In addition to the studies described in posts below, my other Founder Frustration research includes the following studies:
- Building a Board - In new ventures, do CEO characteristics (prior years of work experience, functional background, founder status) and equity holdings affect Board characteristics (board composition, frequency with which the board meets, board size)?
- Splitting the Pie - Does the initial equity split among the founders (the standard/”easy” equal split versus the more-contentious unequal split) affect the stability of the founding team as the venture grows, the venture’s growth/valuation, and its ability to attract outside investors?
- Entrepreneurial Handcuffs - What factors affect vesting terms in new ventures?
- After the Firing - How does the timing of founder-CEO succession affect the company’s post-succession growth and survival? Is it affected by whether the replaced founder-CEO remains in the firm as an executive, stays on the board as a director, or leaves the firm?
- VC Founders and Firm Structure - How do general partners who are founding their own VC firms decide to structure their firms? In particular, how do their strategic choices affect internal firm structure? Does the fit between strategy and structure affect investment performance? Once they choose their initial structure, can VCs change it easily?
I’ll hopefully be posting results for each of these in the coming weeks, IY”H…
Noam,Great start to what should be an very interesting blog. One topic that comes to mind that may be of interest to you and your readers relates to founding teams; as in “I’m starting up a comapny, how do I pick the right co-founder(s)?”.Allen Morgan at Mayfield had an interesting post related to this topic recently. You can find it at:http://allensblog.typepad.com/allens_blog/2005/08/the_problem_of_.html
Thanks for the suggestion, Paul! That is a core issue in my “Ockham” founding-team case that we use in our MBA course. In the context of the link you provided to Allen’s post, it’s also very related to the equity-splitting issues he raises (thus to my Splitting the Pie study).However, beyond “Ockham” and Splitting the Pie, I haven’t found a good way to approach it in a rigorous study.For instance, in the context of picking the right co-founder, how would we define what “right” means? To take some common cases:1. If a co-founder fills a key hole early on but then leaves the company when his skills no longer fit what the company needs, does he qualify as the “right co-founder”?2. If a co-founder willingly takes on less-senior positions as the company grows, but therefore isn’t a key member of the company for very long, does she qualify?3. If the co-founder is an important contributor, but his friendship with the other co-founder causes sub-optimal decisions or increased tensions as the company grows, was he the right co-founder?4. If a co-founder is an important contributor to the company, but her equity % is greater than the degree of contribution, does she qualify?Looking across these questions, key dimensions of defining the “right” co-founder seem to be the person’s role in the context of the overall team’s abilities, how long that person contributes in that role, how the person’s role changes over time, and how much of a stake the person gets/takes. (I already have data on many of these already, but being able to use the data effectively depends on how we define “right.”) Are there other general dimensions we should add to the list?
Indeed a very complex issue and perhaps a good Ph.D topic for one of your students. Very topical as well, as I spent and extended length of time yesterday with a founding team that is trying to come to grips with all of these potential eventualities. (I must commend them for their forward thinking.)Several other thoughts/issues come to mind on this topic that add to the complexity rather than reduce it:1) There is a clear distiction in my mind in the dynamic of “Co”-founder and co-”Founder” teams. The emphasis is the former is in describing the team as being true peers in the formation and start-up of the venture, while the latter charcterizes a lead/dominant founder with a team that “signs-on” over time. 2) Blood relations on the founding team is a significant factor with serious downsteam implications.3) Situational effects. As a practicitoner, I am always trying to resolve the optimal model against current reality. In that vein, the make-up and character of founding teams is most often driven by situational (right-place, right-time) effects and most importantly, “simple ease of formation” factors. I often have thought about this in terms of minimizing contractual “sign up costs” amoung the founding team members. In other words, inexperienced founders have a tendency to build teams with buddies, classmates, relatives etc. rather than “best of breed” because the costs of convincing buddies, classmates relatives etc. to “sign-on” is so much lower that the costs of finding and convincing a “best of breed player” to join the same team. This is one area where good VC’s can add tremendous value at the earliest stages of a company’s devleopment. I don’t think I helped in reducing the complextiy, but hoepfuly some food for thought./Paul FYI - I use Nanongene Technologies” (HBS 9-803-117) as the case for my “splitting the pie” session.