Reflection Paper #1, Justin Wylie
The Founder’s Dilemma by Noam Wasserman highlights the struggles encountered by entrepreneur founders who inevitably walk the gauntlet in an effort to make a decision about their own future within a venture they founded. Do I want to get rich (wealth) or run the company (power)? The answer to this seemingly either/ or question has far reaching implications about their role in the venture they created.
The “get rich” option (wealth) favors increasing the value of a smaller piece of the pie. Why smaller? The founder leverages equity slices of the pie to attract qualified co-founders, critical executives and valuable investors. The outside resources have critical skills required to make the venture a success but are not inherent to the founder. As such the founder is left with a smaller stake in the venture they founded, al-be-it a ...view middle of the document...
I assume for a founder who is completely motivated by money, there is no dilemma. Sell the equity, pocket the cash and go live on an island. The same would be true for the founder consumed with the need for power, there simply is no dilemma. Don’t sell the equity and manage the venture exactly the way they desire. To their personal benefit or detriment. The “dilemma” only exists when the founder wants both – the wealth and the power.
Set aside the binary option, a 3rd option would be required. A middle ground where half-wealth and half-power might co-exist to the benefit of the venture and the risk of the founder. This scenario would require hyper communication via the founder concerning his/ her motivations, strengths, weaknesses and vision for the venture.
This scenario is also not without its challenges. Any outside investment needed to further the venture would introduce “strings”, i.e. he who has the gold makes the rules. The founder would once again be required to be hyper vigilant in communicating their vision of the venture, their value (need to maintain the wealth and power) while seeking outside an investment. Depending on the abilities of the founder, this could dramatically reduce the pool of available investment capital. This option would also require the founder to exercise a good deal of humility. I.e. Seeking the expertise from individuals with skills not inherent to the founder.
Sharing motivations (the “why” we are doing it this way or that way), humility (knowing personal limits and seeking outside expertise) and communication (frequent and varied) would be critical; however, the founder would probably be well rewarded by also knowing themselves what “success” looks like for themselves. As such, being prepared to define what their role in the venture would look like far into the future (moving away from CEO into Chairman role). Much like the Chinese proverb says, “decide on three things at the start: the rules of the game, the stakes, and the quitting time.”