend the book. It is not inspiring but factual, data driven and to a certain extent impersonal although the author uses the case study of people, it felt cold to me. Maybe one needs to be cold when dealing with starting a company completely opposite to what you hear in the mainstream media, passion, camaraderie and everything is fine stories.