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HR 101: Hiring and Scaling Challenges

On December 15, 2020   /   hiring   /   11 Comments

The chart below shows the percentage of start-ups that had each “C-level” position, categorized by the rounds of financing raised by the company. (This is from the start-up survey conducted in early 2005, which had responses from 263 private IT companies.)


For some of the positions just below C-level, the chart below shows the percentage of start-ups that had each position.


These charts bring to mind 2 recurring hiring issues that founders pose to me.

ISSUE #1: Hire ahead vs. Hire for now

Should you hire senior people before you need them, or hire junior people now …

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Thanksgiving Dinner … With Your Investors

On December 5, 2020   /   investors   /   13 Comments

The “Founding with Friends, Founding with Strangers?” post suggested that starting a company with friends can introduced big risks, an assertion that was echoed and amplified by many of the comments, experiences, and insights that people posted in response. Among the risks: losing a great friendship when the friend underperforms, or making suboptimal business decisions because of emotional complications (hence, losing the company).

Is the same thing true with your investors?

Whether you’re trying to avoid raising venture capital or just waiting until your venture gets big enough for it, one of the most common early sources of funding is …

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Neverland, or Dictatorship?

On November 25, 2020   /   co-founders, roles   /   16 Comments

As a start-up grows, can the founding team continue to make decisions collectively, or does someone have to rise above the others and become the final decision maker?

A couple of years ago at a panel discussion at HBS’s annual Entrepreneurship Conference, the 4 founders on the panel disagreed about almost every topic raised by the moderator. The one thing on which all 4 agreed was that “a start-up has to be a dictatorship.” Each of the founders had started a company with at least one co-founder, and had tried to make all decisions by “consensus.” However, in …

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“Rich versus King”: Charts and Impressions

On November 25, 2020   /   rich vs. king   /   11 Comments

In the original “Rich vs. King” post (thanks to everyone who participated in the dialogue there and helped flesh out additional pieces of the puzzle!), I argued that most founders will have to choose between building valuable companies in which they are minor players (being “Rich”) versus being major players in less-valuable companies (being “King”).

As promised, let’s get into some data to examine this “Rich versus King” tradeoff. I’ll present 3 data-graphs, then give my impression of the patterns in each one. Love to get your reactions / rebuttals!

Methodology Note #1: These charts are based on results

…

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Founding with Friends, Founding with Strangers?

On November 14, 2020   /   co-founders   /   43 Comments

Is it better to start a company with someone you know well (friends, classmates, family members) or with strangers?

In my next post, I’ll return to “Rich versus King” and show some data, results, and charts that shed light on the phenomenon. For this post, though, I want to take a brief detour to explore a different issue. (At the same time, the issue is related to scenario #1 in the “Rich versus King” post. Or maybe I’m just seeing R-vs.-K tradeoffs everywhere I look these days!)

On Wednesday night, I moderated a Founders panel for the Boston chapter of …

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“Rich versus King”: The Core Concept

On November 8, 2020   /   rich vs. king   /   20 Comments

Here are three founder scenarios, all with parallels to cases I teach our MBA students:

#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).

…

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“Founder Discount” Paper: Coming to an AMJ Near You

On November 3, 2020   /   compensation   /   1 Comment

The “Founder Discount” paper described in “Executive Compensation and the Founder Discount” was just accepted by the Academy of Management Journal. I have added a PDF version of the full paper to the links on the right side of this page.

Now that it’s complete, I’ll be focusing on my “Rich versus King” paper, and will begin posting about it in the coming days.…

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3 Tidbits from the “Emerging Ventures” Conference

On October 17, 2020   /   compensation, equity split, founder-CEO succession   /   7 Comments

On Wednesday, I gave a keynote address at the Emerging Ventures conference. I also chatted with several founders and venture capitalists, some at lunch Wednesday and some after my address. Three tidbits from those conversations that are relevant to this blog:

  • Succeeding at Founder-CEO succession? - A central issue in the “After the Firing” project and in my “Wily” case (which I explored for several minutes during the address) is whether the (replaced) founder stays in the company post-succession, and if so, whether the founder’s presence will be beneficial (e.g., if the founder willingly takes another executive role) or disruptive

    • …

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After the Firing: Initial Research Questions

On October 6, 2020   /   founder-CEO succession   /   10 Comments

When an “irreplaceable” founder-CEO is fired, does the venture’s long-term growth suffer? Conversely, if the board waits a long time to replace the founder-CEO with a more experienced CEO, does the venture suffer? In each case, if the fired founder leaves the venture completely, does the venture’s chance of surviving decrease or increase?

Sparked both by a query from Tim Connors and by the upcoming next phase of my founder-CEO succession project, it’s time for us to delve into the “After the Firing” research.

The initial phase of the “Founder-CEO Succession” project examined the antecedents — i.e., events and conditions …

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Building a Board: Composition by Company Stage

On October 2, 2020   /   board of directors, investors   /   3 Comments

Paul McManus of Boston Millennia Partners asked whether I have data on how board composition changes by company stage. I can slice my data using rounds of financing, company age, and a variety of other metrics. Most of those metrics tell similar stories. To pick one of them, the chart below shows board composition by company age:


Angels are consistently 6-10% of boards (an interesting pattern), the % of VCs rises relatively consistently from a high first-year base of 34%, and the % of industry execs/reps also increases consistently. As these “outsider” categories collectively increase, the % of insiders …

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