Apr 01 2008
Founders: Do you want to be Rich or King?
Noam Wasserman, a professor at Harvard Business School, came up with a core concept about startup founder motivations:
Rich versus King?
Academics are long known for coming up with interesting, but relatively impracticable concepts. This is not one of them. Founders need to understand their motivation for starting the company. By taking time out in the early stages to understand why you are building the company, you can avoid a lot of heartache and headache down the road.
Wasserman proposes that investors think very hard about their true reactions to the following three scenarios:
#1: You have an idea for a great product and want to start a company. Do you start it yourself (and keep all of the equity) or do you find a good co-founder (with whom you have to split the equity 50/50)?
#2: You have 2 similar offers from potential investors. However, one is from angels (who want one board seat out of 3, leaving you in control of the board) and the other is from VCs (who want 2 of 3 board seats). Which do you take?
#3: You have been doing a good job as a founder-CEO, and have really enjoyed being able to control major decisions and being able to “put my stamp on my company.” However, you are starting to feel that a more experienced CEO would be able to grow a more valuable company than you could. Should you keep your CEO seat, or should you offer to step down (into a “ceremonial CTO” role) and find a better CEO to take over your “baby”?
It is not hard to see immediately how understanding your motivation will shape the future of your company. For his full post, click here:
http://founderresearch.blogspot.com/2005/11/rich-versus-king-core-concept.html
Many founders think they can be both “rich” and “king”, and certainly there are some that can be – such as Gates and Dell. However, the exception is not the norm.
For founders unfamiliar with the venture process, I can assure you that if you are looking for venture money you need to be primarily motivated by the “Rich” themes. Venture investors aren’t interested in founders who want to be King unless they are the rare exceptions noted above (which they probably would not have bet on initially!).
Best of luck!
Dan
I kind of agree with these thought but to me it seems like “Rich” is not the right word. If all you wanted is to be “rich” and hence you build the company, you obviously would keep more control and equity stake too. I kind of would like to put them in these two words “building” Vs “king” / controlling themes.
If you concentrate on “building the company”, you will select the second option in each of the three cases which will be +ve to investors and also for the company. I have heard this from VC often in various conferences, but entrepreneurs still have to learn them well.
But, yes when you go building the company venture way, you need to have the “rich” theme in mind as VCs are mostly thinking about exiting in 5-7 years time frame and so should you! which is a bit confusing…