Idea People and Their Initial Roles Within Founding Teams

Does being your venture’s “idea person” affect your initial role within the venture and the size of your equity stake?

Initial analyses of data from our 2007 Compensation Survey (the 2008 Survey is currently under way — see here to participate!) suggest that being the idea person can affect your role and the size of your equity stake. In this post, I delve into the impact on roles, and in the next post, I’ll delve into the equity-stake implications (IY”H).

Note: The analyses I present below are only descriptive and preliminary, and will be followed by more detailed/definitive regression analyses (which will control for differences in years of prior work experience, prior founding experiences, and other factors). Please post your thoughts on any data or statements below — I look forward to incorporating those insights into the regression analyses.

In the survey, we asked whether each founder had come up with the idea on which the venture was based. Within the IT survey, we received data on 324 founding teams encompassing 880 individual founders (for an average founding-team size of 2.7 people). Of those 880 founders, 412 were identified as being the “idea people” within the team, an average of 1.3 idea people per venture. As shown in the pie chart below, 81% of the ventures had a single idea person and 15% had 2 idea people.

Of the 412 idea people, 232 (56%) of them took the CEO position at the time of founding, 50 took the CTO position, another 50 took a lower-level VP position, and 30 became Chairman.

Sliced another way, what percentage of people in each initial position were identified as the idea people for their ventures? Almost 85% of founding CEOs had been the idea person, 65% of the founding Chairmen had been, and 42% of the founding CTOs had been.

Any thoughts on how being the “idea person” affected (or is affecting) the roles taken by each founder in your ventures?

Up next, I’ll blog about my initial analyses of the “Idea Premium”: Do idea people get more equity than do non-idea founders? How much more?

  1. I don’t think having the idea should generally affect your position in the company (that should be determined by your abilities and motivations) -some people say that having an idea is worth 20 bucks, the rest is implementation.In my experience, the idea was mostly the result of brainstorming and the team assumed their roles regardless of who came up with what – but I guess generally if the team’s culture demands the CEO to provide the motivation and drive necessary for the company to advance, then having the idea can often help her/him do a better job.Useful post!- Tadej

  2. Couple of thoughts: (1) having the “idea” guy as CEO half the time when the company starts is probably correlated w/ the high turn over of founder/CEOs and (2) you didn’t say explicitly, but I assume the “idea” person typically gets a bigger equity stake initially (since on average the founder/CEO has a larger equity stake than other founder/CXO roles), but I wonder what the long term equity stake is. I think there is a higher turn over rate on founder/CEOs than other founder roles (is that true?) and as a result they probably give up more in unvested founder’s equity.

  3. In general, I often find that people who believe that an idea is 1% inspiration / 99% perspiration are not idea people themselves (duh). That said, clearly an idea that is not executed (properly) IS worthless!For the sake of this post, I think it’s also worth clarifying that “idea person” has the ability to mean different things.For instance, if your idea for a company is that of a general nature: “Let’s build a car that can go to the moon”, then the idea really IS 1% inspiration because you’re going to need a team of people to help get such a concept off the ground (literally!).If your idea for a company is more specific: “Let’s make signs that say ‘baby on board’ and hang them in car windows” then the idea IS the company.Obviously the examples above are extreme, but they’re my meager attempt at making my point that the more one brings to the table, the more value he or she should get in the company. If you’re an IT guy and you create a tech based company, then I think it would make sense to minimally be the CTO of the company (as your study has shown). If you’re completely tech-less (is that a word?) and you come up with a tech based idea, then I think you need to honestly asses what your value is to the company (as tadej said) and go from there. Thanks for another great post Noam!

  4. I am shocked that only two founders out of your sample of more than 400 later move on to become CFO, a path that I am about to take. I believe that you can hold on to the control of your company so long as you firmly grasp its finance. A CFO may not enjoy the glamor and prestige that comes with the title of CEO, but it is a nonetheless a position that is loaded with real substance.

  5. Very interesting, “eep” — thanks for those thoughts about the potential power of CFOs! (Your comments actually fit well with a CFO-related discussion I tried to kick off in < HREF="" REL="nofollow">the post here<>. Would love to get any further thoughts you have about the issues there.) Best of luck with the transition. Very much looking forward to hearing more about it….

  6. Noam, Very interesting and the results play out as one would expect. My anecodtal experience tells me there might be some additonal factor affecting the “idea issue” as well as the “equity spilt” issue. The subtlety or nuance is the “order” of founding team formation. i.e. Does the team form spontaneously, a peer-peer relationship? Or, is the there leader-follower relationship among the members of the founding team. I’d be curious to see if your data could provide insight on this. /Paul

  7. First of all, I want to thank you for the interesting session at “Four seasons” , Palo Alto(Best Leadership Best Practices) and Wily’s case.Coming to the “idea people discussion”, may I ask if you have any data on non-IT /non-technology ventures? Is there any bias towards importance of a good ‘idea’ ( wily :-) ) people in IT industry, which may not be working in, for example, barber shop? On the other hand, do you also have any international data to analyze? Is there, for example, an opprtunity, that in a more regulated environment (like that in Germany), the Geschaeftsfuehrer (CEO) is more likely to be a financial or ‘organizational’ guy?What’s about the emerging markets, like that of ours (Ukraine)?

  8. The idea ownership shouldn’t have an affect on your position. That should be determined by your existing strengths but I think that it should affect your equity. Without the idea your org would not exist.Looking forward to the idea premium!

  9. I’m the idea person for my company and it is more than just 1% inspiration. In my case it is the ability to identify certain problems and service gaps within an industry and find solutions for them. Plus it is the ability to refine and adapt technology and trend concepts for that industry. It is the ability to keep coming up with ideas that are also revenue streams and to use instincts as well as industry knowledge to know what will NOT work.That said, I want to continue to be the idea person and I know there are business people out there better suited for the CEO position. Knowing how to manage and delegate are important skills. I’ve worked with many idea people/founders/CEOs who let their ego get in the way of their success.

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